The Next Twist: Stimulus Borrowing

In my search for a rational dialogue on the spending question I have come across a variant which is new to me, although I have to admit I don't quite get it.

In a recent article by a Harvard economics professor Edward Glaeser who is also grappling with the question of stimulus spending versus austerity budgets he came up with the idea to give tax breaks to the lower-income workers who have just become unemployed.

Now I might be missing something here, but I didn't know unemployed paid payroll taxes so I don't see how this helps. Professor Glaeser does shed some further light on the subject by suggesting that instead of increasing unemployment benefits (i.e. government spending) decreasing payroll taxes would incentivize lower-income unemployed workers to find work.

Aha, we see that he doesn't want to increase spending, but by offering the unemployed incentives such as lower payroll taxes the government will be borrowing instead of spending. Confused? I am. Not to mention that the 7 million American workers who lost their jobs since 2008 didn't make an active decision to take unemployment payments rather than go to work.

They were made redundant.

Professor Glaeser is against a modern Works Progress Administration (WPA) and yes some of the big infrastructure projects are "bridges to nowhere" and as such are wasteful. But our friend Professor Glaeser also includes public spending on projects such as high-speed rail networks in this "enormously wasteful" pot.

He goes on to discuss the capital costs of rail networks and even goes so far as to look at environmental savings. Unfortunately, this is where he loses me. It is the root of the problem for environmentalism. As long as environmentalism has to compete on a cost basis, it will fail-unless taxes on non-green activities are jacked so high that green is the only solution.

Now maybe that's what he is suggesting. Lower the tax burden on those who "value a dollar" and cut the deficit by taxing non-green industries.

Somehow I don't think so.