Learning from Japan: Infrastructure Spending Won't Boost the Economy

(Compiler's note -- source a friend: Exerpts here—complete paper below, with source.

Although the benefits of a costly, infrastructure-focused stimulus package based on massive gov­ernment spending may be intuitively attractive, past evidence suggests that the impact of govern­ment spending programs that are intended to encourage economic growth is very modest and unlikely to enhance recovery or deter recession. As noted above, the Japanese government imple­mented such a program during the 1990s, and the consequence was two decades of economic stagna­tion. Less ambitious infrastructure stimulus pro­grams have been implemented in the United States over the past few decades, and numerous indepen­dent and government studies have concluded that these programs had little impact on economic activity or jobs.

It is worth remembering that the New Deal of the 1930s substantially and permanently increased the scope of the federal government as Congress and the President attempted to spend their way out of the Depression. After the stock market collapse in 1929, the Hoover Administration increased federal spending by 47 percent over the following three years. As a result, federal spending increased from 3.4 percent of GDP in 1930 to 6.9 percent in 1932 and reached 9.8 percent by 1940. That same year-- 10 years into the Great Depression--America's unemployment rate stood at 14.6 percent.

It is important to recognize that our infrastruc­ture and the continued investment in it are impor­tant underpinnings of future economic growth and sustained prosperity. But it is equally important to recognize that the long-term nature of these bene­fits to cost-effective mobility and quality services, and the need to choose carefully among competing options and technologies, suggests that a stimulus scheme based on spending is ill-suited to the short-term stimulus needs that are of concern to policy­makers. Given current congressional practices, any stimulus package approved by Congress is certain to contain a host of projects that have nothing to do with prosperity and everything to do with political influence and current fashion.

Ronald D. Utt, Ph.D., is Herbert and Joyce Morgan Senior Research Fellow in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.)

by Ronald D. Utt, Ph.D.

As the U.S. economy continues to deteriorate and has now entered a recession of uncertain magnitude, many in Congress, the media, and the business com­munity are pushing for a bold federally funded stimu­lus package that they claim will create jobs, raise incomes, and put the economy back on its path of positive economic growth. Not surprisingly, much of this advocacy stems from a nostalgic embrace of Pres­ident Franklin Delano Roosevelt's New Deal, imple­mented in the early 1930s in a failed effort to end the Great Depression that had its origin in the stock mar­ket collapse of October 1929.

Related to this sentimental longing for New Deal authenticity is the revival of the teachings of John Maynard Keynes, who postulated in his 1935 The General Theory of Employment, Interest and Money that "There is room...to promote investment and, at the same time, to promote consumption, not merely to the level which with the existing propensity to con­sume would correspond to the increased investment, but to a higher level still."[1] Subsequent generations of elected officials throughout the world took this obser­vation as a license to raid their treasuries, and no country could be sorrier for endorsing a primitive ver­sion of Keynes's teachings than the Japanese--who squandered vast sums of national wealth in a vain attempt at stimulus that cost them the chance to lead the world in economic growth and prosperity.[2]

New Deal Back in Vogue

Here in America, federal officials and lobbyists have raced back in time to embrace their own retro-Keynesian kitsch by passing H.R. 7110, the Job Cre­ation and Unemployment Relief Act of 2008, in September. The Congressional Budget Office (CBO) estimates that this bill will cost $58.2 billion between 2009 and 2013.

More recently, President-elect Barack Obama announced his intention to propose a stimulus package composed of spending increases and tax reductions that may total between $500 billion and $1 trillion and that will include a substantial amount of money for infrastructure, an inexact term that includes the physical assets upon which everyone depends: telephone poles, school buildings, roads, electric wires, power-generation plants, waste-water treatment facilities, grist mills, reservoirs, etc. This focus stems in part from a belief that much of our infrastructure has deteri­orated and that a substantial investment in it is essential to long-term growth and prosper­ity while also providing jobs and profits in the present.

Not surprisingly, trade associations that repre­sent road, rail, and transit builders and operators have been aggressive in their advocacy of more infrastructure spending, promising tens of thou­sands of new jobs and vastly improved service in the future. The media have also joined in; The New York Times's Paul Krugman was one of many to make this case for more infrastructure spending when he urged recently that "[f]iscal expansion will be even better for America's future if a large part of the expansion takes the form of public investment--of building roads, repairing bridges and developing new technologies, all of which make the nation richer in the long run."[3]

Little Impact on Jobs or Growth

As The Heritage Foundation has noted in earlier reports, past infrastructure spending--especially related to transportation--has little to show in terms of countercyclical stimulus or job creation.[4] Much of this lackluster impact stems from the long lag time involved in getting such spending pro­grams up and running, as well as the propensity of the state and local governments to substitute federal money for already-committed state and local money in order to shift such funds to other purposes.[5]

In this regard, trade associations like the Ameri­can Association of State Highway and Transporta­tion Officials, which contend that there are more than 3,000 transportation projects ready to get started within 30 to 180 days, are most likely refer­ring to projects that are already funded. In this time of need, no sensible state government would waste the considerable costs associated with planning, permitting, engineering, and management in get­ting projects "ready to go" unless there were funds already available to start--and complete--them.

In making his pitch for more spending, Mr. Krugman perhaps anticipates that critics of his spending scheme might cite the example of Japan, whose reliance on bold infrastructure spending in the early 1990s led to the squandering of so much money on so many wasteful projects that the coun­try soon slipped from one the world's most prosper­ous nations to the status of a middling also-ran that has yet to recover from its mistake. Krugman attempts to create a parallel to New Deal timidity by arguing that "[i]n 1996-97 the Japanese govern­ment tried to balance its budget, cutting spending and raising taxes. And again the recession that fol­lowed led to a steep fall in private investment."

The Japanese Experience

In fact, Japanese fiscal policy during the 1990s was flamboyantly unrestrained, and during that decade no other advanced industrialized country had expanded government spending by nearly as much. Starting in 1991, government spending (outlays) in Japan accounted for just 31.6 percent of the nation's GDP--one of the lowest among members of the Organisation for Economic Co-operation and Development (OECD).[6] That year also marked the high watermark of Japanese pros­perity: In 1991, Japan's per capita gross national income (as adjusted for purchasing power parity) reached 86 percent of the U.S. gross national per capita income, compared to the 66 percent Japan had reached in 1970--a remarkable achievement that only tax- and budget-cutting Ireland has achieved since then.

As the decade of the 1990s wore on, many other countries--especially in Europe--were paring back government spending to spur growth, but Japan was doing just the opposite. By 2000, its government outlays had jumped to 38.3 percent of GDP, while Canada had reduced its government's share from 52.3 percent in 1991 to 41.1 percent, and the United Kingdom had gone from 44 percent to 37.5 percent, to cite just a few of the many developed nations that were actively shrinking government over that period to bolster their private sectors.

While Krugman is correct in noting that Japan cut back spending in 1997 (to 35.1 percent from a 36.4 percent share of GDP), it soon shot up to around 38 percent, where it remains today. As a 2001 Heritage Foundation report noted, a substan­tial portion of Japan's stimulus spending was focused on infrastructure:[7]

Beginning in 1991-1992, Japan adopted the spending approach now advocated by many in the U.S. Congress when it embarked on a massive nationwide program of infrastruc­ture investment. Between 1992 and 2000, Japan implemented 10 separate spending stimulus packages in which public infra­structure investment was a major compo­nent. Excluding the 2000 program, for which final costs are not yet available, addi­tional spending on the infrastructure com­ponent alone amounted to 30.4 trillion yen, or $254 billion at the current exchange rate.

Cutting spending seems not to have deterred prosperity in most of the European countries that have done so since 1990, while the relative prosper­ity of the Japanese has been on the decline as gov­ernment spending has advanced. After peaking at 86 percent of U.S. income in 1991 and 1992, Japa­nese income continually fell behind the U.S., and by 2000, Japan's per capita gross national income had fallen to 73.7 percent of that of the U.S. despite the increased spending stimulus in Japan during the 1990s and into the 2000s. This decline in relative performance reflects the fact that the Japanese econ­omy grew at an annual rate of only 0.6 percent between 1992 and 2007. In 1991, only the United States, Austria, and Switzerland had higher per cap­ita incomes than Japan. By 2006 (the most recent OECD numbers), Japan's per capita income was surpassed by Austria, Australia, Belgium, Canada, Denmark, Finland, Ireland, Holland, Switzerland, Sweden, and the U.S.[8]

Conclusion

Although the benefits of a costly, infrastructure-focused stimulus package based on massive gov­ernment spending may be intuitively attractive, past evidence suggests that the impact of govern­ment spending programs that are intended to encourage economic growth is very modest and unlikely to enhance recovery or deter recession. As noted above, the Japanese government imple­mented such a program during the 1990s, and the consequence was two decades of economic stagna­tion. Less ambitious infrastructure stimulus pro­grams have been implemented in the United States over the past few decades, and numerous indepen­dent and government studies have concluded that these programs had little impact on economic activity or jobs.

It is worth remembering that the New Deal of the 1930s substantially and permanently increased the scope of the federal government as Congress and the President attempted to spend their way out of the Depression. After the stock market collapse in 1929, the Hoover Administration increased federal spending by 47 percent over the following three years. As a result, federal spending increased from 3.4 percent of GDP in 1930 to 6.9 percent in 1932 and reached 9.8 percent by 1940. That same year-- 10 years into the Great Depression--America's unemployment rate stood at 14.6 percent.

It is important to recognize that our infrastruc­ture and the continued investment in it are impor­tant underpinnings of future economic growth and sustained prosperity. But it is equally important to recognize that the long-term nature of these bene­fits to cost-effective mobility and quality services, and the need to choose carefully among competing options and technologies, suggests that a stimulus scheme based on spending is ill-suited to the short-term stimulus needs that are of concern to policy­makers. Given current congressional practices, any stimulus package approved by Congress is certain to contain a host of projects that have nothing to do with prosperity and everything to do with political influence and current fashion.

Ronald D. Utt, Ph.D., is Herbert and Joyce Morgan Senior Research Fellow in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.

---

[1]John Maynard Keynes, The General Theory of Employment, Interest and Money (New York: A Harbinger Book, 1964 edition), p. 325.

[2]Ronald D. Utt, Ph.D., "Lessons on How NOT to Stimulate the Economy," Heritage Foundation Backgrounder No. 1495, October 22, 2001, pp. 3-6, at http://www.heritage.org/Research/Budget/BG1495.cfm. See also Amity Shlaes, "The Perils of a Cement Tsunami," The Washington Post, December 10, 2008, p. A25. at http://www.washingtonpost.com/wp-
dyn/content/article/2008/12/09/AR2008120902785.html.

[3]Paul Krugman, "Deficits and the Future," The New York Times, December 1, 2008, at http://www.nytimes.com/2008/12/01/opinion
/01krugman.html?pagewanted=print(December 16, 2008).

[4]Ronald D. Utt, Ph.D., "More Transportation Spending: False Promises of Prosperity and Job Creation," Heritage Foundation Backgrounder No. 2121, April 2, 2008, at http://www.heritage.org/Research/budget/bg2121.cfm.

[5]Ibid., pp. 6-7.

[6]All subsequent data on incomes are from Organisation for Economic Co-operation and Development, OECD Factbook 2008: Economic, Environmental and Social Statistics--ISBN-92-64-04054-4, "Macroeconomic Trends--Gross Domestic product (GDP)" and "National Income Per Capita (U.S. dollars, current prices and PPPS)," while data on government spending shares come from OECD Economic Outlook 77, Annex Table 25: General Government Outlays.

[7]Utt, "Lessons on How NOT to Stimulate the Economy," p. 3.

[8]Luxembourg and Norway are excluded from these calculations because of anomalous economic factors that distort their data relative to those of other advanced nations.

Keeping Marines Off the Beach

by Norman Polmar

As the new administration takes office, the defense budget will come under extensive scrutiny. A recent editorial in The New York Times entitled "How to Pay for a 21st-Century Military" calls for a halt to the F-22 Raptor fighter, the DDG 1000 Zumwalt-class destroyer, SSN 688 Virginia-class submarines, and MV-22 Osprey programs, among others.

Some "big dollar" programs could be cut, in part to demonstrate the seriousness of the Obama administration to reform the U.S. military establishment. But there will be many programs at risk that have less visibility. One of the leading candidates for cancellation is the long-gestating Expeditionary Fighting Vehicle (EFV), the advanced "amtrac" that has been under development for almost two decades.

The Marine Corps now has ten of the EFVs -- that designation being assigned in 2003 to replace the more prosaic but useful AAAV -- Advanced Amphibious Assault Vehicle, which in turn replaced the LVT -- Landing vehicle Tracked -- designation in 1982.

The EFV can carry 17 Marines on land or sea, at a speed up to 45 mph on land and about 25 knots at sea. The EFV’s range is 325 miles on land and 65 nautical miles at sea.

But those specifications are the "rub." How does the EFV fit into the Marines Corps concept of Operational Maneuver From The Sea (OMFTS)? That concept calls for launching an assault from 25 to 100 nautical miles from the objective -- which may be an inland location, such as an airfield, capital, or military base. Recent studies by the Defense Science Board (DSB) and Naval Research Advisory Committee (NRAC) call for amphibious ships to stand offshore at least 50 miles because of the threat of land-launched cruise missiles (as struck the Israeli frigate Hanit operating off the Lebanese coast in 2006).

Thus, launching an assault from 25 or more nautical miles offshore would see the assault troops flown in by MV-22 tilt-rotor STOVL aircraft and CH-46E and CH-53E helicopters, the former at more than 300 mph and the helicopters at more than 100 mph. And, of course, they could land troops on an inland objective.

Follow-up equipment that was not air landed would be brought ashore by Air Cushion Landing Craft (ACLC), with a new design being developed, and the few remaining LCU landing craft.

Where does the EFV fit in? It cannot be launched from more than about 30 miles offshore because of its limited waterborne range if it is to return to the launching ship; it could be launched farther out if it is to then climb ashore and operate as a personnel carrier. And, even at 30 miles the transit time would be more than an hour, or longer if the seas are rough. If too rough, of course, the EFVs could not be employed.

After the EFVs "hit the beach" they must then travel to the objective. At that point the troops will have been "in the box" for at least an hour. Once ashore, an EFV operating as a personnel carrier has the benefit of a relatively heavy gun armament -- a 30-mm cannon and 7.62-mm machine gun. But it will lack support from armored vehicles -- tanks or even the Marines’ valued LAV (Light Armored Vehicle) -- making the EFV particularly vulnerable to the widely proliferated anti-tank weapons found in the Third World.

The official cost of the EFV is $10 million per vehicle, with several hundred planned to replace the existing AAV-7 series. The total EFV force will not be fielded until at least 2020.

With some "bugs" still to be worked out after two decades of development and the high cost per vehicle, coupled with the operational limitations or at least questions about how the EFV fits into the OMFTS concept, the EFV must be considered a highly visible target for administration budget cutters.

Help Track Muslim Jihadists INSIDE the U.S.

(Compiler's note: A must read article)

From WorldNetDaily

.... Below you will find a special message from our dedicated friends at the Mapping Sharia Project.

An Islamic cleric recently proclaimed that suicide bombings against U.S. troops in Iraq were justified.

It might not surprise you to learn that these were the words of some fanatic Al Qaeda leader hiding in a cave in Pakistan, or a mullah indoctrinating students at a madrassa in Syria. But this was said by an imam in Texas.

That's right, this incendiary statement—advocating the killing of our soldiers—was made right here on American soil. And this Texas imam is hardly alone.

Across the United States, foreign-born clerics are using mosques as staging grounds to advocate violence against non-Muslims and the spread of Sharia, or Islamic law. While presenting themselves as pious spiritual leaders, Islamofascist scholars trained in Saudi Arabia, Egypt, and Pakistan are flooding onto our shores and inciting a young generation of American Muslims to plot the downfall of the Constitution and the rise of law based on the violent teachings of the Koran.

It's not too late to stop this surge of radical Islam on American shores. But in order to stop it, authorities need to know which organizations are advocating treason in our midst.

This is where the Mapping Sharia Project comes in.

While political correctness and red tape often prevent law enforcement from investigating groups allegedly supporting terrorist causes, our operatives are able to collect this important information from the most obvious source—the imams themselves.

At the Mapping Sharia Project, we send our trained field researchers in to meet with imams and learn their views directly from them. So far, we have visited over 200 Islamic centers across the country, and conducted legal interviews with these foreign scholars to learn firsthand what they're advocating.

In order to continue our efforts to document which organizations are advocating violence against non-Muslims, we need your help.

The Mapping Sharia Project is an independent organization that receives no government support. We depend on the support of concerned citizens like you to sustain the manpower and resources required to send our trained researchers out into the field to document how radical Islam is taking root in America.

Consider just a few examples that Mapping Sharia Project researchers have recently uncovered:

* In New York, Islamic leaders advocating putting weapons into the hands of gang members after they have been taught Islam.

* In Virginia, an Islamic leader near Virginia Tech informed our researcher he advocates Sharia law in the U.S., similar to Sudan. He also argued in favor of slaying anyone who does not adhere to "pure Islam."

* In Florida, Islamic leaders support killing non-Muslims and even Muslims who do not agree with their ideology of Sharia.

* In Texas, clerics informed our researchers how illegal funding is obtained in the U.S. and then transferred to foreign organizations in support of terrorist organizations.

Foreign clerics are sowing the seeds of radical Islam here in America. The War on Terror is not a foreign war being fought in Iraq and Afghanistan. Islamofascists have brought the battle to our own backyard. We need to know what they're planning.

The work being done by the concerned citizens at Mapping Sharia Project is critical for national security. We need your help to keep up our efforts to document the foreign nationals who have entered our country to preach hatred and convert young Americans to their evil cause.

The march of radical Islam can be stopped, but only if we know where it is going. Please help the Mapping Sharia Project continue its efforts to defend liberty.

Click Here to help the Mapping Sharia Project by making a contribution today.

P.S. "The Mapping Sharia Project is performing a critical mission," says Joseph Farah, editor and founder of WorldNetDaily.com. "With foreign-born jihadists on American soil preaching violence and seeking to undermine the Constitution, Mapping Sharia plays an invaluable role in identifying potentially dangerous organizations accused of terrorist ties. No one else is doing this work—not the FBI, not the police, not the Department of Homeland Security. So it's up to those of us who recognize the dangers to support the Mapping Shariah Project."

Over 60 per cent of Britain's Muslim schools have extremist links, says draft report

(Compiler's note: Must read -- We frequently refer you to what is happening in Great Britain because there we have a road map of what is coming to the United States, if we fail to act or choose to act as Great Britain has acted over the past 30 years. Seldom in life do we get the opportunity to see so clearly what does not work so that we can avoid replicating what does not work.

The bottom line is that Britain’s approach to dealing with the threat of radical Islam, no matter how well-intentioned, is proving to be an abject failure. Britain’s politically correct attempts to appease and accommodate Islamic militancy, in the hopes of mitigating radicalism and terrorism, are not only failing to mitigate those threats, they are accelerating them.

For instance, two different polls released over the past few years reveal that Britain’s Muslim population is increasingly clamoring for the imposition of Shariah law – which is now officially recognized in numerous cities across the country. These polls also reveal that second-generation Muslims, the children of the immigrants who came to Britain, are likely to be more radical than their parents.

The latest evidence of the failure of Britain’s approach is revealed in the commentary below.

As dangerous as Islamic terrorism is, to focus on that threat to the exclusion of the many ways that “cultural jihad” is being advanced in the West and here in America, is in itself dangerous. What will America be like in 30 years if we have 2,000 Islamic schools and madrassas in this country, a majority of which have links to extremists, teach extremist doctrines, and isolate their students from the world at large?

This is what the chilling study referred to below has found in Britain. This is cultural jihad at work. We are watching the transformation of Britain take place before our very eyes.

If we fail to act…or if we choose to act as Britain has…we are next.)

By Damian Thompson

Britain's Muslim schools have been sharply criticised in a controversial draft report commissioned by a leading think tank which suggests that over 60 per cent of them are linked to potentially dangerous Islamic fundamentalists.

An early version of the report, entitled When Worlds Collide, alleges that of the 133 Muslim primary and secondary schools it surveyed, 82 (61.6 per cent) have connections or direct affiliations to fundamentalists. The 133 schools are in the private sector but supposedly subject to Ofsted inspection.

The report also claims that some of these schools teach "repugnant" beliefs about the wickedness of Western society and Jews.

The claims in the report, written by Denis MacEoin in response to a commission from Civitas, will provoke ritual cries of "Islamophobia" from the Muslim Council of Britain and fellow travellers such as Koran Armstrong. MacEoin has been careful to back up his claims with evidence - in particular, screen captures of links to Islamic hate-mongers, including supporters of Al-Qaeda.

Civitas, however, is not prepared to endorse MacEoin's 61.6 per cent figure, which will not appear in the published version of When Worlds Collide. A spokesman for Civitas explains: "We want to concentrate on claims that are absolutely robust, rather than complicated material, some of it in Arabic, that might unjustly damage someone's reputation."

Perhaps the most alarming finding of the draft I've seen is that so many of these schools (including ones with no connections to political extremism) are bricking up their pupils behind a wall of Koranic injunctions and Sharia law.

The schools known as Darul Ulooms, which base their curriculum on a seventeenth-century Indian teaching system, include very few secular subjects, claims the report. It says: "Their aim is not to prepare pupils for life in the wider world, but to give them the tools for a more limited existence inside the Muslim enclaves."

The consequences for bright Muslim British girls are absolutely dire. Lively intellects are being destroyed and brilliant careers cut off before they can begin. To quote the report again: “Every year, an incalculable number of Muslim teenagers and young women are lost to the wider world that informs their citizenship.”

The numbers are increasing fast, and there is confusion over how many schools exist. The growth of non-Muslim schools, says MacEoin, is “hugely overshadowed by a rapidly growing sector of Muslim institutions. These now number 127 [sic] full-time schools and an estimated 700 part-time madrassas for intense religious instruction [and that doesn’t include the Darul Uloom seminaries] … Many recreate in the UK the style and content of schooling that can be found in Pakistan, Bangladesh and India.” Great.

And all this is happening with the implicit consent of the Government, Ofsted – and Christian leaders, who bang on about the threat to “faith schools” (and, in the case of R. Williams, the virtues of Sharia) while shielding their eyes from the evidence that many Muslim faith schools are poisonously anti-Christian.

I've seen many of the extremely damaging screen grabs on which MacEoin bases his claims. Memo to the Muslim Council of Britain: start lining up irate spokesmen now.