Stimulus Without Waste

President Elect Obama's comments at the press conference yesterday announcing Peter Orszag as head of OMB, following his announcement on Monday of other key economic appointments – Tim Geithner as Secretary of the Treasury, Larry Summers as director of the NEC and Christina Romer as head of the CEA – illustrates the tightrope that the new Administration will have to walk in addressing the economic crisis.

On the one hand, on Monday the President Elect highlighted the immense economic challenges facing the country that will require a stimulus package that Larry Summers has said "must be speedy, substantial and sustained."  On the other, however, it is important that the stimulus not be perceived as wasteful spending.  And thus it was appropriate for President Elect Obama to highlight his cost cutting challenge to Orszag, namely to eliminate waste from the federal budget.

By it very nature, a rapidly implemented stimulus cannot be as focused as ordinary elective spending.  To accomplish its goal, the stimulus must be broad, get the money out on the street quickly, and be large enough to do its job.  However, if the money is perceived as being dropped from a helicopter (in the metaphor popularized by Fed Chairman Bernanke), it may undermine faith in the government and hence confidence in markets.

As the stimulus package is developed and released, all eyes will be on whether it appears to be thoughtful or wasteful of the public's money.  President Elect Obama's comments yesterday were thus encouraging in suggesting he recognizes this requirement and that his team will work to ensure that the stimulus meets this crucial test.

As we at NDN have argued, investments in infrastructure not only have a short lead time in getting money where it is needed, they also are not wasteful because they will continue to pay dividends for years to come.  We need new, up to date roads, bridges, rail lines, water mains, fiber and power lines to undergird our future prosperity.  However, as we have also argued, a key part of infrastructure investments being up to date is that they acknowledge our energy and environmental challenges.  Retrofitting older buildings, requiring that every new government facility meet green standards and making transportation investments based on their energy and environmental implications is investing in the future. 

Placing a gigawatt of renewable solar power on government buildings over the next 5 years, for example, is not only desirable but is also cost effective.  Investing in our electricity grid can not only create jobs today but stimulate the economy down the road.  And funding a clean infrastructure bank to make energy smart infrastructure investments will not just stimulate the economy but raise productivity in the future.

In short, energy and environmentally smart represents a responsible use of the public's money.  And making these sorts of investments is one way to meet the challenge of stimulating the economy responsibly.  In coming weeks, we look forward to working with the Administration's new team, Congress, and stakeholders on a stimulus package that addresses both our short and long term economic challenges.