In the wake of a historic snowfall in Washington, perhaps snow removal can help make the case for deficit spending. It makes sense for the government to borrow money, if necessary, to remove snow from streets. The main reason it makes sense economically is that the snow removal makes sense economically — it helps people get to work, and as a result, they create things of value. The net result is more value than if the snow had not been removed.
When people create more value, the ultimate result is that the country is more valuable, and therefore, the currency is more valuable.
Most of the people who are worried about deficit spending, along with most of the people who advocate deficit spending, are not making the right distinctions about the value created by the spending. In a time of high unemployment, putting people back to work is not just a way to get the economy on track — in fact, it doesn’t necessarily accomplish that. But it does allow something of value to be created by the people who would otherwise not be working, an opportunity that is lost forever if it is not taken. The people who are saying we need to “tighten our belts” on things like snow removal are focusing too much on the money and forgetting the value of work.
There are endless government projects that have the same kind of economic rationale as snow removal. If it were politically feasible, the federal government should borrow or even print about $250 billion right now for energy improvements in government-owned buildings. The best case for this is for the buildings owned by the federal government, but with states in such distress and unemployment as high as it is, it would make sense to extend this to state government buildings. This work makes financial sense because the energy investments are earned back in lower utility bills within 3 to 4 years. It makes sense in job terms because there are a million unemployed workers who have construction experience and would need little or no training to do the work involved. It is not inflationary because in monetary terms, it makes little difference whether the government is paying interest to foreign bondholders or is paying for energy derived from imported oil. This kind of borrowing adds to the federal government’s ability to borrow because it strengthens its financial position, making it more able to make its debt payments.
Some of the $200+ billion in stimulus spending that was approved a year ago as part of the economic recovery bill and is now being spent fits this kind of profile. Some of it does not. Congress does not seem to know how to make this distinction. But there is a need for more deficit spending on projects like these that are viable short-term investments in financial terms. Too much emphasis is being placed on long-term investments, where the payback may be 5 to 10 years away. Many of those can be saved for better economic times. Too much emphasis, also, is being placed on make-work projects, like the Cash for Clunkers program. And there is far too much discussion of business tax cuts that are supposed to result in businesses making long-term investments. That kind of budget deficit leads to inflation. Borrowing money for things like snow removal does not.