Krugman: The Folly of Prudence

[ProSense]

The Folly of Prudence

Many American roads are in pretty bad shape — I can attest to that, after driving up to Massachusetts and back for family business last week. When you combine that fact with the underlying macroeconomic situation, of which more in a minute, the case for spending substantial sums on repair seems obvious.

But Obama’s proposal for what is actually a modest infrastructure program appears to be going nowhere, thanks to a fight over how to pay for it.

Which brings me back to something I started saying way back in 2008, which is still true: when you’re in a liquidity trap, virtue becomes vice and prudence becomes folly. Asking how we pay for infrastructure may seem prudent, but it is in fact deeply foolish.

Think about it: what would the true costs be of repairing our roads? It wouldn’t divert capital from other investments — capital has no place to go, and markets are practically begging the federal government to borrow funds and put it to work:

- more -

http://krugman.blogs.nytimes.com/2014/04/29/the-folly-of-prudence

Obama Asks for $302 Billion to Fix Bridges and Potholes
http://www.bloomberg.com/news/2014-04-29/obama-asks-for-302-billion-to-fix-bridges-and-potholes.html

[ProSense]

1. Kick! n/t

[djean111]

2. So - Krugman is saying borrow the money, and the administration is saying no, the taxpayers have

to rearrange their budgets to paying for infrastructure and not buy other things? Is there that much disposable income?
I certainly cannot afford toll roads.
What will happen when minimum wage earners literally have to work an hour or two just to pay the tolls in order to get to work?

[pampango]

3. Obama's proposal: "a temporary tax increase on overseas earnings by companies".

From the link in Krugman's article.

The funding proposal is in line with President Barack Obama’s February budget request. House and Senate panels are drafting their own bills and there are no plans in Congress to consider the president’s proposed way to help pay for it: a temporary tax increase on overseas earnings by companies.

http://www.bloomberg.com/news/2014-04-29/obama-asks-for-302-billion-to-fix-bridges-and-potholes.html

[djean111]

4. I have absolutely no faith that any tax increase on any corporation will be in a signed bill.

[pampango]

5. Republicans would oppose such a bill, just as they would oppose the borrowing Krugman proposes.

Krugman is saying borrow the money, and the administration is saying no, the taxpayers have to rearrange their budgets to paying for infrastructure and not buy other things?

My post was meant to show that the administration did not say no to Krugman's proposal to borrow the money without offering an alternative that involved the taxing the overseas profits of corporations.

I agree that is unlikely to be enacted into law. Of course, it is the same republicans in congress who would not vote such a tax into law who also oppose borrowing the money as Krugman proposes.