Obama on infrastructure: Wrong again on government ‘investments’

Obama on infrastructure: Wrong again on government ‘investments’

In yet another summer speech on the economy yesterday, President Obama trotted out familiar tax-and-spend ideas, this time pairing his latest call for a tax increase with his familiar call for increased government “investment” on infrastructure.

He touched upon a host of wish-list projects: widening roads, dredging ports, repairing older bridges, and modernizing the nation’s air traffic control system. Obama gets it right when he says the country needs a strong, reliable infrastructure to facilitate economic activity and growth. The trouble is that there is a big difference between the limited role for government regarding true public infrastructure needs and Obama’s vision of massive federal spending on and onerous control of America’s infrastructure.

His Washington-centric prescription for helping the economy also ignores a couple economic realities.

First, every time the government spends, it takes money out of the economy. In this case, Obama wants to tax U.S. businesses as a way to obtain new spending money. It’s easy to point to the new construction project that the government spending has funded. Hidden, but of crucial importance, is the negative effect on the economy from the higher tax burden that’s necessary to pay for that spending. The money didn’t come out of thin air. Government simply transferred resources from the more efficient private sector to the less efficient public sector.

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