Getting over stimulated on economic policy

I take on the folly of using transportation funding as an economic stimulus in my newest contribution to the New Geography web site.

Harking back to the days of the Great Depression, many policymakers see transportation spending in roads, highways, and transit as an effective job creation program. Indeed, the American Association of State Highway and Transportation Officials has identified 3,109 “ready to go projects” worth $18.4 billion that could, in theory, produce 644,000 jobs.

Of course, pundits galore on getting on board the stimulus train. Paul Krugman is practically arguing that no stimulus package would be too large. I point out:

Krugman’s observation is an extraordinary statement because little evidence exists that this kind of discretionary fiscal policy has a meaningful impact on the economy. Alan Aurbach, one of the nation’s leading macroeconomic policy experts and an economist at the University of California at Berkeley, examined fiscal policy during the 1980s, 1990s and early part of 2000s and concluded: “There is little evidence that discretionary fiscal policy has played an important stabilization role during recent decades, both because of the potential weakness of its effects and because some of its effects (with respect to investment) have been poorly timed.”

That’s not to say we can’t use more money in transportation. We do. But, these investments have to be focused on long-term economic competitiveness, not short-term make work schemes.

Today’s travel environment is far more complex, and doesn’t lend itself to the hub-and-spoke system. Current travel patterns point to a transportation network that should focus on improving point-to-point travel in a dynamic economy, more of a spiderweb than a hub-and-spoke network, as Adrian Moore and I point out in our new book Mobility First: A New Vision for Transportation in a Globally Competitive Twenty-first Century.

Anyway you slice it, these kinds of investments also imply more private investment and more market involvement, not less.