Measure J here in Santa Clara in the upcoming fall elections covers the building of a new sports stadium in the city. This would be the new home to the 49’ers, a well-known, established football team with a loyal following that would certainly come down the peninsula for games just as they currently head up to the city to Candlestick Point.
Based on the phone surveys, television commercials, and the number of trees killed on flyers in the mail, this is a pretty hot topic. This group endorses it, another group opposes it. The teachers support it, but the school janitors don’t (I’m just making that up, but it really seems that divisive at times).
I was speaking with a work colleague about the topic while thinking about this blog post and started off by comparing the project to a stimulus package. On the one hand, this is a big, government-driven project that will create jobs right now and into the future. Ongoing business at the stadium will also generate tax revenue. The measure is actually written relatively well considering how often these kinds of projects go massively over budget, with various protections built-in. This is the type of project that only a government can put together. With very few exceptions (McGowan’s ATT Park for the SF Giants, Jones’s Texas Stadium for the Dallas Cowboys), no individual business (much less a person) could start up such a project. This energizes the local economy, contributes to GDP, and helps overall long-term growth.
On the other hand, the main argument I’m seeing in the mail (and I must admit I’m throwing a lot of stuff away) is that this is a bad idea because this is going to be paid by debt. And we’re all in this mess because of debt, right? Well, personally, I don’t think that holds a lot of water (at least not to a quasi-Keynesian like me). Deficit-spending (i.e. fueled by borrowing) is not bad unto itself. It is in fact the only way to fund big stimulus projects, almost by definition (if the economy needs to be stimulated, it is unlikely to have enough existing monetary power to fund such projects without borrowing). The problem is if such spending goes unchecked or if there aren’t plans to recoup that debt as part of the plan.
As I thought more about the issue last night, I realized that there is a key issue with thinking of this as a stimulus project. One of the problems with any stimulus package – including the American Recovery and Reinvestment Act (ARRA!!!! as pirates would call it), the big federal package started under President Obama at the start of his administration – is that there is a lag before its effects are felt.
Let’s say that the money goes into a project the day after the ARRA was approved. Person X is hired after being unemployed for some time. Person X now has money. Person X spends some time paying off bills, perhaps overdo, and then saves for a while out of a renewed inclination to do so (the national savings rate is still higher than it has been since, I think, the 1950’s or so, perhaps ever). Eventually, after Person X is confident of his or her income and financial stability and perhaps the well-being of his or her family’s well-being, there is some spending. Then the money multiplier (where $1 from Person X leads to something like $100 of GDP growth) kicks in and things start to get better. This is the lag.
Well, the key is that such stimulus packages go towards “shovel-ready” projects. These are not only ones that are ready to go right off the bat, but also ones that have already been approved, presumably because they have gone through some vetting (not always the case – lots of examples of ARRA funds going to some dumb projects). The Santa Clara stadium, however, is a totally different situation. The fact that we’re voting on it indicates that it’s not shovel-ready, and the benefits are still unclear. Such projects – stadium construction – have historically gone over budget. Those overruns are almost always borne by the taxpayers (even if the original costs are designed to be covered by the team).
I don’t know where I stand on this, even with the mail-in ballot sitting on the table in front of me.