NAU building plan
too late for stimulus

Sounding Board Editorial #9 (March 30, 2008)

Dennis Foster

     The president of Northern Arizona University joined his counterparts at UA and ASU in proposing a massive building plan at the three state universities.  Well, can we ever expect anything different?  No.  But, the absurdity of this proposal lies in how it was marketed - as a "fiscal stimulus" to help stave off the ill effects of an economic recession.  Ouch!  I think I was reasonably successful at convincing my compatriots on the editorial board of the Arizona Daily Sun that it was a smokescreen, and penned this comment, which ran on March 30.

If it looks like pork, smells like pork, and waddles like pork, it’s probably not really “economic stimulus.”  And, so it goes for the recently floated proposal for $300 million in building projects at NAU.  Yes, this spending will boost the fortunes of the local economy.  But, this isn’t some kind of salve for a slowing national economy – it’s too small and it is ill-timed.

The idea that government spending can boost the economy relies on the existence of excess saving, meaning that purchasing power exists and isn’t being used.  If this is true, then it is possible that these funds can be accessed through government bonds and used to stimulate production and income.  But, timing is everything here.

Economic downturns are generally short-lived.  Embarking on a spending spree in 2009, 2010 and 2011 is likely to be counterproductive.  That is, this government spending will likely have to compete with private investment spending, squeezing out residential and commercial development.  That is why the Fed is cutting interest rates now and why the Congress has decided to send us tax rebates later this spring.  And, don’t think even this is without cost.  If inflation is surging a year from now, we’ll be pining for the good old days of the sub-prime crisis!

It may be that sound public policy determines that it is worthwhile to build a one hundred million dollar health professions building at NAU.  Trying to sell that proposition based on its “economic stimulus” effect leads me to be suspect.

Dennis Foster has a Ph.D. in economics, teaches at the university level and is an avid Grand Canyon hiker.

With a state budget that is verging on being $2 billion in the hole, the prospect for cuts at NAU, and the other universities, has increased dramatically in the weeks since this editorial was publish.  It seems that the "fiscal stimulus" notion has met a quick and deserving death.

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