Budget Problems May Loom From Trump Infrastructure Spending

As a matter of policy, spending and taxing have always engendered debate around how the government should maintain goods and services, how to pay for them and what happens to various financial spheres as a result.

One economics Nobel laureate, Oliver Hart, thinks the incoming Trump administration’s plan to ratchet up public infrastructure works may spell trouble for the public finance system in the United States.

As reported by Reuters, Hart said at a news conference in Stockholm that spending on infrastructure, in itself, may be a good thing, given the rough shape that that sector is in, physically. Yet, paying for those improvements remains another matter entirely. At the same time, investments in public works will be elevated, with a Republican-led initiative “also reducing taxes.”

“I mean that is going to lead to all sorts of budgetary problems in the future." And in fact, he added: "I would be in favor of actually increasing the tax burden on the wealthy.”

Hart was in Stockholm ahead of the awarding of his prize, scheduled for this weekend, along with fellow Nobel laureate Bengt Holmstrom.

As has been reported, President-Elect Donald Trump has pledged to develop projects that would require spending $1 trillion over 10 years on roads, bridges, airports and other structures.

That nascent plan has received a lukewarm reception from Chicago Fed President Charles Evans, at least as a means for economic growth, but he added that the overarching intent to actually repair and improve infrastructure is a good one. Evans stated in a speech to the Executives Club of Chicago that the labor market in the U.S. remains tight, with figures dictating that the nation is close to full employment, Chicago Tribune reported, and thus, additional stimulus may not be needed.



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