If at First You Don’t Succeed, Spend, Spend Again
An economy is like water: It can’t expand unless it has somewhere to go, artificially adding more volume will only cause a limited and temporary upward surge, and the extra must be taken from somewhere else. This is the image that came to mind in response to our Senators’ suggestions that the nation might need another stimulus package:
“The only way we’re going to get the economy out of the slump is to get people back to work and to stabilize housing values,” Reed said in an interview with MSNBC. “I don’t think we should rule out a second stimulus package.”
The strategy on which Reed and Whitehouse wish to double down is to continue adding volume to the economy in the hopes that it will overflow some barrier currently preventing new streams. The problems with chasing that remote possibility are that it floods the extra into an area of the economy that’s pretty well bounded and takes money out of the economy where it can be most productive (eroding soft dams by investment and innovation, one might say).
The move might be advisable if there were clear consensus that the economy is on the cusp of a new field into which to flow — another Internet about to be created, new frontiers to be populated — but that is not currently the case. (Green ain’t it.) Improving roads and other such infrastructure repairs will keep a handful of workers occupied, but when the funding evaporates, so will the jobs.
What Rhode Island’s Senators ought to be declaring — what all leaders ought to be declaring — is the need to pull down those barriers that governments of every tier have erected.