Infrastructure Now is No New Deficit

There are two reasons why spending public money now is a good idea and creates no new deficits. I argue that despite what all the naysayers say, we are not burdening our grandchildren by doing this spending (though we may have by buying that flatscreen TV).

First, over the last thirty years we burdened (or really most of us were burdened) with a deficit in order to allow taxation to be significantly cut (largely for people who are getting ready to leave the workforce now). That deficit comes in the form of crumbling infrastructure -- our roads, our bridges, our power generation systems and our hospitals have largely been left to crumble or have merely been modestly maintained. Also our public service has been allowed to wither so that now that now it is old and worn out and about to retire en masse.

All of these things are things that will eventually have to be paid for by somebody and those somebodies were going to be future generations (or in many cases us -- who were the future generations when things were left to rot). Thus the spending that we are going to see in infrastructure today in fact is just the conversion of one form of debt (a maintenance debt) into another form of debt (a cash debt). The good thing about a cash debt though is it brings the maintenance debt out into the open and the current generation will have to start paying -- not our grandchildren. Thus current infrastructure spending actually reduces the burden on our grandchildren (provided the spending is not on junk).

Second, now is the best time to actually keep the costs of such infrastructure spending in control. Labour is available and labour costs are down (just ask anyone here in BC who needs to do something on their house). Material costs are down across the board -- steel, gravel and wood are all at lows we have not seen in years and energy costs are a fraction of what they were six months ago. Furthermore, the prospects of these things shooting up in response to the stimulus package is essentially nil (at best they are likely just not to continue to tumble). As a result we will be building this infrastructure when it is economically prudent to do so (contrast this will the Sea to Sky Highway upgrade which was built when labour and material costs in BC were at an all time high).

Notice neither reason is 'we need to deliver stimulus'. That reason is more controversial and likely to lead to shouting matches and all sorts of abuse but what can one say against fixing the hole in the roof when prices are low?