In other words, a stimulus should not just be tax cuts or paying people to dig holes and then fill them in. A stimulus should invest in education. Let's hope our Senators are reading the same article.Japan’s experience also seems to argue for spending heavily to promote social development. A 1998 report by the Japan Institute for Local Government, a nonprofit policy research group, found that every 1 trillion yen, or about $11.2 billion, spent on social services like care for the elderly and monthly pension payments added 1.64 trillion yen in growth. Financing for schools and education delivered an even bigger boost of 1.74 trillion yen, the report found.
But every 1 trillion yen spent on infrastructure projects in the 1990s increased Japan’s gross domestic product, a measure of its overall economic size, by only 1.37 trillion yen, mainly by creating jobs and other improvements like reducing travel times.
Economists said the finding suggested that while infrastructure spending may yield strong results for developing nations, creating jobs in higher-paying knowledge-based services like health care and education can bring larger benefits to advanced economies like Japan, with its aging population.
Friday, February 06, 2009
Invest in the Future
This morning's New York Times has a good read analyzing what we can learn from Japan's Lost Decade, a period where they suffered a real estate bubble, pumped government spending as a stimulus, but could not raise economic growth. Here's the takeaway:
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The only way for the U.S. to recover is to export more and import less and to export products that are of the same quality but cheaper than what competitors sell. That means working hard and receiving lower pay, among other things.
The problem is that other exporting countries want to do the same. Also, if most are doing the same, who will import?
If this is the case, then there can be no recovery, with or without bailouts or stimulus packages.
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