Obama to push huge public works projects

[Punarbhava]

http://www.nytimes.com/2008/12/07/us/po ... ml?_r=1&hp

December 7, 2008
Obama Pledges Public Works on a Vast Scale
By PETER BAKER and JOHN M. BRODER

WASHINGTON — President-elect Barack Obama promised Saturday to create the largest public works construction program since the inception of the interstate highway system a half century ago as he seeks to put together a plan to resuscitate the reeling economy.

With jobs evaporating and the recession deepening, Mr. Obama began highlighting elements of the economic recovery program he is trying to fashion with Congressional leaders in hopes of being able to enact it shortly after being sworn in on Jan. 20. His address on Saturday followed the report on Friday indicating that the country lost 533,000 jobs in November alone, bringing the total number of jobs lost over the past year to nearly 2 million.

Mr. Obama’s remarks showcased his ambition to expand the definition of traditional work programs for the middle class, like infrastructure projects to repair roads and bridges, to include new-era jobs in technology and so-called green jobs that reduce energy use and global warming emissions. “We need action — and action now,” Mr. Obama said in an address broadcast Saturday morning on radio and YouTube.

Mr. Obama’s plan, if enacted, would be in part a government-directed industrial policy, with lawmakers and administration officials picking winners and losers among private projects and raining large amounts of taxpayer money on them.

It would cover a range of programs to expand broadband Internet access, to make government buildings more energy efficient, to improve information technology at hospitals and doctors’ offices, and to upgrade computers in schools.

“It is unacceptable that the United States ranks 15th in the world in broadband adoption,” Mr. Obama said. “Here, in the country that invented the Internet, every child should have the chance to get online.”

President Bush and many conservative economists have opposed such large-scale government intervention in the economy because it supports enterprises that might not survive in a free market. That is the crux of the argument against a government bailout of the auto industry.

But Mr. Obama proposes to charge ahead, asserting that extensive government support is needed to preserve and create jobs while building the latticework of a 21st century economy.

Although Mr. Obama put no price tag on his plan, he said he would invest record amounts of money in the vast infrastructure program, which also includes work on schools, sewer systems, mass transit, electrical grids, dams and other public utilities. The green jobs would include various categories, including jobs dedicated to creating alternative fuels, windmills and solar panels; building energy efficient appliances, or installing fuel-efficient heating or cooling systems.

Paul Bledsoe, a former Clinton White House energy adviser, said that Mr. Obama had now settled whatever debate there was in his transition team and among Democrats in Congress over how to lift the economy in the short term and over a longer horizon.

“It’s now clear that Obama intends to stimulate the economy through large direct government spending on infrastructure projects as well as through business and individual tax cuts,” said Mr. Bledsoe, now an official of the National Commission on Energy Policy, a nonpartisan research group in Washington. “He is advocating things like guaranteeing every American a college education, wiring the entire country for Internet, putting in a smart electric grid. If he can do it, these will be major systemic advantages for the United States in the competitive global economy.”

Although Mr. Obama is weeks away from taking office, Friday’s grim jobs report heightened pressure on him to assert leadership before his inauguration.

Mr. Obama and his team are working with Congressional leaders to devise a spending package that some lawmakers suggest could total $400 billion to $700 billion. Some analysts forecast even higher costs. Mr. Obama has said he would direct his team to come up with a plan to save or create 2.5 million jobs in the first two years of his administration.

A big part of that will be public works spending. “We will create millions of jobs by making the single largest new investment in our national infrastructure since the creation of the federal highway system in the 1950s,” Mr. Obama said. He did not estimate how much he would devote to that purpose, but when he met with the nation’s governors last week, they said the states had $136 billion worth of road, bridge, water and other projects ready to go as soon as money became available. They estimated that each billion dollars spent would create up to 40,000 jobs.

Local and regional transit systems have $8 billion more in projects that could begin immediately, like buying hybrid buses and expanding light rail systems, creating thousands of jobs.

“He hasn’t given us any commitment, but we are fairly certain it’s going to be large,” Gov. Edward G. Rendell of Pennsylvania, a Democrat and chairman of the National Governors Association, said in an interview Saturday. “I think he understands if you’re trying to reverse the economy and turn it around, this is not the time to do it on the cheap. This is not the time to do it in small doses.”

Mr. Bush and other Republicans have resisted such an approach in part out of concern for the already soaring federal budget deficit, which could easily hit $1 trillion this year. Borrowing hundreds of billions of dollars today to try to fix the economy, they argue, will leave a huge bill for the next generation.

Conservative economists have also long derided public works spending as a poor response to tough economic times, saying it has not been a reliable catalyst for short-term growth and instead is more about politicians gaining points with constituents.

Alan D. Viard, an economist at the American Enterprise Institute, told the House Ways and Means Committee recently that public works spending should not be authorized out of the “illusory hope of job gains or economic stabilization.”

“If more money is spent on infrastructure, more workers will be employed in that sector,” Mr. Viard added. “In the long run, however, an increase in infrastructure spending requires a reduction in public or private spending for other goods and services. As a result, fewer workers are employed in other sectors of the economy.”

Mr. Obama implicitly tried to counter such arguments by invoking the federal interstate highway program, seen as one of the most successful public works efforts in American history.

President Dwight D. Eisenhower signed the Federal Aid Highway Act in 1956, ultimately resulting in the construction of 42,795 miles of roads. In 1991, the government concluded that the total cost came to $128.9 billion, with the federal government paying $114.3 billion and the states picking up the rest.

Mr. Obama also responded to criticism of waste and inefficiency in such programs by promising new spending rules, like a requirement that states act quickly to invest in roads and bridges or sacrifice federal money.

“We’ll measure progress by the reforms we make,” Mr. Obama said, “and the results we achieve by the jobs we create, by the energy we save, by whether America is more competitive in the world.”

The green jobs portion of the economic package could run as high as $100 billion over two years, according to an aide familiar with the discussions.

A blueprint for such spending can be found in a study financed by the Political Economy Research Institute at the University of Massachusetts and the Center for American Progress, a Washington research organization founded by John D. Podesta, who is a co-chairman of Mr. Obama’s transition team.

Daniel J. Weiss, an environmental analyst at Mr. Podesta’s center, said Washington should invest more money in existing programs that create work while cutting energy use, like home weatherization programs that have been chronically underfinanced.

[Darth Wong]

I'm forced to wonder how much debt this will create. Too bad America plowed itself so deep into debt during its economic good times. It limits their ability to use debt to solve problems in bad times.

I suppose the proposed tax hikes on the upper class could be increased to mitigate this problem, but I can only imagine the shrill screaming that will result. Especially since the rich people happen to control all of the media.

[Ender]

Well, its gonna be expensive as hell and throw some more debt on my generation and me, but at least we get something we need out of this, unlike the 700 billion boondoggle.

[Darth Wong]

Well, its gonna be expensive as hell and throw some more debt on my generation and me, but at least we get something we need out of this, unlike the 700 billion boondoggle.

It would be more tolerable if your country simply accepts tax increases. Many apologists for America's current economic woes point out that its debt is not absurdly large relative to its GDP, and compare it to the debt:GDP ratios of other countries, like Canada. But an individual must compare his debt to his actual personal income, not the amount of money he merely comes into contact with. The US debt is gigantic compared to the government's actual revenue, in part because of the pathological tax cutting that has come to be regarded as a cure-all.

Increase taxes on everyone, but with a very heavy emphasis on the wealthy, while simultaneously increasing spending on the social programs which would make life easier for the poor and middle-class people who currently must consume large amounts of their own income providing the kind of services and security that the state could (and, I would argue, should) provide. This would more than offset the deleterious effect of tax increases for the poor and middle class. It won't do anything for the rich because they don't need those programs anyway, but I think we've spent more than enough time looking out for the rich. Maybe the rich can look out for themselves from now on; it's not as if they're helpless.

[LMSx]

Conservative economists have also long derided public works spending as a poor response to tough economic times, saying it has not been a reliable catalyst for short-term growth and instead is more about politicians gaining points with constituents.

Alan D. Viard, an economist at the American Enterprise Institute, told the House Ways and Means Committee recently that public works spending should not be authorized out of the “illusory hope of job gains or economic stabilization.”

“If more money is spent on infrastructure, more workers will be employed in that sector,” Mr. Viard added. “In the long run, however, an increase in infrastructure spending requires a reduction in public or private spending for other goods and services. As a result, fewer workers are employed in other sectors of the economy.”

I wonder if Viard's recommended plan includes reducing the capital gains tax. Although I'm concerned about the debt too, this is still satisfying news after years of stories about America's crappy crumbling infrastructure. If Obama were to announce an increased tax hike above his campaign pledge, I think it makes sense to hold off until after he's inaugurated. At that point in early 09, the news from the economy will likely be even worse, which could make a more favorable attitude for his plan.

Or not. We didn't get in this hole by being reasonable.

[Guardsman Bass]

I'm pleased with some of the infrastructure spending, as long as not too much of it gets derailed into pork. This (repaired roads, electrical grid, green power, etc) is the type of stuff we realistically should be working on to get regardless of the recession.

That said, I wish that the government would actually find the balls to raise taxes during a boom time, so you can use of the increased tax revenue to pay down the debt.

[Thanas]

I am not an expert on this period of American History, but the first thing that came to mind was: Obama tries to emulate FDR. He could do a lot worse IMO.

[Broomstick]

It's simply mind-blowing that the brain-bug that is the "fact" that the lower and middle classes can't afford to pay income taxes (but the rich can painlessly afford to see their after-tax incomes reduced by 10+% instantaneously) has shielded people making $30,000/year from paying even $5 in Federal income tax and the country expecting a balanced budget.

What the FUCK are you talking about? The middle class doesn't pay income tax? You're full of shit. I was middle class over 20 years and I paid out in Fed income tax every damn year of it. Sure, I got a refund check most years, too, but that's because of how I set my withholding. That doesn't mean I got everything back, because I didn't. I paid thousands in Federal income tax every fucking year.

Either back that shit up, asshat, or retract it. Provide proof that people making $30,000 a year live Federal income tax free - except I don't think you can.

---------

Moving right along - my major concern with this infrastructure for jobs plan is.... working as a deskjockey does not qualify you for manual labor. Doing these jobs requires skills and training - where will THAT come from? Although we have a pool of unemployed tradesmen at present, it's not large enough to fill all the proposed jobs. That means we must take people trained for other areas... which is fine, except how long will take for them to get into the grove, as it were?

As another obstacle I've heard locals say the unions "won't allow" an influx of non-union people into these jobs. My feeling is that the unions may not have as much say in this as they'd like, and that leaves aside the possibility that this may be a way to increase union membership.

Anyhow - there are people details as well as fiscal details to be worked out here.

Conservative economists have also long derided public works spending as a poor response to tough economic times, saying it has not been a reliable catalyst for short-term growth and instead is more about politicians gaining points with constituents.

Alan D. Viard, an economist at the American Enterprise Institute, told the House Ways and Means Committee recently that public works spending should not be authorized out of the “illusory hope of job gains or economic stabilization.”

“If more money is spent on infrastructure, more workers will be employed in that sector,” Mr. Viard added. “In the long run, however, an increase in infrastructure spending requires a reduction in public or private spending for other goods and services. As a result, fewer workers are employed in other sectors of the economy.”

I think what these guys are missing is that the "other sectors of the economy" are already employing fewer people. It wouldn't be taking workers from those sectors, it would be utilizing workers already discarded from those sectors. It's not so much about growth as putting to work idle workers so they can pay for necessities.

We're also going to have to get over the notion that people over 30 aren't suitable for entry-level jobs in a new career. It's a particularly corrosive form of ageism in these times. Prospective employees need to come to grips with starting over at the bottom, and prospective employers need to hire older workers for entry-level sometimes and not just insist on 18 year olds. I don't care how efficient it is in a business sense, society can't afford to discard people over 35.

[Bellator]

Increase taxes on everyone, but with a very heavy emphasis on the wealthy, while simultaneously increasing spending on the social programs which would make life easier for the poor and middle-class people who currently must consume large amounts of their own income providing the kind of services and security that the state could (and, I would argue, should) provide.

This is great advise during normal circumstances, but if the governement would raise taxes in the way and to the degree you described, it would worsen the economy tremendiously. This is the worst possible time for large tax increases. Even if all that money would be earmarked for public works or social programs, the waste alone would result in a substantial net loss, especcially in the short run. During normal economic conditions, this would be manageable. During a recesion of this magnitude, it would be a disaster. It would be worse than doing nothing at all (which is nearly as bad).

[MKSheppard]

Waste of $500 billion. For that much money I could right now, order 1,800 Delta IV Heavy launch vehicles which would have a greater effect on our economy than bridges -- like putting 36,000 tons into LEO.

[Starglider]

I could right now, order 1,800 Delta IV Heavy launch vehicles which would have a greater effect on our economy than bridges -- like putting 36,000 tons into LEO.

Bridges save fuel and reduce travel/commuting/shipping costs. That's the payback. In the cases where existing bridges are close to failure, major new costs will be incurred if they have to be closed without replacement. Similar arguments apply to most other infrastructure.

What exactly is the economic payback of 36,000 tons (of what) in LEO? I am of course well aware and generally in support of all the long-term arguments in favour space settlement, but how is '36,000 tons into LEO' going to deliver a better ROI in the next decade than transport and utility infrastructure?

[Admiral Valdemar]

You could transport 36,000 tonnes of eggs into space.

*Shrug*

[aerius]

I'm forced to wonder how much debt this will create. Too bad America plowed itself so deep into debt during its economic good times. It limits their ability to use debt to solve problems in bad times.

It would be pretty hard to blow more money than the $7.5 trillion (it's now 8.6 trillion or so) that's already been commited to the financial sector bailout. From various sources I'm reading that's more than twice the inflation adjusted cost of WWII. If true, that's insanity.

This is great advise during normal circumstances, but if the governement would raise taxes in the way and to the degree you described, it would worsen the economy tremendiously. This is the worst possible time for large tax increases. Even if all that money would be earmarked for public works or social programs, the waste alone would result in a substantial net loss, especcially in the short run. During normal economic conditions, this would be manageable. During a recesion of this magnitude, it would be a disaster. It would be worse than doing nothing at all (which is nearly as bad).

What if the alternative is a default of all US government debt, and the US going the way of Iceland or Argentina? Because that's a distinct possibility if things continue to go south.

Waste of $500 billion. For that much money I could right now, order 1,800 Delta IV Heavy launch vehicles which would have a greater effect on our economy than bridges -- like putting 36,000 tons into LEO.

But Shep, what about nuke plants? Don't you wanna build a few hundred nuke plants?

[Starglider]

You could transport 36,000 tonnes of eggs into space.

I'm actually surprised that Shep isn't advocating buying 2000 B-1Cs for that money.

This is the worst possible time for large tax increases.

Tax increases on people who are struggling to house and feed their families are obviously a bad thing. Tax increases on higher earners simply move the spending from whatever investments or luxuries the individuals were going to allocate the money to whatever the government decides to spend the money on. I think there is a strong argument that the government can and will do more socially useful things with the money than the rich individuals right now, so it's mostly a personal liberty vs social welfare issue. Given the extremely high real deficit in the US I think higher taxes are the lesser evil.

My response to the Laffer curve fanatics is that the desire for extreme luxuries isn't going to go away. One effect of higher taxes is to motivate self-made wealthy to work harder and longer for their private jets, which isn't always a bad thing.

[Edi]

The conservative economists quoted in the article are still just not fucking getting it. Not conducive to short term growth? The whole bloody point is to overhaul the infrastructure so that it will still work 50 years from now, which it sure as fuck won't do unless it is maintained and upgraded after the decades of neglect it has suffered. But it looks like a the concept of a long term permanent investment is incomprehensible to them.

Then again those are the same assholes who advocated the policies that have driven the US economy to the dire straits it is in now and who also backed up the completely insane financial sector bailouts. The only reasonable response to their bleating is to tell them to sit down and shut the fuck up.

Funding it will be a problem and it's going to have to be tax increases, like Mike said, but no matter what is done (or not done), the consequences are going to assfuck someone either right now or down the line. The difference is whether it's done with lube or sandpaper.

[LadyTevar]

Rant on Income Tax Moved to HOS

Crap, why didn't it work the first time...

[Qwerty 42]

I can see it now: the right compares it to the Five Year Plan, the left to the New Deal.