Democratic Platform Part 2

The Democratic platform envisions a fairly massive public works program. The following extract tells us the policy.

Creating New Jobs by Rebuilding American Infrastructure
A century ago, Teddy Roosevelt called together leaders from business and government to
develop a plan for the next century’s infrastructure. It falls to us to do the same. Right now, we are spending less than at any time in recent history and far less than our international competitors on this critical component of our nation’s strength. We will start a National Infrastructure Reinvestment Bank that can leverage private investment in infrastructure improvements, and create nearly two million new good jobs. We will undertake projects that maximize our safety and security and ability to compete, which we will fund as we bring the war in Iraq to a responsible close. We will modernize our power grid, which will help conservation and spur the development and distribution of clean energy. We need a national transportation policy, including high-speed rail and light rail. We can invest in our bridges, roads, and public transportation so that people have choices in how they get to work. We will ensure every American has access to highspeed broadband and we will take on special interests in order to unleash the power of the wireless spectrum.

Now, we all know the stimulus money is just about ready to kick into gear. Many people feel that if the jobs we create are Government jobs as opposed to private industry jobs, it calls into question the nature of any recovery. Clearly, if unemployed people are provided with jobs that provide decent pay and benefits, it will increase demand in the economy. The only question has to be "Is it affordable?" The paragraph discusses paying for this with money from the Iraq war. Either way, there is a formula that I used to be familiar with that talks about the leverage provided by each $1 put into circulation. The person who earns $1 pays some percentage of taxes and saves some percentage and the rest is spent, say 75%. This 75 cents gets recirculated at 75% of that amount and so forth. Depending on the amount of taxes and spending each dollar ends up representing some multiple, at my 25% reduction rate, each dollar ends up generating about $4 of spending. It doesn't really matter what the source of the initial dollar is. So by providing say the stimulus money this way it will have a significant impact on consumer spending, since it is logical that the people getting these jobs are in fairly low tax rates.

So, it does seem that the creation of "2 million good new jobs" will have a significant impact. If you consider jobs in the same way as the circulation of the money, you have a jobs multiplier impact as well.

It should be noted that the money collected as taxes in the equation, while split between the States and the Federal governments, mitigates the deficit increase to some extent.

Now the same impact is created when the money put into circulation is provided either as unemployment insurance or other forms of public assistance. However, by actually improving the infrastructure, the money further improves competitiveness and services within the country, so using it to create jobs is extremely beneficial.