Climate Change

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.

Building the Electron Superhighway

New York City - Should the federal government build or incent others to build a new electron superhighway? In other words, a backbone for a 21st century electrical grid?  At NDN's recent event on clean infrastructure, U.S. Rep. Jay Inslee asked precisely that question and it's one more and more energy leaders are asking.  

Our current grid, as former CIA Director Jim Woolsey has noted, resembles nothing so much as the road system before interstates were built. Had President Eisenhower not built the interstate system after observing the autobahns in Germany and fretting over the difficulty of moving an army from one end of America to the other, our roads would be a network of streets, shopping boulevards and country roads, slowed by trucks as well as tolls.  There would be no easy way to travel between one large city and another and trade and distribution of goods would be drastically hampered.  

This is precisely the situation we have today in the world of electricity, where mid-20th century wires are now tasked with carrying 21st century loads and tolls are collected by dozens of utilities along the way. As a result, instead of a national market in electricity, we have a balkanized patchwork of local fiefdoms each with vastly different prices. Electricity producers face obstacles in moving their electrons to market -- hardly an ideal solution.

How would an electron superhighway work? One proposal by the Energy Department would build major high voltage (765KV) trunk lines traveling East to West and North to South, particularly in the underserved center of the country. Like Interstates 10, 40, 80 and 90 which link the East and West and Interstates 5, 55 and 95 (as well as those in between) which link the North and South, these large roads would facilitate long distance movement of power.  Relieved of this burden, utilities could focus their resources on localized distribution. While the proposal might cost $60 billion to $100 billion (a weekend's worth of bailout money), the long-term benefits would be tremendous. In fact, the proposal could be financed through a miniscule tax of less than a penny on the average monthly utility bill.

A particularly interesting approach to building an electron superhighway would be to run the cables underground. No one wants a high voltage transmission line running anywhere near their home, leading to complex obstacles to siting new lines. Additionally, underground lines are far more expensive than overhead ones and it is harder to identify problems when they occur. However, new superconducting wire (eliminating almost all the resistance in a wire by cooling it down using liquid nitrogen) that can be laid in a three-foot trench and is already being implemented in Long Island could be run underneath bike paths, along roads and in other unobtrusive places. While this technology, proven in pilot projects and now being tested at scale is new, it could revolutionize long-distance power transmission.

The interstate highway system is not the only model for moving goods. The Internet backbone, though jumpstarted by federal investment, is run privately for profit. Similarly, private companies own the long distance natural gas pipes. And private companies own the railroads.  

Of these, the Internet system is probably least illustrative because it remains unregulated.  Natural gas is produced at a comparatively limited number of points, simplifying its long distance transportation requirements.  America's rail system, a relic of the 19th century, is probably not a model for a ubiquitous electricity network.

It may be that federal ownership is not necessary. However, a national tax on electricity would certainly be easier to implement than hundreds of individual rate cases -- the traditional method for funding investment. Important obstacles to greater federal involvement in electricity remain, however, in the form of state regulators and some utilities that have traditionally opposed a larger federal role.

As America confronts its 21st century challenges, in particular, developing a grid that can facilitate a national electricity market and also accommodate decentralized generation of renewable power, the idea of an electron superhighway merits serious attention. At a very minimum, work should accelerate on how to implement an electricity backbone. As FERC Commissioner Jon Wellinghoff, quoting Albert Einstein, remarked at NDN's clean infrastructure event, "physics is easy, politics is hard."

NDN Applauds Emanuel's Comments on Importance of Green Infrastructure, Will Support Administration's Efforts

On Wednesday, the Wall Street Journal reported that President-elect Barack Obama’s Chief of Staff-designee Rahm Emanuel "promised that a major economic stimulus would be 'the first order of business’ for Mr. Obama when he takes office Jan. 20. The focus of spending will be on infrastructure, specifically 'green infrastructure.'"  

According to Congressman Emanuel's statement, this green infrastructure will include mass transit, modernizing the electrical grid, and universal broadband Internet access, all of which NDN has been arguing should be included in the next Administration's agenda. NDN strongly supports this policy direction and will work with Members of Congress in support of this agenda.  

NDN has long been a strong and vocal advocate of a clean infrastructure stimulus because of its ability to create jobs and stimulate the economy in the short term while also creating a basis for future prosperity.

NDN Green Project Director Michael Moynihan first articulated the vision of clean and green infrastructure in his 2007 paper, Investing in Our Common Future: U.S. Infrastructure.

As Moynihan wrote more than a year ago, America needs "a GREEN Act requiring that federal infrastructure and buildings...not only address issues like global warming but also establish American leadership in green technologies of the future." Wrote Moynihan, "Only by working together can Americans reverse the decline in infrastructure that is eroding our present economy and make the forward-looking public investments needed to ensure future prosperity." To that end, NDN has proposed a number of green stimulus measures including a clean infrastructure bank, modernization of the electrical grid, support for mass transportation, and greater broadband access.

Recently, Moynihan, NDN Globalization Initiative Chair Dr. Robert Shapiro, and NDN President Simon Rosenberg have authored a number of essays and analyses on clean infrastructure and clean technology:

Additionally, earlier this week, NDN hosted a Capitol Hill forum entitled, "A Vision for a Modernized Electric Grid: Clean Infrastructure for a 21st Century Economy," with U.S. Reps. Jay Inslee and Earl Blumenauer, FERC Commissioner Wellinghoff, and other energy experts. Click here for video and photos of the event.

Waxman Unseats Dingell on Energy and Commerce

Word has just come down that U.S. Rep. Henry Waxman (CA-30) has defeated Rep. John Dingell (MI-15) in the race for chairman of the powerful House Energy and Commerce Committee. This will have a dramatic impact on the course of climate change and energy legislation in the 111th Congress.

Clean Infrastructure Stimulus to Be the Obama Administration's "First Order of Business"

New York City -- At NDN, we have been arguing for many months that a stimulus package is needed to jump start this difficult economy. We need a proposal that works for the long term as well as the short term. Absent real stimulus, there is a possibility, as Rob Shapiro argues, that the economy may lapse into a "sub-optimal equilibrium" in which people spend and produce far less than they can. However, we have also argued that the form the stimulus takes is as important as the amount. Invesments in clean infrastructure have the ability not only to get money onto the street quickly but also to address our long-term economic challenges such as stagnant wages, rising energy costs and the threat of climate change.

Yesterday, President-elect Obama and his Chief of Staff Rahm Emanuel said that a clean energy and infrastructure stimulus package literally will be the first order of business for the new Administration come January. What a difference a new President can make!

This is good news for the American economy and the American people. Clean infrastructure investments have the ability to create high-paying domestic jobs, lower energy costs and raise productivity all while stimulating the economy in the short term.

Here are some of the stimulus measures proposed yesterday by the President-elect's new chief of staff: mass transit, upgraded electricity transmission lines, "smart" electrical meters that allow consumers to save money by using electricity at off-peak hours, and universal broadband Internet access. 

All not only make sense but are critical to our future.

As the new Administration takes shape and a new Congress prepares to take office, we look forward to working with stakeholders and policy makers to make these critical investments and get America moving again!

The Hedge Fund and the Stimulus

New York City -- On October 3, the day President Bush signed the $700 billion bailout package that Hank Paulson called vital to saving American capitalism, the Dow closed at 10,325. Yesterday it closed at 8,424. In the six unhappy weeks of the bailout fund's life, the Dow has shed close to 2,000 points or about 20% of its value. Almost as soon as the fund was authorized, the Treasury and the Fed shifted gears and followed Gordon Brown in using the first slice to invest in banks. Capitulating last week to the fund's dubious impact on markets, Secretary Paulson announced that the Troubled Assets fund would not be used, after all, to buy troubled assets. Yesterday, he announced he does not plan to use the unspent funds of about $410 billion at all but will instead leave it as dry powder for the Obama Administration. Some have unkindly called this fund a slush fund. However, launched by a former Goldman star, levered at close to 100% and with the goal of making opportunistic investments, it really resembles nothing so much as a Hedge Fund.

So what's wrong with a government hedge fund?

The advantage of a Hedge Fund over a more constrained capital allocation process is that the fund manager can make the decisions quickly. If the manager is a genius, the fund does well. However, a genius one year can turn out to be not so smart the next. And as the limited partners in this hedge fund, the public should have the right to withdraw its money if the fund manager does not have a strategy.

In a world of constrained debt, one cost of the public's commitment to this hedge fund is that it has used up a healthy amount of the public's credit -- something that has not gone unnoticed by markets. As an article in the current Barrons observes, the yield curve, or the premium for borrowing for a longer period, has stiffened, recalling the famous inflation premium on long-term debt that drove the Clinton Administration's fiscal restraint. That premium disappeared during the Bush years, thanks to supercharged global liquidity from the Asian savings glut and expansion that followed the Asian financial crisis. Its reappearance, however, bears noting. More ominously, perhaps, a little known derivative, the credit default swap for long-term U.S. government bonds -- a derivative that should not exist since it represents insurance against a Treasury default -- has risen in price. In other words, some are now betting against the full faith and credit of the U.S. government. 

However, this hedge fund poses another problem for the economy and government policy that is impacting the proposed government stimulus, its opportunity cost. Any focused stimulus package now pales in comparison with the TARP hedge fund. Of what stimulative impact is $2 billion for weatherization or $10 billion to extend unemployment benefits when the Treasury is giving out chunks of $30 billion or $50 billion at a time to AIG? 

The hedge fund -- while it may have served a purpose in helping the banks stay solvent --threatens to interfere with needed stimulus.

As we have argued at NDN, the unbridled use of monetary tools last year left the Fed empty handed as we enter a recession and a fiscal stimulus is now the primary tool left to policy makers with which to address the slowdown. But we have also argued this fiscal stimulus should work for the long term as well as the short term.

We suggested a substantial share go into clean infrastructure projects that get money out onto the street but also address our long-term energy, environmental and economic challenges. Clean infrastructure projects can not only can create jobs and exert a large multiplier effect, but also pave the way for future prosperity. As President-elect Obama said over the weekend and again yesterday, clean energy is his top priority next year because it has the ability to address so many of our challenges at once. 

However, as long as the Hedge Fund overshadows any proposed stimulus, it will be difficult for Congress to make these needed investments.  What, then, is the answer?

Now that the immediate challenge of stabilizing the banks has been met, Congress and the incoming Administration should reassert their authority over the second half of the hedge fund. A portion of this money might be better allocated to stimulus than loans to banks.  In any case, it should not stand in the way of a meaningful stimulus package. 

The hedge fund may have served a short term purpose, but it is no way over the long term to allocate public funds. The sooner we begin making real investments, not just backstopping financial institutions, the sooner we will get America's economy moving again.

NDN, Inslee, Blumenauer, FERC's Wellinghoff, others to discuss Clean Infrastructure Tomorrow

As a new president prepares to take office amidst a receding economy, infrastructure investments are gaining attention as a way to create jobs and stimulate the economy in the short term while also creating the basis for future prosperity. However, U.S. infrastructure, already outdated, has come under new pressure from the combined challenges of climate change and volatile energy prices. As we face up to the competitive demands of the 21st century, it is clear that old, energy-inefficient infrastructure must be repaired, upgraded, or retired and replaced with a new, clean infrastructure to meet the needs of the coming low-carbon economy, the creation of which President-elect Obama has already made a top priority. NDN has long argued that any economic stimulus proposal must be heavily weighted toward clean infrastructure investment.

In that light, NDN is hosting the first in a series of events on clean infrastructure, beginning with a powerful discussion on modernizing the electrical grid tomorrow, Tuesday, November 18 on Capitol Hill.

A Vision for a Modernized Electric Grid: Clean Infrastructure for a 21st Century Economy
Rayburn House Office Building, Room 2322
Tuesday, November 18
12 p.m. – 1:30 p.m.
Click here to RSVP

Featured Speakers include:

Congressman Jay Inslee, Member, House Committee on Energy and Commerce, the Committee on Natural Resources, and the Select Committee on Energy Independence and Global Warming and co-chair of the New Democrat Coalition’s Energy Task Force

Congressman Earl Blumenauer, Member, House Committee on the Budget, the Commitee on Ways and Means, and the Select Committee on Energy Independence and Global Warming

Commissioner Jon Wellinghoff, Federal Energy Regulatory Commission (FERC)

Kurt Yeager, Executive Director of the Galvin Electricity Initiative

Moderated by:

Michael Moynihan, NDN Green Project Director

To attend or for further information about the event, please click here or contact Courtney Markey at or (202) 384-1214.

FERC Commissioner Wellinghoff Joins Nov. 18 NDN Clean Infrastructure Event

NDN is pleased to announce that Federal Energy Regulatory Commission (FERC) Commissioner Jon Wellinghoff will join Congressman Jay Inslee, Google’s Dan Reicher, the Galvin Electricity Institute’s Kurt Yeager, and NDN Green Project Director Michael Moynihan on Tuesday, November 18 for:

Developing the 21st Century Economy: Investing in Clean Infrastructure:
Rayburn House Office Building, Room 2322
Tuesday, November 18
12 p.m. – 1:30 p.m.
Click here to RSVP

This event should be an excellent and powerful conversation on clean infrastructure investment and grid modernization. For more information on the event or to RSVP, please click here or contact Courtney Markey.

The Clean Opportunity

The historic victory of Barack Obama last night and increased majorities for Democrats in the House and Senate create a huge opportunity to build a high productivity, low carbon economy.  The last eight years have been lost economic years  The rare exceptions in the form of the housing and financial markets have now, of course, imploded.  The silver lining to the crash, however, is that it has cleared the way for a new round of economic growth built on new economic policies.  And if the right lessons are learned, with new leadership in place, the next round can be one of real engineering, not financial engineering, high paid jobs, not low paid ones, and inclusive, broadbased growth, not speculative fortunes for a few.

The number one priority of the United States must be to raise the real incomes of the middle class.  To do that, however, we must accomplish a variety of things at once that include creating new high paying jobs to replace old ones that have moved overseas, taming energy costs, and creating a modern, high efficiency plant and infrastructure to undergird higher productivity and our future prosperity.

Fortunately, as President Elect Obama has joined NDN in arguing, clean energy has the ability to address many of our economic problems at once.  For this reason, President Elect Obama has indicated that he believes clean energy must be a key priority next year.  At NDN, we are rolling up our sleeves to embark on this economic journey with him.

In the short term, spending on clean infrastructure--to modernize the grid, weatherize homes and buildings, and upgrade transportation--has the ability to jumpstart the economy.  The long backlog of infrastructure projects means that many are teed up and ready to go.  There is a short lead time between appropriating money for infrastructure and shovels in the ground, and infrastructure investments, because they occur in the local economy, have a high multiplier effect.

Second, investments in clean energy have the potential to create millions of high paying jobs, many of which can go to people without extensive education.  Because these jobs cannot be done overseas, and are either inherently domestic or have a high technology component, there is reason to expect them to be high paying.

Third, investments in clean energy will pay long term dividends in taming our volatile energy costs.  Even though oil costs have fallen, the virtual destruction of the American auto industry as a result of the twin blasts of soaring gas prices this summer and the credit implosion, shows that we cannot afford this sort of volatility in a critical commodity.  Meanwhile, the underlying trend of energy prices remains upwards. 

Fourth, investments in clean energy and infrastructure will benefit our environment and the environment of our children.  The costs of climate change in the form of erratic weather and rising water levels have already been considerable and may increase.  We cannot afford not to make these investments.

Clearly, clean energy and clean infrastructure are ideas whose time has come.  As the new Administration takes form, we look forward to working closely with it and leaders in Congress to build a low carbon economy with the potential not only to jumpstart America's current ailing economy but also power prosperity for decades to come.

In coming days, we will be making a number of specific proposals for ways that the new Administration can move quickly to achieve these goals and realize the clean opportunity.

NDN: Week in Review

There's always a lot happening here at NDN, so in case you missed anything, here's what we've been up to in the last week:

NDN's Election Analysis - With the race drawing to a close, NDN has focused its political analysis this week. Simon had a popular essay on the Huffington Post last Friday: Keys to the Fall: Obama Leads, McCain Stumbles. Simon reprised this argument with a blog post on Saturday: Still No Evidence that McCain is in This Thing. Writing again on Monday, Simon speculated: Could This Be A Ten Point Race?

Yesterday, we released a compendium of NDN’s best political analysis from the past several years. These memos and essays cover the main arguments coming from NDN: The end of the conservative ascendancy and the dawn of a "new politics," the emergence of new voting groups like the Millennials and Hispanics, the power that a whole array of new media and technology tools are unleashing into our democracy, and old-fashioned number crunching and analysis on everything from the role of independents, the economy and video in the elections. We've also included some of our analysis from the election of 2006, a day that saw the end of the conservative era, and set the stage for tomorrow's election, which will mark the beginning of a new one.

Millennial Makeover Authors Join NDN as Fellows - NDN is excited to announce that Morley Winograd and Michael D. Hais, authors of the best-selling book Millennial Makeover, have joined NDN as Fellows. Morley and Mike are two of the most insightful and prescient interpreters of the profound demographic shifts taking place in our country today. NDN has a long history of working with Morley and Mike; they co-authored a seminal 2006 paper, "Politics of the Millennial Generation," for our affiliate, the New Politics Institute, and have spoken at several NDN events, including one in March about the Millennial transformation of American politics. They are an important and tremendously impressive addition to the NDN Team. To read bios of Morley and Mike, please click here.

NDN has long argued that Millennials, along with Hispanics, are becoming core elements of a new, sustainable 21st century progressive coalition. To learn more about how these demographics are changing the face of American politics, read our reports, "Hispanics Rising II" and "The Progressive Politics of the Millennial Generation."

NDN Breaking Through - NDN has been a major player in shaping the narrative surrounding the 2008 election. Here's a recap of our press from the last few weeks.

Simon's election analysis was recently featured in the Financial Times (11/4), the Arizona Republic (11/4), and The Hill (11/3), on NPR (11/4/08), and in DemFromCT's daily poll roundup on DailyKos (11/1), which linked to his front-page Huffington Post (10/31) article, as well as in Newsday (10/27), the Arizona Republic (10/26), and the Huffington Post (10/28, again). He was quoted in the VIBE cover story, "The Tipping Point" (10/14) about the historic implications of the rise of U.S. Sen. Barack Obama. Dan Balz quoted Simon in the Washington Post after the third and final presidential debate (10/16). Simon also provided analysis of the election in the Independent (10/22), Reuters (10/22, as well as here on 10/17), and in several more featured posts on the Huffington Post (here, 10/21, here, 10/22, and here, 10/17). His election commentary also aired on radio stations across the country (10/22), and he was featured on WAMU's "Power Breakfast." Finally, Andres was featured in the Wall Street Journal (10/31) speaking about the increasing importance of early voting.

Our work on Hispanic issues has garnered widespread attention in the last few weeks. Our recent polling on immigration reform was featured in a front page article in the Wall Street Journal (11/1). Ron Brownstein quoted Simon about demographic shifts on MSNBC's "Road to the White House." Simon hit on similar themes involving the Hispanic electorate and the country's changing electoral map in the San Francisco Chronicle (10/26), Bloomberg (10/26), the San Francisco Chronicle (10/13), Bloomberg (10/17), and Hispanic Trending (10/9). Andres also talked about the importance of the Hispanic electorate in the Latino Journal (10/12), and our recent immigration poll of battleground states was featured in a diary on DailyKos (10/16).

On the green front, Michael was featured in the Council on Foreign Relations (10/30) discussing energy prices and cutting carbon emissions, and had a featured post about dealing with climate change in a troubled economy in the Huffington Post's Green section (10/22). Rob was featured in Grist (10/28) speaking about clean infrastructure and a second economic stimulus.

NDN also remained a strong voice on the economy: Rob was quoted recently in a big story in the New York Times (10/22) and the International Herald-Tribune (10/21) about the Treasury backing the consolidation of banks, was featured in the Philadelphia Inquirer (10/14), and had this excellent quote in the Washington Times (10/17).

Finally, NDN also made several TV appearances recently. Our event with Simon and Joe Trippi was broadcast on C-SPAN, Simon went on BBC World News to discuss the election (relevant section begins at 1:40), and Andres appeared on several Nevada TV channels, including Fox and ABC, condemning illegal voter suppression tactics targeting Hispanic voters.

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