by Mitch Kokai
Senior Political Analyst, John Locke Foundation
Can it be that the U.S. political system has reached consensus on an important economic issue? Unfortunately, yes, even in this peculiar election year.
While the candidates for president don’t admit that they agree on anything, their semiofficial documents and semicredible stump speeches suggest that they are all Keynesians now.
Again? Richard Nixon, please don’t call us, and we won’t call you.
Led by Hillary Clinton and Donald Trump, both major political parties are turning again to public investment in infrastructure. Just like every other president since 1928 who faced a punk economy, the two candidates are promising to get the country moving again, get it growing more, get it building more, and get it borrowing more.
Although he has previously focused on improbably large tax cuts, Trump last week also stressed an improbably large infrastructure investment plan that he brags will cost $1 trillion over five years. Details to be tweeted soon. It will be really huge, that’s all we have heard.
Clinton has proposed a five-year plan to add $250 billion of infrastructure spending to the $305 billion being provided by the five-year transportation-spending bill enacted last year. Clinton also talks about a federal infrastructure “bank” initially capitalized at $25 billion, which would be able to lend $225 billion or so on a revolving charge plan. …
… Traditional Keynesian economists also just want to see the money. As Harvard University’s Lawrence Summers, former secretary of the Treasury and former head of the National Economic Council, said in an op-ed article last week, “What is needed is more demand for the product of business. This is the core of the case for policy approaches to raising public investment, increasing workers’ purchasing power, and promoting competitiveness.”
Although most of Summers’ essay was about the usefulness of economic growth in raising low incomes and reducing inequality, in this telling passage he put the cart of economic growth before the horse of industry that pulls it. We don’t need more demand for products; we need more innovative products that can be sold for prices people can pay.