Infrastructure and Carbon

| Mon Nov. 10, 2008 1:26 AM EST

INFRASTRUCTURE AND CARBON....Robert Reich says the best way to stimulate the economy is through massive spending on infrastructure:

So the crucial questions become (1) how much will the government have to spend to get the economy back on track? and (2) what sort of spending will have the biggest impact on jobs and incomes?

The answer to the first question is "a lot."....The answer to the second question is mostly "infrastructure" — repairing roads and bridges, levees and ports; investing in light rail, electrical grids, new sources of energy, more energy conservation. Even conservative economists like Harvard's Martin Feldstein are calling for government to stimulate the economy through infrastructure spending. Infrastructure projects like these pack a double-whammy: they create lots of jobs, and they make the economy work better in the future.

This is actually something that conservatives should be relatively happy with. Entitlement programs never go away once they're enacted, but infrastructure projects do. Spending a trillion dollars on bridges and electrical grids may be a lot of money, but it's a well-defined lot of money that isn't likely to continue indefinitely. What's more, conservatives aren't actually opposed to bridges and electrical grids on principle, so from their perspective the money is also being pretty well spent. (Or at least, not too badly spent.) All in all, it should get a fair amount of support.

Here's another way to make it even better. One of the problems with running a big deficit is that we want it to be temporary. Infrastructure helps with the spending side of that, since it's not likely to go on forever. But how about on the revenue side?

A pretty good answer might be found in Barack Obama's energy plan, which includes a cap-and-trade proposal to reduce carbon emissions. One of the details of his plan is that it includes full auction of carbon permits, with the revenue from the auction going to the federal government. But that money won't start rolling in immediately. If a cap-and-trade plan were passed in 2009, it would probably take effect in 2012 or so, and the revenue stream would start small the next year and then grow every year after that. That's perfect timing. We don't want to raise taxes right now, but a program that guaranteed a growing revenue stream starting a few years from now would help convince investors that the current budget deficit won't last forever.

That's not the main reason to pass a cap-and-trade bill, of course. The main reason is to start reducing carbon emissions. But an infrastructure program that makes the country more productive in the future but automatically winds down, combined with a revenue program that automatically winds up in the out years, is a pretty fiscally conservative plan. That doesn't mean conservatives will support it, of course, but they should.

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