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January 16, 2012

Infrastructure First? We Should Learn From Spain!


Infrastructure spending has been touted as the solution to stimulating economic growth. The spending has been seen as both a job creator and an investment towards future economic growth. While liberals are the primary proponents of infrastructure, moderate Republicans and conservatives have also shown friendliness towards spending on infrastructure.

Additionally, economists from some of the nation's largest banks and the World Bank seem to believe that increased infrastructure spending will progress its economic development. However, you'd be surprised where infrastructure first policies have recently been attempted and failed.

In late 2008, Spain passed an infrastructure bill that was equivalent to 1.1% of the country's GDP. In the United States, that would equal $165 billion, which is almost double the transportation budget. What Spain ended up with is their unemployment rate going from 9% in 2008 to 21% at the end of last year, going from 2% on GDP surplus to 10% on GDP deficit, and airports with no flights or passengers.

On the bright side, Spain has the fastest and most advanced rail technology. Is it worth bankrupting the country? The link above also points out that the old socialist regime took an "infrastructure first" policy, which reminded me of President Obama touting the stimulus and "shovel ready" projects in 2009.

On top of all this, Spain's real estate bubble hasn't fully burst yet, and the mitigating deflation threatens to destroy every large bank in the country.

This country was led by the very central planning complex that is currently leading this country. Our behavior with the 2009 stimulus is eerily similar to the infrastructure waste that has plagued Spain. It's something for every citizen to keep in mind the next time a politician pushes another "stimulus plan."

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