CNN iReport

That is the question asked most often by critics of the government stimulus program. They fear a return to pre-Reagan wastefulness in government programs. I concede that this is a difficult question and the risks of big government characterized by waste is a worthy concern. I also know that government is the only entity capable of making the investments needed to resurrect our crashing economy. My answer to those skeptics is "capital formation facilitated by government programs".

The first challenge is we (the people) need jobs. We need good jobs in sustainable industry. The jobs must employ people in their highest, most productive capabilities. These jobs must create productivity enhancing infrastructure through investment. The projects must be of such substantial size that the investment continues for years and that there is enough spin-off technology to fuel growth in small business through entrepreneurship. Prior programs such as the NASA space program, Interstate Highway system, and TVA rural electrification are good examples. These programs added permanent (long term employment) jobs to the economy and spawned other industries.

The second challenge is we need to pay for these initiatives and efficiently manage the infrastructures created. Government is more apt to introduce bureaucracy and resulting inefficiency in the running of the programs after the infrastructure has been built. So this is where our system of capitalism and supply side economics becomes so powerful. The government exits the program by privatizing the programs when the "construction" is complete. The government should create a corporation and IPO the stock to get a return on its investment. The return of capital plus "capital gains" would then be available for funding new programs and retiring the original debt. Private industry would run the program and the infrastructure would be owned by private investors. Many of these new companies may be natural monopolies requiring government regulation such as mass transit and electric utilities. Other programs such as education and health insurance may require a public/private partnership to assure an affordable standard of quality is maintained.

In summary, certain socially desirable projects are too big to garner private initiative and private investment. These projects would create the high value, high pay jobs of the future. The government is the most likely candidate to make these investments but does not need to be "in the business" of running the finished projects.  Once large investment projects are complete and operational, government should exit the project, collect a fair return on its invested capital, redeploy the resources for new projects, and reduce debt.  As the economy reaches full employment the government gradually recedes from the business of "capital formation" and pays down the debt. This fiscal restraint returns capital and resources to private enterprise where it will be most productive in a growing economy and reloads the arsenal for the future.