Crossposted from the California High Speed Rail Blog
Not content with denying to Californians the numerous tangible benefits of high speed rail, Prop 1A opponents have retreated into a revival of Herbert Hoover’s economic policy in order to try and defeat the most important project Californians have considered in nearly 50 years. Their argument is that in an economic crisis, we should turn to austerity instead of following the tried and true path of deficit spending on infrastructure that provides short-term job relief and long-term economic value.
Today we have numerous articles and media outlets starting to push back against the New Hoovers. From newspaper editorial pages to leading economists there is a growing consensus that we must use deficit spending – in our case, bonds – to spur economic growth through infrastructure projects.
Speaker Karen Bass is calling for infrastructure projects to be part of a California economic stimulus that she hopes to offer later this year to deal with the worsening economic crisis.
Even conservative observers and federal deficit hawks are seeing the need for deficit spending, as the conservative Washington Times reports:
Conservative Financial Times columnist Samuel Brittan said the fears that short-term stimulus spending by governments will raise deficits miss the point. Even the $700 billion Wall Street rescue plan approved by the U.S. government – part of a more than $2 trillion international bailout of banks by governments around the world – does not change the equation.
“Maxims about debt that might be prudent for families can be the height of folly for government,” he wrote.
British economist John Maynard Keynes is credited with the basic insight, arguing that the Great Depression was prolonged because Western governments insisted on balancing budgets, raising taxes and cutting spending at a time when private economic activity had ground to a halt.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a nonpartisan research group, said both candidates must put together a credible long-term plan to deal with the exploding deficit, but that the government should be priming the pump in the short term.
These conservatives are joined by Nobel laureate Paul Krugman, who writes in today’s column:
And to provide that help, we’re going to have to put some prejudices aside. It’s politically fashionable to rant against government spending and demand fiscal responsibility. But right now, increased government spending is just what the doctor ordered, and concerns about the budget deficit should be put on hold….
All signs point to an economic slump that will be nasty, brutish – and long….
And this is also a good time to engage in some serious infrastructure spending, which the country badly needs in any case. The usual argument against public works as economic stimulus is that they take too long: by the time you get around to repairing that bridge and upgrading that rail line, the slump is over and the stimulus isn’t needed. Well, that argument has no force now, since the chances that this slump will be over anytime soon are virtually nil. So let’s get those projects rolling.
The growing unanimity of opinion on the need for deficit spending for infrastructure projects is striking. Krugman, MacGuineas and Brittan join leading economic figures like Nouriel Roubini and Lawrence Summers in calling for bold action to mitigate the deepening economic crisis.
They are joined today by the Fresno Bee editorial in favor of Prop 1A which clearly understands the need for infrastructure stimulus, and directly refutes some of the fiscal arguments against HSR:
Sadly, much opposition has come from people who say they like the idea of 220-mph trains zipping up and down the state, but don’t think we can afford it right now, in a time of budget disaster and economic crisis.
That sounds prudent, even reasonable, but it ignores an important fact of American history: Many of our most important public works projects have come in times of deep economic distress — and they have been crucial elements in our recovery in those times.
Recall the Great Depression, when voters in the Bay Area passed bonds to build the Golden Gate and Bay bridges — projects that lightened the impact of the Depression on that region and were critical to the postwar economic boom. Shasta Dam was built during the Depression, and remains a linchpin of the state’s water system.
The closing paragraph of the editorial is a powerful, stirring statement that deserves to be quoted in full:
The high-speed rail project is immense, and that can be daunting. The current economic situation is likely to get worse before it gets better. In the past, Californians have risen to such challenges with vision and determination. Voting “yes” on Proposition 1A is a declaration that we still possess those qualities, and have not surrendered them to a timid faith in a status quo that is no longer sustainable.
I’ve never seen it put so well. The Fresno Bee clearly understands that our state’s very future is at stake and that Californians should be able to meet that challenge just as we have done in the past.
And what about the arguments that the financial crisis makes this a bad time to float bonds? The Sacramento Bee reports “unprecedented demand” for California’s short-term bonds:
California has secured commitments for nearly $4 billion in short-term loans thanks to unprecedented demand from individual investors Wednesday, averting a need for federal assistance and allaying fears of a cash shortage….
California secured orders for $3.92 billion in short-term bonds from individual investors Tuesday and Wednesday, 98 percent of its original $4 billion goal, according to state Treasurer Bill Lockyer….
This week’s bond sale reassured state officials that traditional lending markets would suffice.
Translation: capital markets WANT state bonds. If we float Prop 1A bonds they will be quickly gobbled up by a hungry market desperate for a safe investment.
All the HSR deniers have left is what was at the core of their belief all along – opposition to passenger rail:
“This is like losing your job and then using your credit card to put in a new swimming pool to help provide work for others,” said [Kris] Vosburgh [of the Howard Jarvis Association] of the jobs argument.
Have fun with that ridiculous “swimming pool” analogy in the comments…
