Auros (auros) wrote,
Auros
auros

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An interesting fiscal policy idea...

Andrew Samwick, a quite conservative (but sane) economist, has suggested that the federal gov't should start planning out its infrastructure capital investment over a period of several years, much as it already does for large defense purchases. (Big defense purchases, like naval vessels, are paid for over a period of several years; IIRC the defense budget can schedule expenses as far out as four years from the fiscal year officially being planned for.) Then it could easily empower a fiscal agency similar to the Federal Reserve to tweak the scheduling of those projects, creating instant hiring (boost aggregate demand) with the benefit of investment in infrastructure (boost aggregate supply) to provide economic stimulus when needed, without the kind of delays and policy arguments we're seeing currently. The agency could also force delays when the economy was already booming, both to help bring the budget into balance, and to help prevent inflation and the kind of "overheating" that allows money to flow into asset bubbles.

It's an interesting thought. And, it turns out, something just a little bit like it has been proposed by Senators Dodd (D-CT) and Hagel (R-NE). Their version is a federal infrastructure bank, which would essentially use monetary policy to influence fiscal policy, by infusing money into infrastructure projects (increasing gov't debt to spend on the infrastructure and associated jobs -- just like directly buying the projects would) when the economy looked like it could use a boost.
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