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A Better Way to Stimulate

Max Fraad Wolff Feb 4, 2008

There are two broad ways to critique the proposed $150 billion stimulus package. One, are the details correct? Currently, the government is waiting until after tax season to mail out rebate checks. This means many Americans will pay taxes to the IRS by April 15, and then get a tax rebate months later.

Instead of having Americans mail money back and forth with Uncle Sam, there could just be an assessment that lowers the tax burden on target recipients. This would speed the policy, reduce administrative costs and lower America’s tax burden. It would be a less effective vote-buying plan. Excluding low-wage earners and the unemployed, which the plan does, makes no sense. We know much of the stimulus will be diverted to taxes and savings or used to purchase imported goods, all of which blunt positive economic effects. We could target lower income folks with bigger rebates. These folks will not and cannot save and make so little that they escape taxation on income. More bang, less buck is always the better course.

A wiser plan might invest in retraining and education for displaced workers. As the great housing boom busts, people need assistance in switching out of housing-related work.

The second way of critiquing the stimulus is to zoom out and survey the economy. Doing so presents more radical alternatives. Refunding taxes is likely slow and short sighted and not the most optimal solution. A better use of money would be to fix our decaying infrastructure.

The American Society of Civil Engineers reports that our national infrastructure has been neglected to the point of imperiling life, restricting freedom of movement and creating a drag on commerce. Our roads, bridges, levees, dams and water treatment systems are slumbering weapons of massive destruction.

The estimated minimum cost of upgrading our infrastructure is $1.6 trillion. A 10 percent roll-out of critical action would be a stimulus about the size of the proposed $150 billion plan. Funds can be distributed through state, local and federal agencies, and will absorb some people and equipment displaced from building and related trades. It is a long-term uniting investment that is overdue. This could give us cleaner water, an improved environment, safer transit systems and lower-cost more competitive production infrastructure.

We could even begin to build a national public transit system like our European and Asian rivals already have. That would reduce both our use of imported oil and greenhouse gas emissions.

I know there are many problems with this. In the end a safer modern infrastructure, reduced oil imports and a cleaner environment pale in comparison to half a mortgage payment, a new TV or a shopping spree at Walmart.

Every crisis is an opportunity to ask the big questions about what went wrong and how we can build a future better than the present. If we don’t, future generations may deem us insane for doing the same thing and expecting a different result.