by Sandy Ikeda
(Map by “vanshnookenraggen.”)
With your indulgence, I’ll get to my main point, and this map, in a moment.
But first, as we all know, the House has just passed a special ex post tax on bonuses awarded to individuals working for companies that received bail-out money. (One egregious violation of the rule of law deserves another then?) Over at Marginal Revolution they’re blogging about one really bad consequence of this hasty piece of policy-making: It seems that any family earning more than $250K with a member connected to a bailed-out institution will be marginally taxed at 90%. If it passes, I’m sure this in turn will give rise to further interventions as Congress tries to deal with THAT snafu (assuming the Supreme Court doesn’t overturn it).
The AIG fiasco is just one, economically insignificant but politically sensitive, instance of the countless unintended consequences that we should expect in the coming months and years issuing from the various bailouts and stimuli. While political snafus seem to dominate economic blunders in the media, the cascade of bad economic consequences down the road will probably continue to provoke far less “outrage.” CNN reports that the various bail-outs and stimuli, beginning with the waning days of the Bush administration up to now, comes to $4.8 trillion! (Sorry, I don’t have the reference for that right now but look at this Milken Institute analysis.) I wonder whether President Obama will “take the blame” for next year’s double-digit inflation with the same alacrity he showed for AIG on Jay Leno?
Anyway, here’s my main point. I blogged a few weeks ago about the likely, but largely ignored, negative effect of the stimulus bill on the “unseen infrastructure,” the network of social capital, that supports local economies. The clever image above and this one
offer good examples of the kind of serious infrastructural snafus that are likely to result from the rush to construction. I got them from a very interesting urbanist blog called “vanshnookenraggen.” (Hat tip to Jeremy Sapienza.) They are hypothetical maps of Manhattan with Robert Moses’ proposed, but thankfully never built, elevated highways cutting through Midtown (the Mid-Manhattan Expressway) and Soho/Chinatown (the Lower Manhattan Expressway), shown in darker colors.
Of course, we’ll never know for sure what the consequences of these two mega-infrastructural projects might have been, but the overwhelming consensus is that they would have effectively destroyed the local economies surrounding them by creating vast border vacuums. The classic treatment of Moses’ local, heavy-handed brand of what Hayek termed “constructivism” is, of course, Robert Caro’s The Power Broker, especially chapter 37, “One Mile,” on the building of the Cross-Bronx Expressway. (For a slightly more sympathetic perspective on Moses’s work see Robert Moses and the Modern City: The Transformation of New York.)
If Moses were around today I don’t think he’d waste any time getting every major project he could think of “shovel ready” for hundreds of billions of stimulus money. While he’s no longer with us, I do fear that, with the incentive structure of the stimulus legislation and the knowledge problems that will accompany such massive and hurried construction, we’ll soon be seeing many incarnations of Moses rising up in cities around the country.
So, not only will we have to live with ill-conceived mega-projects for decades to come, we’ll be subsidizing the birth of who-knows-how-many local despots who’ll be guiding urban policy for the foreseeable future.
ADDENDUM: In today’s New York Times is this article about road expansion financed by the stimulus:
The road exemplifies an unintended effect of the stimulus law: an administration that opposes suburban sprawl is giving money to states for projects that are almost certain to exacerbate it.