A California Republican

One of the solutions being touted by President-elect Obama, Congress, and the California Governor to the economic crisis is to raise spending on public works projects.

President-elect Obama wants to spend it on “green” public works projects. How building roads is gree, I don’t know, but I assume there will be some criteria set down for that. Roads aren’t green. With the amount of energy and carbon emissions it takes to build a road, there is no possible way it can be considered a “green” project.

But building housing, and building it up rather than out, would be a green-ish project. I think that building mass transit systems would also fall under this title.

Gov. Schwarzenegger has put no such “green” limitations on his desire to spend public works money. His plan is to sell the rest of the bonds quickly, and invest that money into public works, quickly, so that the people most affected by this economic crisis (construction) can have jobs.

There are a few problems with this concept.

The first is that investors are not buying bonds. New York and New Jersey just tried to sell a total of $300 million in bonds and no one bought any of it. Maybe it will be a different situation in California. The reason investors gave for not buying bonds was concern about the stability of the revenue and the credit crisis. If that is the concern - then California shouldn’t be able to sell any bonds. The state is headed towards another bankruptcy if there are not some solutions to the budget. There is a huge structural problem with the budget, which will lead to California defaulting on the bonds. I don’t think California is going to be able to sell the bonds, much less spend the money on public works.

The second problem is that the Treasurer says there is no mone money to spend on public works. In about 8 days, the Treasurer is going to stop payment on all public works project. This includes those fixing the freeways (I love those projects, my car is getting much better mileage with the newer pavement and fewer holes).

This will have major side effects. It is going to worsen the economic recession we are all in. More people are going to be out of jobs, and more businesses are going to go under. That means there will be less spending by those people, more demand for unemployment and other state welfare programs. Which will only put a larger dent in the California state budget.

Additionally, those projects are going to sit undone. Which means they will cost more in replacement of parts of the project that got damaged or stolen because there was no one there to stop it. It will also cost more to build because things are always costing more to build in the future than they do if you build now. This will bring increasing pressure on the California state budget in years to come.

What is the solution? Keep building. It is true that one of the best things you can do to get out of a recession is to build. A government must spend money to build, but we should be building. All the economists agree that this is a good way to go - it worked in past recessions, so it should work now.

Let’s try to use proven solutions to getting out of a recession, rather than whatever bogus stimulus package the California Legislature puts together.