Infrastructure

Here is a bit from a post by Brad DeLong on his blog Grasping Reality with Both Hands. The post is in response to an Obama insider pooh-poohing the idea that infrastructure spending by Obama would have done much about the unemployment problem. The insider claims that building the Hoover Dam only added 5,000 jobs in the midst of the Great Depression:

The total appropriations for the Hoover Dam were $50 million in nominal. With nominal GDP per worker of $1000 per year back in the 1930s, that means that the immediate employment impact of the Hoover dam was vastly more than 5000 workers. Figure that 50,000 employment-years of useful paid labor were generated by the dam: the people who worked on the dam, and the people who brought materials to the dam, and the people who made the machines that the people who worked on the dam used, and the people who made the materials that were brought to the dam, et cetera, et cetera.

And then there are the multiplier effects: The people who worked on the dam had higher incomes than they would otherwise have had, and they spent those extra incomes, and the businesses that sold them products hired more workers to meet the added demand and hired workers and boosted their incomes, and spent their incomes on extra goods, and businesses then hired more workers to produce those extra goods.

Figure a multiplier of 3, and thus an impact of the Hoover Dam during the Great Depression of 150,000 employment-years of useful work relative to what would have been the case had the appropriation been cancelled and the resources devoted to "deficit reduction."

5,000 is not the number you should carry in your brain as the employment impact of the Hoover Dam.

150,000 is the number you should carry in your brain.

150,000 >> 5,000

How to avoid our own lost decade: [W]e should recognize that it is a false economy to defer infrastructure maintenance and replacement, and take advantage of a moment when 10-year interest rates are below 3 per cent and construction unemployment approaches 20 per cent to expand infrastructure investment...

Tragically Obama surrounded himself with yes-men who subscribed to the view that $700 billion was "enough" stimulus and that making a third of that "tax cuts" to appease the Republicans was astute. The sad fact was and is that it wasn't enough. The US is into a decade of lost growth because it is bumping along the bottom in a never-ending recession. Neither major party in the US is willing to recognize this fact. They are only too happy to sacrifice the 14 million unemployed and the millions losing their houses, the youth coming out of college not finding jobs, and the long-term unemployed becoming unemployable just so they can keep Wall Street happy. Tragic.