Not quite as straightforward. Infrastructure comes with maintenance costs. These costs can tie you down in the next decades. But even worse, you literally cannot spend an arbitrary amount of money even for absolutely obvious ideas. Try to renovate or rebuild all schools in one state at once. Or create new bike lanes. You will soon see that there's only a limited amount of companies that actually can do what you want.

The one thing that seems to work surprisingly well is direct subsidies for switching to a better but more expensive product (electrical cars, house insulation).

Personally, I agree that the government should take negative interest rates as a sign to massively invest. But I struggle to find an investment that is both just and sustainable.

There is, for instance a huge pension gap in Germany. It would be wise to borrow money now if we could invest it to mitigate that gap. But how would such an investment look like? Buying children?

Renewables are one option for massive investments without massive long term costs. The important thing is to subsidize them upfront rather than subsidizing their income stream or you get high electricity prices.

However, the idea of stimulus makes basic assumptions that the economy can sustain a higher level. That economic article of faith may inherently be flawed in many cases.

Another option for developed countries is rather than trying to stimulate the economy instead focus on increasing efficiency. Japan’s workforce increased 1% in the last 22 years. Long term stagnation should be expected in countries like Japan with stagnant and aging populations. Even 1% growth assumes the economy will double every 70 years. Relative stagnation isn’t inherently bad as long as the economy is still doing all the things an economy should be doing.

> electrical cars, house insulation).

Those are very regressive, you’re taking money away from the less well-off (through higher fuel taxes, for example) and giving it pretty much directly to the way better-off middle-classes who can afford those new EVs and those houses which to insulate. It’s pretty much a return to the 1770s-1780s France, when “la gabelle” was in full force.

That's one of the main complaints I have about all those measures that are being taken currently to become green.

Government officials are also talking about using tax money to rebuild all houses for the people affected by the recent floods that were without flood insurance. It's a huge middle finger to all those people who can't afford a house.

There are so many tax exemptions that exclusively apply to the rather well-off that I'm surprised that these issues are not coming up regularly when talking about social issues.

Examples include offices at home are only deductable if they have a door (applies to larger-than-necessary apartments or houses), you get money for driving to work rather than living nearby and walking (0.35€/km), a more expensive hybrid company car costs the employee a lot less than a privately owned ICE car, and many more.

Please stop spreading misinformation. Yes, the classical "Arbeitszimmer" must be a separate room and, by the letter of the law, must have no private function. No, that does not apply for 2020-style home office. And no, you don't "get" 0.35€/km. You can deduct that amount from your income taxes. And that's totally in line with everything else you can deduct because you do it to earn the money in the first place.

Also, building a modest-sized house in Germany costs about 200k€ - this sum is affordable by the average German couple (average income is around 36k€ per year).

Germany is not California and especially not the Silicon Valley. Just because you may have chosen to rent an extremely expensive, 130 year old apartment 5min from your workplace that does not mean it is the lifestyle for the majority in the country.

Ha, 200,000€, you'd be lucky to get even land for that. Have you looked at housing prices recently? You can maybe get this in Saxony in a village somewhere where you need to drive 20km to the next supermarket or doctor. In my city you don't even get a 60m² apartment for that.

The Arbeitszimmerregelung is only valid for 2020 and 2021 and only up to 120 days/year. You typically work 220 days a year. In 2022 it's back to door-or-bust.

I live in a big city, I can walk to work and pay a relatively high rent for a small apartment, I can claim 0.35€ per day, about 77€/year. Meanwhile a friend of mine commutes over 50km, living in a big house. They are quite happy each year to get about 4,000€ back. It's government funded pollution.

Please don't tell me I spread misinformation when you yourself claim things that aren't true.

I wrote "building" a house, not buying the land. But if you need to know, I could recently have bought a 6000qm plot for about 100k€ about 1.5h by train from Berlin.

Also, again, your friends do not "get" anything. They pay way more than that for getting to work. They recover some of the financial burden of commuting, while you don't pay that in the first place and safe the time. Why should society help you in your insane quest to live in an ever denser environment, compete for square cm and minutes of time with literally hundreds of competitors while the countryside just rots away?

Your singular perspective about the big city life being the only true path is exactly what makes the city so expensive. If one day you cannot pay the rent anymore this has been partly because of this ideology. Don't complain when you have to move into some crappy apartment in nowhere when you retire and the young guns with 15times your income just pay ridiculous rents for your apartment.

> Also, building a modest-sized house in Germany costs about 200k€ - this sum is affordable by the average German couple (average income is around 36k€ per year).

This must be very modest and without any special necessities like a cellar. Current prices for a cold cellar alone are already 80k.

More realistic construction costs currently are rather between 300k and 400k - for a modest house. You'll only come down to 200k if you do lots of the work yourself.

Source: I'm currently trying to build a house and have gathered bids for weeks now.

I don't think so. First and foremost, house insulation can also be done when you rent out the apartments (but often the landlord has little incentive to do it). Second, electrical cars are expensive, yes, but they don't subsidize the well-off because they would have bought expensive gasoline cars otherwise. Who really profits from the subsidies is the middle class: You can lease small electric vehicles quite cheaply and if I am not completely mistaken, you can buy an electric Dacia for 10k€ after subsidies. So yes, this is not for the working poor. But the working poor hardly invest anyways, so it is really difficult to setup an incentive program for them.

One thing worth noting in this is that, at least in the US, a lot of the "infrastructure spending" that has been talked about recently is, in fact, maintenance.

We have roads, bridges, and buildings that were built decades ago, then the funds that should have gone for their maintenance spent on tax cuts instead, so they're limping along with stopgap solutions.

The US talks about infrastructure and then nothing happens because of political impasse on Capitol Hill. Biden is no Deng Xiaoping and the Democrats are no CCP.

Maybe it's time for radical political reform to end these deadlocks?

https://www.youtube.com/watch?v=0ySL82WbcvU

Germany is one example where a long-term infrastructure investment strategy makes a lot of sense as the infrastructure is crumbling: https://www.dw.com/en/german-infrastructure-begging-for-over.... Not all could be spent in a short time as you mention, but for economic recovery, long-term funding is probably better anyways.

To close the pension gap, Germany could also buy ETFs on borrowed money, or borrow to create a national investment fund, but that would be much too eccentric for an extremely risk-averse country.

> you literally cannot spend an arbitrary amount of money even for absolutely obvious ideas.

Is there a good way to measure what potential productive capacity of infrastructure investment is? I wonder what percentage of the limit we're at right now? Could the market efficiently react to a doubling or even 10x-ing of federal infrastructure investment?

I think there is: Count the applications for the infrastructure projects that you actually do. I doubt most companies can do more than one at a time. So if you have five applicants you can maybe do 3 projects in parallel before the price raises absurdly.

By this logic, shouldn't Europe be growing at much faster rates than the US? Their social services are more extensive, I believe the minimum wage is higher, and they spend more on infrastructure.

The EU imposes strict fiscal discipline. That basically prevents the possibility of taking advantage of Keynsian fiscal expansion. In other words, to the extent that greater spending causes growth, it's cancelled out by the matching taxes that reduce growth.

https://www.ecb.europa.eu/mopo/eaec/fiscal/html/index.en.htm...

> Compliance with this rule is to be examined on the basis of reference values for the general government deficit (3%) and gross debt (60%) in relation to GDP, whereby a number of qualifications can be applied.

The simple key to understanding what can and cannot be done with printing money is to understand that you can redirect activity inside the country almost at will by printing, a pseudo command economy; but you can't print (a) foreign currency or (b) oil, steel, vaccines, or other constraints of physical production.

Worked example? If you print money and the citizens spend it on imported goods, that depreciates the currency and is usually Bad. Currency depreciation against hard currency (USD) usually shows up as inflation.

Weimar prints money to buy up domestic gold to ship to France for reparations => hyperinflation.

Zimbabwe prints money but is unable to subsidize kerosene in shops at any price because the country doesn't export enough value to import fossil fuels => hyperinflation.

US prints money for domestic stimulus while being oil producer and having labour slack and a generation of anti-wage-rise policy => almost nothing happens except asset inflation.

What in the US economy isn't inflated? The only thing I can think of in my life is utilities.

Everyone knows housing has gone way up. As I go about trying to do work on my house, it's very clear that the price of getting work done when you want it is not what it was in 2019, because I pay those same prices in order to be in a line. I haven't needed anything enough to figure out what the price of prompt work is.

Food prices have gone up. Cars have increased in price significantly.

> What in the US economy isn't inflated?

wages in many circumstance, though growth in low-skill labor wages from supply shortage we are seeing the same as other supply shock from corona.

> Their social services are more extensive, I believe the minimum wage is higher, and they spend more on infrastructure.

They have to spend on top of what they already do, because the current level is the baseline and is generally priced into market expectations.

As the original article is about Germany, in 2020 they had their first budget deficit in a decade:

* https://www.politico.eu/article/coronavirus-pushes-germany-t...

To put it bluntly: the Germans don't spend s--t.

Public spending in Germany is about the same as in the US, no deficit needed, because taxes are so damn high.

https://en.m.wikipedia.org/wiki/List_of_countries_by_governm...

Germany tax burden on consumption is over 18% against less then 7% in America: https://www.chicagofed.org/publications/chicago-fed-letter/2...

A first deficit meaning Germany spend ordinarily all that and then also more. This is showing Germany spend significantely more for economy size.

Evidence is in need for supporting an idea that only spending above and beyond usual have an effect on markets.

This is not like-with-like. Spending on health should be lumped in with taxes to get a real picture.

Disagree, not all German health spending are in that figure. We have different social program as well that might cause change in figure, so such argument make any comparison meaningless.

Europe is a big place. There are huge variations in social services, minimum wages, and infrastructure spending. In general though building infrastructure is more expensive in the US.

https://nymag.com/intelligencer/2019/07/why-we-cant-figure-o...

I agree with this, but if you merely throw money at the economy without resolving supply chain issues, (which is the case we have now) - we get inflation. Because it's more money chasing after fewer (available) goods.

The previous US administration basically created supply chain problems with it's Hooverian trade policies. (ie. doing the same thing over and over and expecting different results. Nope. We got the same results we got in the late 1920's + COVID).

It's going to be hard to unwind that. I think the central bank has done a pretty good job making arguments that sustained low interest rates are a necessary evil. Unfortunately, the government (ie. aggregate of congress, senate, SCOTUS, and POTUS) are having a hard time swallowing that we need a looser fiscal policy. All because of political idiocy.

I feel like Keynes should be taught to all children in primary school.

You can leave out SCOTUS. They don't have much impact on fiscal or monetary policy.

They have the power to kill major initiatives; see e.g. how SCOTUS curtailed some of the New Deal programs (and how it took the extraordinary threat of court packing to stop them from going further).

I don't think it's as straightforward as you propose. Debt is itself deflationary and dampens growth. Public and private debt are already at global highs. Every dollar of debt is far less effective at stimulating the real economy than in decades past. Further, how much infrastructure spending would stay in a local economy without a significant manufacturing base?

I don't have the answers, but this seems to be borrowing from a playbook written for a different era.

Private debt is deflationary as people prioritize paying it off, reducing the velocity of money that would otherwise be spent.

The causality is reversed for public debt though - governments react to deflationary environments by increasing public spending to compensate for the private sector's propensity to save - as a "spender of last resort" as it were.

That's how Japan ended up the way it did.

Arguably it should have spent even more to offset deflation in the 90s.

>The causality is reversed for public debt though - governments react to deflationary environments by increasing public spending to compensate for the private sector's propensity to save - as a "spender of last resort" as it were.

Again, we're at levels record levels of global public debt. There is no free lunch. Debt financed spending is only possible through financial repression (real default through inflation in this case and in the 1940's following WWII, the last time US debt reached 130% of GDP) which ultimately drives speculation as capital searches for yield. Rinse repeat deflationary shock as a result.

All this speculation and capital going a little crazy searching for yield are side effects of an overabundance of capital.

We are seeing this now thanks to wealth inequality brought on by capital being given preferential tax status to labor for decades and stagnant wage growth again for decades.

This wasnt a problem following WW2 - wage growth was high and given vastly preferential tax treatment to labor.

>All this speculation and capital going a little crazy searching for yield are side effects of an overabundance of capital.

The stock market is where savers have been forced to. Pensions included. ZIRP/negative real rates have consequences. There "isn't too much capital". It's being misallocated due to misguided policy. It will get worse.

You need to start thinking in second and third order effects.

The data and financial instruments available to investors is a completely different universe than what they had in the 1940's. It's very unlikely that history will repeat itself.

Or if you really want the wealthy to see red, just deflate the damned asset bubbles. Cancel the underlying debts. Just null the whole damn thing. If you bet on real-estate prices or bank stocks or whatever rising 15% per annum when the economy was growing at 2.1% per annum, you eat the loss.

Do you like the idea of insolvent pension funds that suddenly lose their debt assets? Moral hazards from people who start taking on loans they cannot afford under the assumption that more cancellations will happen? Higher interest rates and more aggressive collections/foreclosure efforts from lenders that must now account for debt cancellation?

Canceling debt does not make wealthy "see red." Long-term it would harm those who initially benefit from the cancellation by leaving less credit to go around and forcing people at the lower end of the income scale to accept less favorable loans.

If you want to upset the wealthy, you can do any or all of the following:

1. End stock buybacks. These sound nice in theory but in practice they have promoted short-term thinking and have disproportionately benefited the wealthy.

2. Eliminate the long-term capital gains tax rates and treat all capital gains as income (perhaps with some provisions for retirement income).

3. Treat cash loans backed by financial assets (stocks, bonds, investment properties, etc.) as income (many wealthy people use loans backed by their investment portfolios to avoid paying income tax, and their heirs pay no capital gains tax because of cost-basis adjustments), with possible exceptions for loans that are immediately invested (to allow for leveraged investment strategies) and exceptions for mortgages that pay for a personal residence.

4. Eliminate the various industry-specific carve-outs introduced in e.g. the Tax Cuts and Jobs Act (which were nothing more than a corrupt way to buy votes from various senators).

and so forth. We have accumulated decades of policies that favor the wealthy, and as a result the income and wealth gaps have exploded.

If you want to upset the wealthy, institute a wealth tax (and redistribute as UBI).

If you want to decrease asset prices, tax them (without loopholes) and see their valuation drop real fast, or slow - depending on tax rate.

Just remember to equitably distribute a part of proceeds so you're helping, not hurting the poor.

I don't want anyone to see red, but this is probably the better path forward. OP's suggestion amounts to an official policy of stagflation, and that has huge drawbacks. If we let inflation run away eventually we're going to need another Volker to break its back.

How would you cancel the underlying debts and maintain any semblance of order?

Honestly? I'd just void them, nationalize any banks that go under, and give everyone who's actually using the underlying assets free-and-clear ownership. If you bought a house in the middle of a bubble in 2020, good job, you get a house and your mortgage is cancelled. The Sunk Cost Fallacy is a fallacy for a reason: there is always ultimately someone who pays for a speculative bubble out of their own use-values, and that's the someone who should be made whole, not the speculators.

And again, I don't mean to be inflammatory (well ok, I do), but I really feel that constantly reflating asset bubbles for the rest of time, rather than accepting a one-time severe penalty whose moral hazard applies only to people who need things for their use-value, really is a Sunk Cost Fallacy that amounts to throwing good money after bad.

The result would be an almost immediate spike in interest rates charged to whoever benefited most from the debt cancellation, as lenders would be forced to compensate for the risk of additional cancellations in the future. Worse still, it would create a massive moral hazard as (some) people start to take on loans they know they cannot afford long-term in anticipation of more debt forgiveness (this often happens after bail-out programs and is one of the major arguments for the "too big to fail is too big to exist" philosophy). Since retirees often live on income from loan interest (through pension funds or personal retirement accounts), much of the burden would be borne by retirees and many of them would be forced back into the labor force (crowding out the younger generations who are trying to find their first job; see e.g. Japan for a manifestation of this problem).

Debt forgiveness is not nearly as simple and positive as people believe. It often winds up hurting the people it was meant to help and having long-term negative consequences.

I'm down, I have a few properties. No mortgage and inflationary rent means I wouldn't have to work anymore

I mean, I'd be fine with screwing homeowners too, and I am a homeowner. The Zillow estimate of how much I could charge in rent is several times over my mortgage and HOA payments. The estimate for how much I could sell for is $25k over what I paid, two years ago. You can't tell me my house is making $12.5k/year for literally nothing, while I live in it and repairs accumulate, and tell me that's a sensible way to run an economy.

also, the rising real estate prices have detrimental second and third order effects.

For instance, birth rates are dropping because young adults cannot afford a house, which in term means they have to rent against higher prices which means they have less income to actually put into the economy.

What will we do once we have a generation which doesn't have any wealth and doesn't own a place to live? People who have little to show for it after a lifetime of working while subsidizing those who own the properties they live in is not a situation you want society to be in.

Don't forget that those young people have parents and will eventually inherit their real estate, so they will have something to show for it after a lifetime of working.

Maybe. Remember that the house can be:

1. Split multiple ways due to multiple children. 2. Sold to finance retirement living.

Only some of them. And many of those houses will be sold to pay for healthcare.

Low interest rates and high inflation will pump those numbers up even more. I don't see a way to stop the increase without the debt imploding on itself which the government would never let happen (I'm personally in favor)

Cancelling debts will only make asset prices skyrocket. Why worry about paying $400k, $600k, or $1 million for a house, if you anticipate that a few years from now the govt will wipe away all your debt?

I just bought a few rental properties hoping this comes true. Lock in 2% mortgage for 30 years while inflation ramps up to 7% is free money. Open up the border and I might not have to work any more

Yeah once one realizes that yields are directly influenced by supply and demand, then that is the right conclusion. Political irrationality and specific interests are what’s holding us down. It is said that one day, if the CCP has to choose between relaxing power or scarifying economic growth, they would sacrifice economic growth without blinking. The same can be said about the 1% in western countries.

I agree with increasing minimum wages and creating robust social services (universal healthcare, mental health support, the elimination of homelessness and enough food support no one goes hungry) in order to set a really solid floor for all. With regards to infrastructure, we have to be exceptionally mindful to not build for a future that doesn't use or need infrastructure that has a lifetime measured in decades (or, wishfully thinking, 100+ years). To see the peril, witness the rapid decline in need for commercial real estate with the very speedy transition to remote work, real estate which is very expensive to convert to other purposes. We don't want to be building "bridges to nowhere." for the sake of economic activity.

> Downside : it'll get a lot of very wealthy people seeing red and will scare upper middle classes who are more used to their security being provided by assets rather than social services.

Change is hard, but inevitable.

> witness the rapid decline in need for commercial real estate with the very speedy transition to remote work

Is this actually happening? Feels like a tech only phenomenon, and tech workers are only a small slice of the US office labour force...

Oh I didn't know this, hmm. Thanks for showing me it

If you treat infrastructure as a special kind of investment that requires a guaranteed return you will likely end up with shitty infrastructure.

I'm not suggesting traditional financial return on infrastructure, but genuine demonstrated need and use regardless of return. If you build an unprofitable but highly utilized HVDC transmission line to avoid CO2 emissions for somewhere than can't generate their own clean energy (ie the Faroe Islands, for example, which hovers constantly at ~40MW of electrical generation using oil with occasional reliance on pumped storage), that would be a win imho. Japan's rail infrastructure is another prime example (although profitable if I recall). Avoid boondoggles, avoid status seeking projects, avoid nepotism and corruption, but deliver value.

Edit: As someone else in thread pointed out, renewables should be invested in.

> The alternative is extremely straightforward - ramp up public spending on infrastructure

Hang on. Isn't that essentially what the Japanese did?

I wonder which domestic investments turned out to be the smart move in Japan.