Barack Obama is facing all kinds of issues in the US at the moment- healthcare reform, whether to put more troops into Afghanistan, climate change, you name it. All the while, he faces huge expectations on the left and visceral anger on the right.
But one thing he can point to is a stimulus package that has made some big investments in covers green jobs, extensive social assistance and research. The stimulus package included $21.5 billion in funding for research and development, particularly in leading edge genetic research. The money has been spread around the US, and is having a great effect in encouraging research where private sector funding has dried up.
This is the kind of long term thinking that has been missing from NZ’s response to the recession. Of course we don’t have $21 billion to do this, but our government has set on the sidelines, and worse still pulled back from research funding. If we want to improve productivity and develop a new economy, we need large scale investment. On this issue, the Obama administration is showing the way. (Hat tip: Lloyd Morrison)
Yes, Obama is the man
Agreed 
But we do have a stimulus package in New Zealand, Grant – mining Fiordland National Park!
Dipton could be the administrative centre and provide the workers’ accommodation.
Now come on toad, don’t forget about the cycleway…
@toad and tigger LOL
And how much has the US borrowed for this package? Its not like they were sitting on a pile of cash – they are borrowing trillions.
It’s called having courage. And vision. And a belief in providing economic and social benefits for all people in America, not just some.
Not like here, under National.
Are you serious? You think pumping over $US 1.5 Trillion of money the US didn’t have into failed financial institutions was a good stimulus plan?
What LabRat said.
When the $US dollar collapses and ours rises even further as a result, and when inflation soars in a few years causing rising interest rates let’s see then if you agree the “stimulus package” is so wonderful.
NZ needs to fix it’s basic infrastructure first (as does America, with two major bridge collapses in the US in the last decade, American public schools need over a $100 billion to bring them up to acceptable grade, etc), it isn’t sexy but much more necessary and doesn’t get done because it isn’t a big, grand project a politican can point too…
Our power transmission network is a disgrace, in need of billions, and our older hydro dams are near their end with only thermal posibilities in the main to replace them…
Our leaky homes need $11 billion to fix them (a responsibility Labour avoided by disbanding the BIA, cheers for that) times that amount by two if he want to get serious about energy efficiency in all our buildings…
With peak “cheap” oil a very real possibility before 2020 we need $20 billion + invested into public transport over the next decade…
Some areas of NZ still don’t have safe drinking water, in NZ, in the 21st century, after 9 years of your watch…
Try providing power, water, schools, homes and transport before getting clever…
Trolling one month ban Trevor
So, Jeremy, to pay for all this work you would support raising taxes?
Oh, BTW, Peak Oil has already happened. Oil production has not increased since 2006.
Better parallel is teh one between Australia and NZ. The proceeded with a large economic/infrastructure/local services package and never even went into recession. Now the govt there is finding that it actually over-estimated its deficit last month by $500 mill.
The NZ govt’s only response is to wail about govt debt (even though private debt is the main problem) and have proposed a FIVE YEAR public service wage freeze. Guess where all our teachers, health professionals, engineers, scientists, police, prison officers and other skilled workers who contribute most to our productivity will be heading soon.
Speaking to my family in Melb- they note that their are 132 vacancies there at the moment in my wife’s profession and 35 in mine. I like nz too much to leave but lots of others may not get a choice.
TopCat, currently NZ is borrowing at the rate of $400 million a week. That’s $100/week per person in NZ. $5,200 per person per year. $20,400 per year for my family of four.
What exactly are you suggesting as a better stimulus plan?
ultimately this is a debate as to whether a government should stand on the sidelines (as here in NZ) or do something to support its citizens as they go through the recession. The Aussie situation might be more comparable, but the point is both there and in the US the government invested heavily in training and research, and yes in infrastructure. In these areas what we have seen from National is timid at best.
To note, I picked this story up via Lloyd Morrison, who made the point that the stimulus money is having a real impact in important areas like cancer research.
Claire
In principle, mainstream economists agree that a stimulus package in the current environment would not necessarily be inflationary. Paul Krugman, for example, covered this is one of his columns recently for the NYT. LabRat may be interested in the same column because to bail out the banks the US Federal reserve simply created money, not usually considered a desirable practice. From what I understand, Krugman is always happy to be consulted on economic policy – maybe you could give him a call
This seems to be where you are headed on this, but is it Labour policy? Is so, are there any concrete proposals?
LabRat,
What you say is true NZ needs to borrow because we consume more than we produce. The solution, therefore is to produce more high value unique products or services. To do this we need a skilled, educated and inventive workforce. To achieve this, we need to invest in science, technology our agriculture, our tourist brand. We don’t need to invest in unproductive enterprises ie property and industries that deplete our natural resources or build a motorway network in Auckland that is used for 2 hours per day only.
Government investment as described in the Obama and Rudd plan does not evaporate into thin air. As well improving our productivity and quality of life they allow us to keep skilled, productive workers- innovators and new adaptors to new ideas, who demand a pleasant environment and decent education for their kids. The money is spent by workers to help retailers and service providers. Some of it is returned to the govt as taxation. Because more people are employed in our productive high value added industries and service sector we don’t have to pay many of these people welfare benefits. That way we avoid the negative spiral we are currently in where consumer spending and our small businesses are being wiped out by lack of demand, which causes more unemployment and further loss of demand for services and retailers.
In the modern world, its not all about supplying raw materials and profits to our eceonomic masters
Public transport is one answer to the oil problem, but at some point oil is going to run out so we really need something to replace the oil. (Or have cars like the Flintstones).
Stimulus eh? Have ya seen this graph? http://gregmankiw.blogspot.com/2009/10/click-here-for-my-interpretation-of.html
@Draco, absolutely not, taxes need to be lower… To pay for the work we should pass an Act, called say, the Strategic Assets Act where all power, water, transmission companies must be publcily traded on the share market and owned by NZ businesses, citizens or permanent residents. All SOE’s must be sold down to be public, it isn’t democratic having them currently responsible to one, maybe two ministers, how is that “public” ownership… Aussie did this in the 80′s…
Were not quite at peak oil yet, the Saudi’s are purposefully not drilling new wells, Brazil had that big find off their coast, we’ll be there soon and then into expensive oil with a final peak ??? who knows when 2050, 2070..? Probably 10 times the cost too…
Krugman’s answer is to blow up another bubble.
In another words, a repeat of how we were lead here in the first place (2001-06).
Why continually afford credibility to ‘experts’ who failed to see the glaring fundamental problems before the inevitable breakdown. Let’s look to the same people for the solution, shall we?
[...] Robertson blogs: Barack Obama is facing all kinds of issues in the US at the moment- healthcare reform, whether to [...]
Krugman’s argument for stimulus in the US (which is Keyne’s argument) is that they face a liquidity trap – monetary policy is no longer effective. This is largely determined by the fact that the Fed interest rates are very close to zero.
While NZ rates are low, they are not nearly zero. So there doesn’t seem to be any good reason to increase spending on stimulus grounds, while we still have monetary policy to do the heavy lifting.
I would be REALLY interested to see a comments to what Greg linked to.
Now I know – he’s just a professor in economics at Harvard, but lets just pretend he knows what he’s talking about.
That dosnt really support the original posters views – so Mr Robinson – where is Greg wrong? or are you?
Biker, there are nearly as many views about the success of the Obama stimulus package as there are economists, but to quote from the Wall Street Journal today (in a slightly pessimistic piece) ” Economists now generally believe that the stimulus package has cushioned the fall.” http://online.wsj.com/article/SB125487096440369163.html?mod=article-outset-box
Have another read of the post too. My main focus was on the fact that the stimulus package actually gave a reasonable amount of money to research and development, and that reports on the ground reports that this was leading to some important advances. Lack of long term investments (like R and D and training) have in my view been a real short-coming of Nationa’s response.