Download Beyond stimulus Obama sees a chance to rebuild America with new

Beyond stimulus Obama sees a chance to rebuild America with new New Deal
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DECEMBER 18, 2008
Compiling a To-Do List for Obama's New Deal
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By JONATHAN W EISMAN
It's being sold as the new New Deal.
As president, Barack Obama plans hundreds of billions of dollars in new spending and tax cuts. The economic recovery package will cost a minimum of $600 billion over two years. It could flirt
with $1 trillion. The need for fiscal stimulus is hardly debated. With unemployment rising, wealth plunging and the Federal Reserve nearly out of ammunition, "nobody's crying wolf here," said
House Majority Leader Steny Hoyer (D., Md.). "The wolf is at the door."
But the president-elect sees his plan as far more than fending off the wolf. He has said repeatedly that in crisis, he sees opportunity -- to rebuild a national infrastructure that has been neglected
for decades and to make down payments on policy initiatives that would have taken years to negotiate.
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As president, Barack Obama plans hundreds of billions of dollars in new spending and tax cuts.
Mr. Obama has announced the five broad categories of the plan: transportation and traditional infrastructure; school construction; energy efficiency, especially in government buildings; broadband
Internet access; and health care information technology.
Upward of $100 billion will go to state governments to temporarily shoulder the cost of health insurance for the poor. Mr. Hoyer said funds are likely to go to elementary and secondary education,
hardly the typical avenue for economic stimulus but, in Democrats' thinking, a critical investment nonetheless.
Mark Zandi, chief economist at Moody's Economy.com, has been running numbers for the transition, trying to find the right formulation to meet Mr. Obama's call for a package that will create 2.5
million jobs. By his calculations, a $600 billion stimulus plan would save 4.7 million jobs over the next two years that otherwise would be lost. By 2010, a 1.6% decline in gross domestic product
could be turned into a 1.9% increase.
Direct payments to the poor still have the biggest bang for the buck, since they go straight into the economic bloodstream, Mr. Zandi says. One dollar of increased food-stamp assistance produces
$1.73 in higher economic growth, and the effect would be felt in three to six months. Using that same dollar as a lump-sum tax rebate for income-tax payers would yield all of one penny in
additional growth, by Mr. Zandi's calculations.
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What should be the top stimulus spending priority for the incoming administration?
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Question of the Day: Which would be a bigger boost to the economy?
Spending on roads and schools does pack a punch as well -- $1.59 in additional growth for every $1 allocated -- but there would be a lag. Even projects that are "shovel ready" -- all the
environmental impact analyses and permitting work are done -- can run into unforeseen obstacles; their full effect wouldn't be felt for 12 to 24 months. But Mr. Zandi says that with such a
protracted downturn, even a delayed project will help by keeping the infusion of stimulus flowing long after its passage.
Such complications will incur the opposition of many Republicans, wary of a package whose cost could exceed the entire price of the war in Iraq. 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. Given virtual carte blanche, Congress's
opportunity for waste will be huge, and the federal deficit -- already nearing $1 trillion -- could shatter the Reagan-era records as measured against the size of the economy.
But for now, Mr. Obama believes economically and politically, bigger is going to be better.
Transportation and Infrastructure
In August 2007, when Minneapolis's I-35W bridge collapsed into the Mississippi River, the call for action on the nation's crumbling transportation system was bipartisan. Little was done.
Congestion -- on roads, at ports, in the air and along railways -- is worse than ever, lengthening commutes and delaying the shipments of goods.
Vehicle traffic has roughly doubled since 1989 while highway capacity has expanded only 6.6%, according to federal statistics and industry groups.
The roads are as old and decrepit as they are gridlocked. Pavement on more than 161,000 miles of interstates is rated unacceptable by the U.S. Department of Transportation and the Federal
Highway Administration. More than 153,000 bridges, roughly half of the total, have been found structurally dangerous or obsolete.
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The cost of a fix is staggering. The American Road and Transportation Builders Association says the Obama administration's stimulus spending would provide immediate relief to shippers,
commuters and railway customers and create jobs through construction projects. But the association says the stimulus spending wouldn't at all address long-term problems posed by the nation's
rapid population and traffic growth that require reforming the surface transportation act when it comes up for reauthorization in 2009. Beyond the stimulus spending, the administration would have
to find $20 billion annually above current levels just to maintain today's levels of highway safety and traffic flow.
"The signs of transportation infrastructure decay and chronic under-investment are everywhere," said Pete Ruane, chief executive of the road and transportation builders group. "Any American
driving on the highway, riding on a train or via airport feels the pain."
-- Corey Dade
Energy Efficiency in Federal Buildings
The allure of pouring money into improving the energy efficiency of public buildings is twofold. There are a lot of leaky public buildings. And they're a strategic place to start improving the energy
efficiency of the U.S. economy as a whole.
Federal buildings themselves aren't huge energy users. They consume just over 0.5% of U.S. energy use, according to the Department of Energy's Energy Information Administration.
In the fight for improved energy-efficiency, however, federal buildings punch above their weight. The government is one of the single largest real-estate owners in the country, notes Bracken
Hendricks, an energy expert at the Center for American Progress, a liberal think tank led by the head of the Obama transition team.
Few beside the federal government "could, single-handedly, with one action, be more transformative" of how buildings are constructed, says Mr. Hendricks.
Improving the energy efficiency of U.S. buildings as a whole would markedly curb the growth in the country's fossil-fuel use. Buildings consume about one-third of all energy used in the U.S.,
according to EIA figures. And studies have concluded that energy-efficiency improvements are the least expensive way to curb the growth in fossil-fuel demand.
At a time of economic crisis, job creation is a more immediate financial reason to target federal buildings for energy-efficiency spending, says Martin Kushler, director of the utilities program for the
American Council for an Energy-Efficient Economy.
The jobs from energy efficiency range from construction workers installing insulation and modern windows to electricians updating lighting and air-conditioning systems.
A September report led by Robert Pollin, a professor at the University of Massachusetts, Amherst, concluded that a $100 million federal stimulus package targeted at environment-related activities
would create two million jobs.
-- Jeffrey Ball
School Building Repairs
Since Bill Clinton held the White House, Democrats have been calling for a spending surge for school construction and repair. In the past decade, they got it -- $504 billion, mostly on school
construction, between 1995 and 2004.
But the money has disproportionately gone to wealthier school districts, leaving the neediest students in decrepit facilities, according to a 2006 survey led by 21st Century Schools Fund, a
Washington, D.C., advocacy group.
The report caught the attention of then-Sen. Obama who noted its "valuable policy suggestions that should receive serious attention," such as greater federal involvement in directing funds to the
neediest schools.
"That targeting has to be done at the federal level," says Amy Wilkins, a vice president at the Education Trust in Washington, D.C. Otherwise, she adds, local "politics will direct the money to the
squeakiest wheel."
While education experts say school construction alone will not close educational disparities, it may help attract better teachers to struggling districts. Researchers at the Brookings Institution note
that teachers' pay structures offer "no extra compensation for teaching in high-needs schools where the work is likely to be more difficult." Better infrastructure may help bring better teachers,
though other incentives are also needed.
Mary Filardo, executive director of the 21st Century Schools Fund, estimates that a $20 billion investment could help offset years of bad maintenance in low-income schools and generate some
250,000 maintenance and repair jobs.
-- Philip Shishkin
Broadband Expansion
In the midst of the 1990s' Internet boom, the Clinton administration grew concerned about the social and economic effects from lower-income families not having the same access to the Internet
as higher-income families, the so-called "digital divide." Under George W. Bush, the debate shifted to economic competitiveness and whether the U.S. lags behind the rest of the world in
broadband -- as measured by deployment, speeds and prices.
Now, President-elect Obama is putting both issues back on the table.
By nearly every measure, the U.S., which invented the Internet, has fallen from its position atop international rankings. The nation is 15th in the percentage of inhabitants with broadband access,
according to the Organization for Economic Cooperation and Development. Countries like Japan enjoy download speeds more than 30 times faster than the average in the U.S., often at cheaper
prices. About half the country, primarily in rural and some urban areas, still doesn't use broadband.
Spending alone can't address those shortfalls. The U.S. may simply lack the Internet service competition necessary to spur better performance, a problem beyond the reach of federal spending.
Most markets in the country consist of a duopoly of one telecom carrier and one cable company. In Europe, governments have forced carriers to open their networks to rival service providers, a
step resisted in the U.S.
In the short-term, the economic effects of building out the existing networks would create 97,500 jobs in the telecom equipment industry for every $5 billion invested , according to the
Communications Workers of America. Longer-term, a state-of- the-art network could improve efficiency in myriad sectors, some experts contend.
"Railways, canals and roads were built because of the importance to the economy," says Markham Erickson, executive director of the Open Internet Coalition. "Now, the Internet is that economic
engine."
There are many ways to expand the network, and the choices Washington makes will create winners and losers. Stoking that engine could spark a lobbying war, as cable and phone providers vie
for government largesse. The fiber optic industry is already busy making its pitch. To bring fiber optical cable to the remaining 90% of American homes that today don't have access to it would cost
about $100 billion, according to the Fiber to the Home Council, a lobby group.
Few expect Washington itself to roll out the network. Big carriers upgrading their own high-speed networks, such as Verizon, would cry foul if the government enters the business. But such a
government-driven initiative has a precedent, when the first New Deal, under FDR, brought electricity to the countryside, spurring growth.
-- Christopher Rhoads
Digitized Health Records
If that broadband network is built, Mr. Obama already knows one thing he wants flowing through the fibers: digitized, uniform medical records.
On the campaign trail, Mr. Obama proposed a health care plan in two parts: Universal access to health insurance, and a health care information technology program budgeted at $50 billion over
five years. Obama aides assembling the stimulus plan wanted to use it to further the president-elect's policy goals. That health care IT program "perfectly fit the bill," an aide said.
Unlike most industries, the country's $2 trillion health care system is clogged with paper, folders and plenty of clipboards. Some 90% of U.S. doctors and at least two-thirds of hospitals still rely on
paper patient records, and many of those who have gone digital can't exchange the information with outside providers. The result is billions of dollars each year in administrative waste, duplicate
tests and medical errors.
Fixing the problem has seemed the low-hanging fruit of health reform, largely because everyone agrees going digital will improve care. But legal questions, privacy issues and the country's
fragmented system of 700,000 physicians have stymied progress. Doctors have been reluctant to invest $40,000 to $60,000 on an electronic record system that may not be interoperable with
other systems, especially when much of the savings goes to insurers and other payers.
Mr. Obama has said digitizing health care could save as much as $77 billion and pay for a lot of other health care reform. The $77 billion figure comes from a Rand Corp. study, however, that adds
that kind of savings wouldn't likely be achieved until 2019 -- and only if 90% of hospitals and doctors are online by then.
-- Vanessa Fuhrmans
Write to Jonathan Weisman at [email protected]