Obama At The Dike: What Does $1 Trillion Buy?

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The new administration will ask Congress for close to $800 billion to stimulate the economy and get America back on the road to recovery without straining the capacity of the map makers. By the time members of the new legislature get their hands on the bills to create new programs and add a bit for their districts, the number is certain to go over $1 trillion.

The Paulson $700 billion plan plus a feeder from the Fed that mainlines capital into the financial system has not been very effective. Of course, Treasury Secretary Henry Paulson has only spent half of his money. He and Fed Chairman Ben Bernanke would argue that without their Herculean efforts, things would be much worse.

Based on very little detail, the executive branch’s program for next year will try to save the states, many of which are nearly out of money, and create jobs.

According to The Wall Street Journal, "The broad parameters of the package are known already. It will include a tax cut designed to pump $50 billion to $100 billion into the economy almost immediately; about $100 billion in aid to state governments, primarily to temporarily assume more of the cost of Medicaid, in hopes of staving off benefit cuts or tax increases; and funding in five main areas: traditional infrastructure, school construction, energy efficiency, broadband access and health-information technology."

Since Mr. Obama has not run a large government, he may only have a modest idea of how hard it is to start, track, regulate, and correct problems with dozens of programs meant to cure scores of ills. He also probably under-appreciates how many hands will reach into the pockets of members of Congress to find a few bucks for special projects.

Some of the spending will simply be throwing money at jobs which will create work but little of value for the future.

Most people other than farmers have access to broadband. Many cannot afford it. Rather than adding more wiring, it would be a better idea to have the federal government underwrite free service. It would save the money that the "broadband army" would have to spend on gas going to work in jobs which don’t really advance any initiative. After all, the infrastructure already exists.

To a large extent, the same is true of creating more efficient energy systems. Making better car batteries takes a modest number of good scientists and some factories in China. The ethanol business has died and gone to hell because of low oil prices and the need to send corn to the world’s poor. This is humanitarian aid which is harder to come by when the global economy is in deep trouble. T. Boone Pickens is prepared to pick up most of the cost of building "wind farms", if the government will kick in tax credits. Then the stimulus package would only need to employ people in manual labor such as placing wiring from the windmills to the electrical grid and digging ditches.

Health-information technology is as complex as it sounds. That is one of the reasons it is such a profitable business for conglomerates like GE (GE) and Siemens (SI). Because most of the creation and deployment of products to streamline the healthcare system requires substantial training, programs in this category could take over a year to beget real jobs. It is not an easy thing to turn an auto worker into a software technician. Most experts would say that technology is not the great enemy of health-care costs. Insurance companies and HMOs are. Better to use the bully pulpit to bring down the expense of the middle men than to send tens of thousands of ill-trained, newly-minted geeks into hospitals and doctor’s offices around the nation.

The plan to build schools and rebuild roads and bridges is the best of the lot. Any observant citizen driving coast to coast and border to border would notice that there are a lot of old schools. Whether there are enough schools is a matter for debate. In the end, it might be better to train thousands of teachers and drop the size of classes across America than it is to put up new structures. But that alteration to the program may be too obvious.

That leaves road and bridge repair. Based on collapsing bridges and the million of potholes in the nation’s road, the proposed stimulus plan may have found a winner.

Douglas A. McIntyre