I was surprised to read the first plank of Obama’s proposed stimulus:
First, we will launch a massive effort to make public buildings more
energy-efficient. Our government now pays the highest energy bill in
the world. We need to change that. We need to upgrade our federal
buildings by replacing old heating systems and installing efficient
light bulbs. That won’t just save you, the American taxpayer, billions
of dollars each year. It will put people back to work.
Maybe that is deliberately unglamorous but I was expecting a more dramatic first punch. Here, by the way, are some simple arguments for energy-efficient buildings. My Google search doesn’t yield much useful, however, in the way of critical analysis. (Any leads, readers?) And surely ten years from now our government still will have the highest energy bills in the world, unless the goal is to grow so slowly that the Chinese government will pass us.
Oddly the two goals of the plan — saving dollars and creating jobs — often stand in tension. Let’s say we could heat all those buildings for a dollar: how many jobs would that create? Is the goal to "spend less" or to "spend more"? The mere fact that you can write in the comments section: "Spend more today to spend less tomorrow!" does not convince me.
The second plank of the program is more roads and bridges, which for better or worse you can consider the opposite of a carbon tax. How quickly can that money be spent anyway? The plan mandates quick spending of the transferred funds. But maybe state and local governments will hold off on some currently planned expenditures (which is contractionary) so they can be ready to spend immediately once they receive their "use it or lose it" allocations. Has anyone thought that problem through?
The third plank is upgrading school buildings. ???????????????? Maybe this is Obama’s attempt to mimic ditch-digging, under the unassailable banner of "education," but again how quickly can these projects come on-line? I call this one total waste and an outright mistake.
The fourth plank is extending the information superhighway. Maybe, but isn’t human capital the real constraint at current margins?
The fifth plank is internet-connected hospitals and electronic medical records. Those are good ideas but I don’t see how they contribute to economic recovery. Basically you either force or pay medical care providers to do it and for sure health care is not the ailing sector.
The bottom line: When it comes to fiscal policy, many projects are not very good. Most projects take a long time to come on-line. The fiscal stimulus should, most of all, be directed at an effective marginal incentive scheme to keep up state and local spending. I am still enthusiastic about Obama’s economic team, but I am starting to worry a little. How many of these expenditures actually help needy people? How many actually will help the economy? In fairness to Obama this was a radio address, and thus hardly the setting for meaty analysis, but still I am a little underwhelmed.