"Fiasco Potential is High"

Another good point from Gregor MacDonald:

The value proposition of commuter and light rail is so powerful, on so many different levels, that I cannot understand why it’s not in the Number One position in current discussions of the Obama plan. It should be above Carbon and Climate issues, Solar and Wind issues, vehicle standards issues, and certainly well above Road and Bridge issues. The only comparable investment theme I find in the proposed stimulus plan relates to the Grid. We will indeed need a new Grid to feed power from new sources of utility grade solar and wind, into electrified public rail transport.

The Obama team appears suddenly quite confused on a number of levels, as we approach the inauguration. For example, if one agrees we’re in a liquidity trap and that Keynesian policy holds the answer, then Tax Cuts should be almost completely off the table. They’ll do nothing. Tax cuts–again, if you believe we are in a deflationary liquidity trap–are nothing more than the fiscal equivalent of cutting interest rates.

More importantly, while Obama has sounded the correct economic goal when saying he wants investments that have large, back-end payoffs, there is simply no competition from investment in roads and bridges when compared to rail transport.

The problem the country faces right now is that we already invested in the wrong things. Wrong things have little sustainable payoff. We invested in Houses and Cars, and did so for decades. But houses and cars are really just tools that are supposed to set us up to do the larger work. In the United States the car and the home became economic fetishes. Alot of the country now lives in a home that’s too big, in a town too far from work. Continuing to invest in this structure is crazy, given that oil prices will be sky-high again in the near future. Politically, however, it will be difficult for the nation’s Governors to do otherwise, and therein lies a problem.