Solving the Yankee Economic Crisis

How’s that for a whopper on a Saturday morning?

I have been thinking about this and it is a classic Gordian Knot.  The tax/spend balance is out of whack and there is very limited political will to seriously tackle the tax side or the spend side.  The unemployment rate is something like 17% when you include part timers who want to work in full time jobs.  And, of course, there are a variety of more structural economic and demographic problems.

Where is the growth to come from?  Consumers are still deleveraging and and the housing market is still very weak.  Governments are pushing their ability to spend to the max.  However, business is sitting on several trillion worth of money to invest but it won’t.

So my big solutions?  A 10 year building America infrastructure investment program similar to the one put in place after WW2 to integrate veterans back into the workforce.  The difference would be in my model this would be funded by those trillions that business has set aside through P3s.   Use the private capital to fund the infrastructure investments – the Yanks like pay as you go anyway so putting tolls on bridges or highways shouldn’t be a huge problem and the cost is delayed for years while the infrastructure is getting built.

It doesn’t cost government anything and the jobs are the type that can be accessed by many of the country’s unemployed (the unemployment rate among those without high school is more than three times higher than among those with a university degree).

It will put that sidelined capital to work.  It will stimulate consumer demand and it will continue to help households deleverage.

It will bolster governments with new tax revenue and reduce the amount paid out in UI benefits and welfare.

Most of all it will fix and expand infrastructure that think tanks and community leaders have been begging for over decades.  The amount the Yanks spend on physical infrastructure as a % of GDP has been steadily declining.

Just a thought.