Bond issues and the economy

In Seattle, as in most parts of the country, there are bond issues on Tuesday's ballot. In our case, they are for expanding the regional public transit/light rail system and for refurbishing Pike Place Market.

In other parts of the country, they may be for parks, roads, court houses, firehouses, bus routes, etc.

States and municipalities put these things on the ballot before the recent Wall Street melt down. Now, polls are showing less support among the electorate. There is a sense that with declining tax revenues and a weaker economy, the governments should not spend money on infrastructure. They should conserve funds as much as possible.


Now is exactly the time cities and states should spend this money. If these projects made sense 6 or 12 months ago, they make even more sense now.

  1. In a strong economy, building materials and labor costs go up. Everyone is building and competing for the same resources which drives prices higher. Municipalities that build now will find that costs are lower.
  2. In a similar vein, building in a strong economy means that municipalities compete with private industry for limited resources. This drives up costs for both parties. In a really strong economy, that can mean industry can't do some projects because resources are absorbed by the municipalities.
  3. Putting people to work in a down economy is a good thing -- especially when they are working on real projects and not just "make work" projects. It blunts the impacts of private industry layoffs.
  4. Municipalities normally pay for these projects with long term bonds. In other words, much of the cost for these programs won't hit the citizens in the year they are built, but over the course of several years -- in weak and strong economies.
  5. Putting off projects until the economy is stronger will make them more expensive. Besides the fact that they will be competing with industry, those costs will also be higher due to regular inflation.

If the projects makes sense in a strong economy, they makes even more sense now. They are cheaper to build in a down economy and have the added benefit of putting people to work. And putting people to work -- real work -- is a key ingredient in bringing an area out of a recession.


Gypsy at Heart said...

And you make absolute sense. I agree with everything you have said.

Anonymous said...

The problem is that people are stupid and irrational, and politicians are gutless which is why we get knee jerk reactions, not sensible policy.

Its the tyranny of living with the stupid 50.1%.

Still you can hope that most of them won't have enough common sense to drag themselves to the polls.