If the winter is unusually long and cold, planting time is delayed and additional projects are undertaken. It’s all very simple and sensible: the idea is not to let people sit around idle, and to use down time to get important things done.

The farm needn’t go into debt to do this. All able-bodied people on the farm are expected to contribute their labor, an imposition we can view as an informal tax. Later, everyone on the farm enjoys the benefits of all that work, by participating in the various benefits — the economic growth — it helps to create.

In many respects, the American Jobs Act, proposed by President Obama but blocked in its full form by the Senate last week — would do much the same thing for the nation during the current economic winter. Parts of the plan would provide for projects like school modernization, airport and highway improvements, high-speed rail systems and redevelopment of abandoned and foreclosed-upon properties to stabilize neighborhoods. Those are the modern national equivalents of fixing the barn and building a fence.

And these projects would be made possible by taxes. As Mr. Obama said last month: “Everything in this bill will be paid for. Everything.” The bill would start public improvement projects in 2012, and raise taxes, in the form of a 5.6 percent surtax on millionaires, in 2013, more than paying for the public improvements part of the bill.

In every depression the nation has faced, there have been proposals for the government to do just this: increase spending on public improvements to create jobs for the unemployed.

An article in The St. Louis Post-Dispatch, written in 1877, during the 1873-79 depression, argued that the government could create a great many infrastructure jobs. “There are many needed improvements: the construction of the Texas and Pacific Railroad, the widening of the entrances to the Mississippi, the diking of its alluvial blanks, the clearing of obstructions from the beds of the great rivers of the West, the improvement of the harbors and rivers in the East, the completion of the post offices, custom houses, seawalls, breakwaters and other useful works of a national character,” the article said.

An article in The New York Times, written in 1893, during the 1893-97 depression, described public improvements to relieve unemployment and said there were plenty of things that could be done to create jobs: “building of lines of rapid transit, widening and deepening the Erie Canal, improving the Mississippi, and building canals across the peninsula of Michigan.”

BUT neither of those proposals got very far back then, because either substantial tax increases or substantial debt increases were politically unacceptable. State, local and federal governments were limited mainly to accelerating the use of existing revenue (or only slightly increasing their borrowing) or to coordinating voluntary donations for infrastructure projects. One observer wrote in The Chicago Daily Tribune in 1877 that it was an outrage “when the government exacts a tax for subsidizing any business scheme, for providing public improvements that are not needed, or in any other enterprise which is intended merely to furnish work for the unemployed.”

In 1894 in St. Louis, the city government backed a campaign to secure private donations to create an artificial recreational lake with picturesque islands in Forest Park. Called the “Lake Poor Fund,” it appealed to dual motives: to improve the city and to hire the unemployed. It paid 750 of the jobless to dig with shovels and picks. (The steam shovel hadn’t yet fully emerged as a dominant technology.) The lake was completed within the year, and city residents still enjoy it today.

It was not until the Great Depression of the 1930s that financing infrastructure programs through serious deficit spending was prominently advocated. A revolution in economic thinking, led by John Maynard Keynes, enabled us to think of the economy as something that can spontaneously fail, that the government can stimulate to get going again and make everyone better off.

In his 1988 book, “The Origins of the Keynesian Revolution,” Robert W. Dimand, a historian of economic thought at Brock University in Canada, says that precursors of Keynes-like thinking about economic stimulus can be traced back to the 1890s, but that their reasoning was muddled and unpersuasive. It was not until 1931, in one of the most influential scholarly economic articles of all time, that Richard F. Kahn, a 25-year-old student of Keynes, clarified his mentor’s ideas and showed how a little government stimulus could have what we now call a multiplier effect.

Mr. Kahn assumed that there would be debt financing of stimulative spending, saying that the effects of increased balanced-budget expenditures — spending that is fully paid for by tax increases — were “a matter for separate study” which, in fact, he never got around to. The terms “multiplier” and “deficit spending” were coined soon thereafter.

Making everyone better off, and a lot better off through the power of the multiplier, was the key to the idea’s success in the political arena.

It wasn’t until the 1940s that economists realized that a balanced-budget stimulus could be effective, too. As I’ve discussed in earlier columns, economists starting with Walter S. Salant and Paul A. Samuelson realized that during a depression or in near-depression conditions, any government expenditure fully funded by taxes will increase national income approximately one for one, without raising national debt. This is known as the balanced-budget multiplier.

The public improvements suggested in the president’s proposal would have been fully paid for by the bill’s tax surcharge. And any new legislation we now consider could also pay for such improvements with tax increases, so as not to raise the national debt even temporarily. This idea should still have common-sense appeal to Americans in this time of high unemployment, just as the idea of winter work does on the farm.

Robert J. Shiller is professor of economics and finance at Yale.

Article source: http://feeds.nytimes.com/click.phdo?i=ef9b4fb208bee7716bfe1c0caa151b75