Eliot Spitzer is writing for Slate after his fall from grace a few months ago. Spitzer says that the Obama government’s stimulus plan should focus not on essential infrastructure refurbishments but rather on “transformative investments” that might springboard the American economy ahead of its competitors. More than that, Spitzer says that it’s incumbent on Obama’s second New Deal to act in this manner in order to “transform our economy and, in turn, some of the fundamental underpinnings of our society”.
One problem with projects far-seeing enough to deserve the “transformative” label is that they are by definition speculative in nature. They wouldn’t be transformative without the risky element of the unknown. Risk is not necessarily bad. A stock portfolio should contain a certain amount of risky holdings because that’s where the highest rates of return can be earned.
Similarly, government make-work projects, if such are to be created by the new government, should also include some high-risk/high-reward ventures. But not many. The federal government’s addiction to gambling with future generations’ economic security is a large part of what has put us in this crisis in the first place. Doubling down by spending vast sums in an attempt to create the infrastructure of the future might well make things worse instead of better.
For instance, Spitzer’s idea that the federal government should push the deployment of next-generation fuel distribution stations is far from a sure thing. The price of natural gas, for instance, has been as volatile as that of oil in recent years. Where is the guarantee that this will be the fuel of the future. Similarly, where is the assured source of hydrogen that would make laying tens of thousands of miles of pipe a good investment? Such an investment could take decades to pay off even if the right choices are made up front. Or all of these technologies could be made obsolete by new development after the money’s been spent. That’s the problem with making a market.
Considering that significant portions of the existing infrastructure is in need of remediation it seems as though getting these essential projects done first would be a more appropriate approach. Doing so would amount to getting our house in order, always a good move before leaping onto the next big thing.