The stimulus from the GOP tax cuts and the bipartisan increase in federal spending in 2018 is starting to fade, says Diane Swonk, chief economist at the tax and advisory firm Grant Thornton. Writing in The New York Times Monday, Swonk says that further increases in government spending are unlikely, raising the risk of recession as we head into 2020, but Washington has a tool at its disposal that could keep the economic growth going as we approach a slowdown: public investment in infrastructure.
While investment in human capital provides the greatest return, education and training is largely a state and local matter. But Washington can provide funds to build and repair infrastructure, which “has the potential to increase productivity growth, stimulate more private investment, gain bipartisan support and connect, instead of further divide, rural and urban Americans,” Swonk says. And lawmakers can pay for the investment through gradual tax increases.
“I have been a fiscal hawk my entire professional career, and I don’t usually support deficits in times of prosperity,” Swonk writes. “But there is a small window of opportunity for policymakers to act, while interest rates remain low and we have some wiggle room on taxes.”