Fiscal Stimulus that is Quick and Stimulating
It is straightforward to come up with proposals that will use idle resources (criteria 1) and can be started quickly (criteria 2). A famous example of this is the suggestion to pay unemployed workers to dig holes and fill them in again. However, this would clearly violate our third criteria - that we get something useful for our money. If we add the requirement that the policy also provide value for the money, our choices become more limited. So limited, in fact that we almost certainly lose one of the other two criteria.Fiscal Stimulus that is Quick and Good Value
Let's suppose, for the time being that the government can start building infrastructure fairly quickly - roads, hospitals, bridges and that sort of thing. This is not likely to be the case, but for the time being we will give governments the benefit of the doubt.In order for a project to provide good value (in an opportunity cost sense) you would want to put them where they are most needed. Your new roads, new hospitals and new schools should go into geographic regions that have expanding populations - cities that are rapidly expanding in population. These are the cities that can use more schools; a city declining in population is likely closing schools, not opening them.
What types of cities tend to have rapidly expanding populations? Almost always, it is cities that are doing well, with booming economies and lots of job opportunities that attract workers from less prosperous areas. In order to provide stimulus, however, we need idle resources, which are typically in short supply in these areas. Unless the government plans on temporarily moving hundreds of thousands of workers, the two goals would seem to be in conflict. The stimulus goal would suggest that your new 2009 road upgrades should be put in Flint, Michigan whereas a cost-benefit analysis would likely put Flint near the bottom of the list.
Fiscal Stimulus that is Stimulating and Good Value
Meeting these two alone is largely difficult, for the reasons described above. In fact, I would contend that it is nearly impossible. But for the sake of argument suppose we can find a project that both uses idle resources and passes a benefit-to-costs test. Can we do it quickly?Likely, not, for the reasons described in the Started Quickly suggestion - before the project can even get started it must be approved by government. Then it must pass the necessary environmental assessments if it involves any physical construction. Often the are three seperate levels of environmental assessments the project must pass - those at the Federal, State and Muncipal levels. Consider the Boston Big Dig project: "Planning for the Big Dig as a project officially began in 1982, with environmental impact studies starting in 1983. After years of extensive lobbying for federal dollars, a 1987 public works bill appropriating funding for the Big Dig was passed by U.S. Congress, but it was subsequently vetoed by President Ronald Reagan as being too expensive. When Congress overrode his veto, the project had its green light and ground was first broken in 1991."
While this is an extreme case, it is clear that this goes well beyond the two year window which is necessary for stimulus spending. Recall that in that two year span we need to go from government recognizing the problem to completition of the project. Not only did the Big Dig finish after the recession ended, it spanned four recessions: 1981-82, 1990-91, 2001-03 and the recession which began in December 2007!
