From: jwh@citi.umich.edu (Jim Howe)
Subject: Re: A Supply Side Call to Arms
Date: Thu, 19 Nov 92 15:41:05 EST
Organization: IFS Project, University of Michigan
Reply-To: jwh@citi.umich.edu

In article <1egjoaINNcdl@usenet.INS.CWRU.Edu>, bo275@cleveland.Freenet.Edu (Larry R Beam) writes:
|> 
|>     Many  Americans feel  as James  W. Howe  does--that public
|> spending is some how  inherently wasteful (see article 13671).
|> They and he are wrong.
|> 

Obviously a matter of opinion.

|>     He writes that "There are  countless examples of roads and
|> bridges that  have been built  for which there  is no rational
|> reason." I can't think  of even one such  example; here in the
|> Cleveland  metropolitan region,  and  the other  parts  of the
|> country, public roads and bridges  are heavily used, and their
|> contribution    economic   welfare    and    productivity   is
|> immeasurable.
|> 

I personally know of one big example in Michigan, an infamous
creation known as the Zilwaukee bridge.  When I-75 was first
built, it crossed the Saginaw river via a drawbridge.  For
many years, a new bridge was planned to replace the drawbridge.
Obviously when the bridge is up it can create tremendous
traffic tie-ups.  The idea was good at the time.  However,
before the new bridge was built, a bypass was built which
completely obviated the need for a replacement for the drawbridge.
It would have been a simple matter to redirect traffic onto the bypass
when the bridge was going up.  Signs were already in place to warn
drivers, all that was necessary was to give them instructions to
take I-675 instead of continuing on.  The extra distance and
time lost on the bypass was minimal at worst.  Did this cause
the government to reconsider its plan?  No.  They went ahead and
built one of the most expensive bridges possible.  It was late,
it was over budget, it practically fell down before they hired
a new contractor to fix and finish it.  In other words it was
a boondoggle.  This bridge was an absolute waste of taxpayer
money.  I have read of similar problems in other areas but I
don't know the specifics.  I believe there is a bridge on the
East Coast somewhere which literally doesn't connect to anything,
for example.

|>     The existence of adequate  infrastructure, in good repair,
|> is absolutely essential to  economic success. And our nation's
|> economic success is essential to every facet of our lives.

Agreed, however much of that infrastructure can be and is being
provided by *private* investment.  For example, if the government
would remove restrictions on the phone companies, it wouldn't
be long before houses were wired with fiber instead of copper.
We don't need to have a government program, we just need to
get government out of the way.

|> 
|>     After admitting that some  public projects are beneficial,
|> Mr. Howe writes, "The question is what is the opportunity cost
|> of public works projects.  Could  the money have been spent on
|> other things  which *also*  would have  benefited the American
|> people, and possibly benefited them more."
|> 
|>     Mr.  Howe  should note  that,  to the  extent  that public
|> projects  are  built   by  workers  who   would  otherwise  be
|> unemployed, their  opportunity cost  is zero.  The question of
|> which proposed  projects will  yield the  most benefit  to the
|> American  people is  very  difficult. Because  public projects
|> yield  different degrees  of  benefit to  different  groups of
|> people, reaching thorough consensus as to which ones should be
|> built  is  always  difficult,  and  never  is  everyone  fully
|> satisfied. C'est la vie.
|> 

However it is a giant leap of faith to assume that the workers
employed by public works projects would have otherwise been
unemployed.  Money taken from the public to pay for public works
project is money that can't be spent by the public.  If you
create jobs via public works, you are likely killing jobs elsewhere.
You can't take a large amount of money out of the private sector
and assume that no ill effect will occur.  In addition, government
is horrible at analyzing a situation to determine *if* money
should really be spent.  The Zilwaukee bridge is a prime example.
Politicians aren't interested in alternative solutions if they
don't have high visibility.  Putting up signs to redirect traffic
when a drawbridge is going to open isn't nearly as impressive as
building a bridge, even though the costs for building the bridge
are high and the benefits non-existant.

|>     America  must--and  under  Bill   Clinton,  I  believe  it
|> will--increase  immensely its  social spending  on maintenance
|> and construction  of public  works. As  everyone who  has ever
|> owned  a  car  or home  knows,  deferring  maintain frequently
|> elevates  costs.  The  failure of  Reagan  and  Bush  to spend
|> adequately on  such things as  roads and bridges  is among the
|> worst crimes of their leadership.
|> 

Where are all these falling down bridges and roads I hear about.
I've driven all over the state of Michigan and haven't seen 
any.  All summer long road construction projects were underway.
I'm not saying that there aren't problem areas, but I would bet
the problems involve local politics more than lack of funding.

|>     Mr Howe writes:  "Our government has  spent money building
|> sports arenas and stadiums which are underused, spent money on
|> transit systems which can't support themselves, etc."
|> 
|>     Here in Cuyahoga County--the  Cleveland area--voters, by a
|> large  margin, agreed  a few  years ago  to tax  themselves to
|> finance the building of a new stadium. Chronic complainers say
|> it's all a  waste. I, and  most voters, I  believe, feel pride
|> and optimism for our city as  we watch the new stadium rise on
|> what was an urban waste-land. Will Cleveland's new facility be
|> "underused," as Mr. Howe suggests others are? That will surely
|> be the  judgment of  some. Yet  the voters  frequently support
|> such projects.
|> 

If a local area wants to tax itself to pay for stadiums and
transportation systems, that's their problem.  Where I have a
problem is being taxed to pay for your stadium, or having
you taxed to pay for mine.  Federal money helped build the
Pontiac Silverdome (which is losing money), the Joe Louis
Arena in Detroit (which is used almost exclusively for hockey),
the Detroit People Mover (which is losing money), etc.  I see
no reason why people from other states should have to pay 
for these projects.  If having a new stadium brings pride
to the people of Cleveland then you damn well better plan
on paying for it yourselves.  Federal funding for a sports
stadium is hardly spending which benefits the 'general welfare'
as spelled out in the Constitution.

|>     And it was the  voters here--acting through the democratic
|> process--who agreed to  pay for one  of those "transit systems
|> which can't support  themselves." Voters here  took both these
|> actions  because the  market  had failed  to  deliver adequate
|> sports facilities  and public  transportation. They recognized
|> that their well-being  and productivity would  be increased by
|> moving some resources  from private to  public hands, allowing
|> government to provide these public efforts.
|> 

I'll bet you received some level of Federal funding for your
transit system.  Once again, fixing Cleveland's transit system
is hardly in the general interest.


James W. Howe                  internet: jwh@citi.umich.edu
University of Michigan             uucp: uunet!mailrus!citi.umich.edu!jwh
Ann Arbor, MI   48103-4943         
Newsgroups: sci.econ