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December 19th, 2008
Analysis: On the Stimulus

Erin Chapman, Blueprint America

The upcoming Blueprint America special, The Big Fix, will include an interview with NY Times op-ed columnist and recent Nobel laureate, Paul Krugman. While his Nobel lecture may tend towards the wonky (see here for a nice explanation of the ideas discussed in the presentation), Krugman’s op-eds are more reader-friendly for the non global trade experts among us. Even before Obama announced his intention to include massive infrastructure spending in the stimulus plan, Krugman was singing its praises. In two more recent pieces for the NY Times and the New York Review of Books, Krugman calls for aggressive fiscal expansion that will be made even better “if a large part of the expansion takes the form of public investment — of building roads, repairing bridges and developing new technologies.”  The new stimulus plan should “focus on sustaining and expanding government spending—sustaining it by providing aid to state and local governments, expanding it with spending on roads, bridges, and other forms of infrastructure.”
While David Brancaccio asks Professor Krugman some tough questions for The Big Fix, in the meantime it’s worth reading other opinions and analyses of the stimulus package – not all so optimistic about the efficacy of fast-tracking infrastructure investment.

— Conservative think tank The Heritage Foundation, for instance, decries the “nostalgic embrace” of the New Deal and says we should take a lesson from Japan in the ’90s – infrastructure spending won’t help our economy. The author worries that substantial impact on the economy would be stymied by the lag time between project proposal and implementation, “as well as the propensity of the state and local governments to substitute federal money for already-committed state and local money in order to shift such funds to other purposes.”

— The Wall Street Journal has a nice break-down of what Obama’s $600 billion economic recovery package will be spent on. The five categories of infrastructure investment are 1) transportation and traditional infrastructure; 2) school construction; 3) energy efficiency, especially in government buildings; 4) broadband Internet access; and 5) health care information technology. The article states there may be opposition to this level of spending from Republicans wary of the price tag – “There is no guarantee that a surge of money will get the economy out of what appears to be the most protracted recession in decades. Consider the failed effort earlier this year with stimulus checks.” Hmmm… Consider that the problem with the stimulus checks may have been – as Paul Krugman has pointed out – that money went to individuals who stashed the rebate in the bank, rather than buying a flat-screen TV to stimulate the economy.

— A group of 26 experts from America 2050 (an infrastructure think tank of sorts) recently wrote to the NY Times blog Economix, outlining the broad strokes of how to improve the nation’s infrastructure while also stimulating the economy. Wary of “spending as usual, ” the authors call for a “new level of accountability, transparency, and economic and environmental performance for how this country invests in infrastructure projects.” Their five part plan consists of 1) fixing existing roads, bridges, etc. in order to quickly create jobs; 2) phased planning that allows time for strategic project development, job training and capacity building; 3) the prioritization of “green” projects; 4) investment in job training programs; and 5) funding for analysis of project outcomes. To oversee this process, they propose a National Recovery and Renewal Council that would report directly to the White House and consist of representatives from both public agencies and the private sector.

— A big question for the Obama administration will be exactly what projects to spend this money on – and the options are hotly debated. Representative Jim Oberstar (D-MN) who is Chairman of the House Transportation and Infrastructure Committee (as well as a representative of the state where the I-35W bridge collapsed in 2007) says the priority should be to create jobs quickly and “to do that, we have to rely on projects that are ready to go to bid under existing formulas.” Often, these projects focus on roads and highways rather than mass transit and some environmental lobbying groups are pushing for the prioritization of greener initiatives. Those folks may be pleased with Obama’s newly announced Secretary of Transportation, Rep. Ray LaHood (R-IL), who has a record of supporting funding for Amtrak and public transit.

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