When does infrastructure plan work when doesn't it work?

The OECD has a great confidence about Trump-led America that it suggests the US economy under Donald Trump's proposed economic plan will grow faster than the previous expectation mainly because of his infrastructure plan. Last century, Roosevelt built massive infrastructure during the Great Recession, from the result, the American economy did recover from the Great Recession; however, the main factor that cured the US economy is questionable and the economists have argued varies reasons for the recovery. In addition, Japan has started its massive infrastructure plan after its economy collapsing; however, the Japanese economy has not fully recovered and the inflation rate stays very low for years and the government seems to have no effective tool to boost the economy and create an inflation in its economy. Therefore, we can see infrastructure does not necessarily make the economy grow faster.

The idea of infrastructure plan is to boost government expenditure, this will directly lead to an increase the aggregate demand according to the basic aggregate demand calculation formula. In addition, the plan can create thousands of jobs immediately and these people can use their incomes to consume goods and services in the economy and creates a multiplier effect that boosts the economy further. Therefore, the immediate positive impact of the infrastructure does exist. However, the cost of such plan may be greater than the benefit. Firstly, infrastructure is only one part of the economy, there are many other fields that require government funding and some of them may be more important and urgent. Secondly, the long term effect of infrastructure could be doubted. I am not saying that infrastructure cannot contribute to future economic growth, instead I am saying the impact of building new infrastructure in some areas could be less effective. It is more effective to build infrastructure in an area with higher population density than in an area with lower population density; however, the area with low population density is usually poorer and made to be the priority of infrastructure plan, the cost could be much higher relative to its benefit.

Therefore, infrastructure plan may have positive impact on the economy, but it is not necessarily to be the best solution.