Clean Infrastructure

New York City -- As the economic recovery and investment package backed by the Administration works its way through Congress and more evidence about the nature of this recession surfaces, an interesting exercise is to think about how we want to emerge once it is over.  In the midst of current economic turmoil, it may seem difficult to imagine the post-recovery world, let alone accurately predict it. Nonetheless, starting with an outcome and working backwards to a policy prescription is far preferable to policy based purely on the passions of the moment. Following are my thoughts on the world I would like to see in 2012 and the resulting implications for current policy.

First, by 2012, I certainly hope that a robust recovery is well underway. But to do that, we need to get through the pain now and resist any temptation to drag things out. In the years of true laissez faire before modern management of the economy, the typical business cycle ran about 3 to 4 years from top to trough.  The United States entered recessions in 1893, 1896, 1900, 1903, 1907, 1910 and 1914, for example, with this pattern continuing through 1931. Modern economic policy combined with changes in the economy have tamed and extended the business cycle so that we have been averaging nine-year expansions interrupted by quick, shallow recessions. However, the Japanese example of the 1990s shows that policy can extend a slowdown if a country is unable to take its licks quickly and then move on. We don't want a Japanese-style lost decade. So a top priority is to face up to our problems now to clear the decks for the future.

Second, a recession of this depth virtually guarantees a strong expansion coming out.  However, it is important that we lay the groundwork for an expansion that has three qualities.  The expansion should create new high paid jobs, it should be broad-based, benefiting every income segment and region of the country and it should contribute to our long-term productivity. The fact is not all expansions are alike. And the recent Bush expansion failed on all these counts. Lacking any science or technology component, it left tract houses and debt instruments but no new industries to speak of.  It benefited a small group at the top while the lower 80 percent of Americans saw their incomes actually drop.  And it made precious few investments in our future productivity. In contrast, the 1980s expansion created the personal computer industry and the 1990s expansion the Internet --both dominated by U.S. firms. The 1990s built our broadband network on which much of our future productivity depends and raised middle class incomes. Both created great new American companies. So in 2012, I would like to see a recovery underway that is innovative, broad-based and long term.

Finally, in 2012, I would like to see the United States on a path toward environmental and climate sustainability. As the global population continues to explode, we can no longer take our earth's health for granted. The consequences of ignoring the health of the earth are simply too dire to leave to chance and the negative consequences of pollution and climate change could easily eat up and make a mockery of the benefits of the next expansion.

So what are the implications for current policy?

First, we need to act decisively, but intelligently, to put this recession behind us. The stimulus package is not a cure-all, but it will help restore liquidity to the economy. The key here is to pass it quickly rather than haggling over details. The greatest task is probably to revamp and refashion the clumsy TARP program into a multi-pronged policy to restore the health of the financial sector. The government needs to help banks clear their books of non-performing loans.  While new classes of bad assets are emerging daily, the largest class -- as evidenced by the financial strength of banks who resisted their allure -- remain the mortgage-backed securities and structured investment vehicles that started the crisis. The government should corral these, buy them up and then sell them off to investors. If the investors profit as did those who bought real estate from the Resolution Trust Company in the 1990s, so much the better. In turn, the government should also create a new US mortgage with a stable, 5.25% interest rate to create the basis for secure, affordable homeownership in years ahead. A comprehensive effort, building on Paul Volcker's recent report, needs to begin to update our financial regulatory regime to prevent another crisis of this nature. And we need to dramatically strengthen the rights of the consumer of financial services. It is shocking that the financial services industry -- with billions of taxpayers' money in its hands and pockets --is at this moment lobbying against consumer protection. The gutting of usury regulation, credit and consumer reporting legislation, fairness in lending and other post-war consumer protections by banking lobbyists in recent years clearly played a major role in the crisis.

Second, we need to ensure that the next recovery is broad based. The answer here involves investing in education, middle-class tax relief and our infrastructure to ensure that everyone benefits from the next expansion. 

Third, we need to ensure that the next economy bolsters the long-term productivity of the United States. That means investing in science and technology to power innovation from which new industry must come, investing in greening our economy to cut energy costs and investing in new infrastructure such as a smarter electrical grid, mass transit and greener buildings to make our people more productive. The stimulus bill is an important down payment on the investments we need. However, by its very nature the stimulus bill is designed to get as much money out the door as quickly as possible. This means it cannot --in its current form -- be expected to make all the long term investments we need. 

Finally, we need to make the energy investments and policy changes needed to restore our climate to health. Many of the green elements of the economic recovery and investment package that we at NDN began proposing last summer will help in this regard -- from greening the federal government to providing tax credits for saving energy to investing in mass transit. However, the Administration also needs to move forward on comprehensive energy legislation and a cap and trade system so that we can take a leadership role in global negotiations next year in Copenhagen.

As I often argued in the 1990s and dicussed in my book, The Coming American Renaissance, and as National Economic Council chairman, Larry Summers, said this weekend on Meet the Press, America's greatest days lie ahead of us. I am convinced that America will emerge from the current crisis stronger and that the years from 2012 to 2016 and beyond can be among America's greatest.

To do that, however, we need to make the right decisions today to power the next round of prosperity.  Cleaning up our financial sector, investing in our people and investing in new clean technologies and infrastructure are the way not only to get our economy back on track, but also to clear the decks for the the next great wave of economic growth.

Yesterday's proceedings were an historic landmark in many ways, representing a momentous step forward in race relations in America and a dramatic shift in governing philosophy and ideology. 

But President Obama's inauguration as the 44th president of the United States of America was historic in other ways as well -- NDN Fellows Morley Winograd and Mike Hais helped to provide some context and insight into the generational implications of this inauguration in the San Jose Mercury News, the San Francisco Chronicle, Forbes, the Palm Beach Post, and the Orlando Sentinel. From the Chronicle piece:

"This is our moment," says Jonah Khandros, 23, of Orinda, a Democratic political activist who worked on Obama's campaign and traveled to the nation's capital this week. He plans to celebrate the inauguration by uniting with dozens of friends from high school and college who have scattered around the country. "We've waited for this; a lot of us worked for it," he said. "But even if your only contribution was talking to your mom and dad and convincing them to vote for Obama, we feel our generation gets a lot of credit."

Morley Winograd, an author and a fellow at NDN, a progressive think tank and advocacy organization, says the Woodstock comparison is entirely appropriate. "This is their moment to demonstrate to America what they think America's future should be like," said Winograd. "They are going to celebrate that and underline it for all of America. Of course, the race relations breakthrough is huge, and the media will be focused on it ... but the generational difference, the moment the generational shift takes place, is also an important story."

...NDN Fellow Michael Hais, who co-authored "Millennial Makeover: My Space, YouTube and the Future of American Politics" with Winograd, said that the Millennial generation's overwhelming and early support of Obama means Millennials are poised to watch his swearing-in with a high level of connection. A recent Rasmussen poll, he said, showed they are expected to tune in to today's events at more than twice the level of other generations.

And another quote, this one from the Mercury News article:

Obama's campaign mobilized a new generation of voters, and the turnout of about 1.5 million in Washington was a testament to his wide appeal. The new 47-year-old president claimed a mandate for bold action, despite the doubts of many.

"What the cynics fail to understand is that the ground has shifted beneath them, that the stale political arguments that have consumed us for so long no longer apply," he said.

Morley Winograd, author of "Millennial Makeover" with Michael Hais, said Obama "was elaborating on the theme of generational change, that we are getting past ideological division, that we need government action and to rebuild our image abroad."

Simon was quoted in the Financial Times and the Boston Globe (and its sister papers) on the challenges facing our new president. From the Globe:

Obama begins his term with a long list of national troubles to address: an economic recession, massive home foreclosures, high unemployment, two wars, a healthcare crisis, and a damaged US image abroad - any one of which could derail his presidency in the first year.

But Obama also starts with a deep reservoir of good will among the public and elected officials in both parties. Recent polls have found that Obama is the most popular incoming president in a generation, with 80 percent of Americans in a Washington Post-ABC News poll released Sunday saying they approved of the way Obama handled the transition. Further, 71 percent said Obama had earned a mandate to work for major new social and economic programs.

"These are happy times for our politics, but a very tough time for the country," said Simon Rosenberg, president of NDN, a progressive think tank. "There's both tremendous hope and a great deal of sobriety. People are having both of these feelings at the same time."

Simon was also featured in the New York Times blog talking about immigration reform.

Finally, Michael Moynihan was featured in the Los Angeles Times and the Seattle Post-Intelligencer on Obama's climate change challenge. From the LA Times feature:

"Before you spend billions of dollars on new lines, you have to spend millions of dollars on design work," said Michael Moynihan, the green project director of the liberal think tank NDN in Washington, who has worked extensively on green infrastructure and the stimulus. "Nobody had been thinking about this much money [becoming available]. So the planning just has not been done."

NDN today released this statement applauding the draft economic recovery and reinvestment package:

NDN: ECONOMIC RECOVERY PROPOSAL SIGNALS CHANGED PRIORITIES, ACCELERATES DEVELOPMENT OF A 21ST CENTURY ECONOMY

"President-elect Obama has made clear that this proposal should not only create more jobs, but do so in ways that will help drive the development of a real, 21st century workforce and genuine 21st century economic infrastructure," said Dr. Robert Shapiro, the Chair of NDN’s Globalization Initiative. "Investments in this 21st century economic infrastructure, such as increased broadband access, computers in schools, health information technology and provisions to green the federal government, are critical to increasing demand for the important technologies and skills that will in turn expand the nation’s capacity for innovation and economic growth."

NDN President Simon Rosenberg praised both the recovery package and President-elect Obama’s commitment to use TARP funds to help keep people in their homes.

"For years, NDN has argued that the central economic issue of our time has been the stagnating wages and incomes of everyday Americans, which led directly to the overleveraging of Americans' largest assets: their homes," Rosenberg said. "By pledging to use TARP funds to keep people in their homes, using part of the recovery package to stabilize the housing market, which is the root cause of the financial crisis, and targeting investments to create long-term prosperity, President-elect Barack Obama and the Congress have made a crucial commitment to focus America’s economic strategy on the well-being of everyday people."

"The new prominence of critical investments in clean technology and clean infrastructure in this package rightly shows that clean energy is no longer a marginal topic and now sits at the heart of America’s economic strategy," said Michael Moynihan, the Director of NDN’s Green Project, who has long argued for clean infrastructure investment. "The inclusion of $32 billion in clean technology investments at the center of this package is not only vital to addressing our short term crisis but also has the potential to power the next great wave of prosperity."

For more of NDN's work on the economy, creating a stimulus for the long run, keeping people in their homes, and clean infrastructure, please see NDN's backgrounder on Economic Recovery:

• Politics and the Economic Crisis by Dr. Robert Shapiro, 1/9/2009 - Shapiro argues that, for an economic recovery plan to be effective, we must also address the underlying causes of the "Great Recession," including the housing crisis.

• Getting the Stimulus Right by Michael Moynihan, 1/6/2009 - Moynihan makes a number of suggestions for ensuring that the upcoming, record-size stimulus package is a success, including a board to oversee the vast expenditures.

• More Ideas for the Stimulus: Free Computer Training for All Americans by Simon Rosenberg, 12/14/2008 - Rosenberg argues that successfully transitioning America and its people to a technology-rich economy
  is one of the incoming President's most daunting challenges, and one he
  seems to understand.

• The Global Economic Crisis and Future Ambassadorial Appointments by Simon Rosenberg, 11/26/2008 - With the mammoth task of rebuilding international financial architecture and recovering from a global recession awaiting the new President, Rosenberg points out the the ambassadors to the G20 nations will be key members of the economic team.

• A Vision for a Modernized Electric Grid: Clean Infrastructure for a 21st Century Economy, 11/18/2008 - NDN's Green Project hosted this discussion with Congressmen Jay Inslee and Earl Blumenauer, FERC Comissioner Jon Wellinghoff, Kurt Yeager, and Reid Detchon on the benefits of modernizing the nation's electric grid as part of a clean infrastructure agenda.

• A Stimulus for the Long Run by Simon Rosenberg and Dr. Robert Shapiro, 11/14/2008 – This important essay lays out the now widely agreed-upon argument that the upcoming economic stimulus package must include investments in the basic elements of growth for the next decade, including elements that create a low-carbon, energy-efficient economy.

• Accelerating the Development of a 21st Century Economy: Investing in Clean Infrastructure by Michael Moynihan, 10/18/2008 – NDN Green Project Director Michael Moynihan outlines a strategy for investing in clean infrastructure that will help create long-term prosperity.

• Back to Basics: The Treasury Plan Won't Work by Dr. Robert Shapiro, 9/24/2008 - As the financial crisis unfolded and the Bush Administration offered its response, Shapiro argued that, while major action was needed, the Treasury's plan would be ineffective.

• Keep People in Their Homes by Simon Rosenberg and Dr. Robert Shapiro, 9/23/2008 – At the beginning of the financial collapse, NDN offered this narrative-shaping essay and campaign on the economic need to stabilize the housing market.

• The Green Economic Opportunity and Energy and the American Way of Life, 8/1/2008 - This two-part event featured an address from U.S. Senate Assistant Majority Leader Dick Durbin on the benefits of a low-carbon economy and Roger Efird, Greg Kats, Jack Hidary, and Shyam Kannan discussing green buildings and clean technology.

• Trading in the Trading Down Economy by Michael Moynihan, 7/11/2008 - As economic activity trended downward, Moynihan argued for an economic vision that both moved America beyond the recession and positioned the country for long term prosperity.

• Investing in Our Common Future: U.S. Infrastructure by Michael Moynihan, 11/13/2007 - This
  far-reaching paper proposes a set of measures rebuild and advance our aging infrastructure. These proposals include a GREEN Act to require that federal infrastructure and buildings meet a higher set of environmental standards that not only address issues such as global warming but also establish American leadership in green technologies.
• Tapping the Resources of America's Community Colleges: A Modest Proposal to Provide Universal Access to Computer Training by Dr. Robert Shapiro, 7/26/2007 – This innovative proposal details how every American can have access to computer training, thereby upgrading the skills of the nation’s workforce.

• A Laptop in Every Backpack by Simon Rosenberg and Alec Ross, 5/1/2007 – Rosenberg and the One Economy Corporation’s Ross offer a modest proposal for putting a laptop in the backpack of every American sixth grader, as connectivity to and facility with the global communications network are essential for success in the 21st century.

For more of NDN's 21st century economic strategy for America, please visit our Globalization Initiative page.

The Washington Post's Steven Mufson today looks at the energy provisions that may be included in the economic recovery plan being offered by President-elect Barack Obama. This clean infrastructure rich green stimulus package will reportedly include $25 billion in energy related tax credits, including a two year extension of the Production Tax Credit.

The legislation may also end up including a bank to finance energy infrastructure, an idea NDN has been advocating. From the article:

The stimulus package may also establish a federally funded National Clean Energy Lending Authority, an idea that has been promoted by Rep. Chris Van Hollen (D-Md.) and Rep. Zach Wamp (R-Tenn.). The agency would receive as much as $10 billion to $20 billion and would extend low-interest loans or loan guarantees to renewable energy projects in an effort to mobilize private capital. If successful, Van Hollen said, the agency could become self-sustaining.

The pair also proposed the establishment of a revolving fund to help finance energy-efficiency improvements by homeowners.

The two lawmakers have written to Obama and have discussed their proposal for a "green bank" with Obama's choice for chief of staff, Rahm Emanuel, and economic adviser Lawrence Summers.

"The idea is gaining traction," Van Hollen said. "It fills an essential gap right now."

As Congressman Van Hollen points out, a clean infrastructure bank is incredibly important right now, as the credit necessary for many renewable energy and clean infrastructure projects dried up in the financial meltdown. Without a way to finance these projects, tax credits alone may not have the stimulative effect that one would like.

For more on clean infrastructure and green stimulus, attend NDN's upcoming event Clean Infrastructure: Transportation Policy for the 21st Century with U.S. Rep. Earl Blumenauer, read the NDN economic backgrounder and read Melissa Merz's blog about President-elect Barack Obama's most recent weekly YouTube address.

Edmund Andrews and David Herszenhorn of the New York Times today offer a very good overview of the how the debate over the economy is shaping up.  It begins:

WASHINGTON - The fresh evidence on Friday of the economy's downward spiral focused even more attention on two questions: Is the stimulus package being pushed by President-elect Barack Obama big enough? And will the component parts being assembled by Congress provide the most bang for the buck?

With the Federal Reserve having just about reached the limit of how much it can help the economy with cuts in the interest rate, Washington's ability to end or at least limit the recession depends in large part on the effectiveness of the big package of additional spending and tax cuts that Mr. Obama has made the centerpiece of his agenda.

And with the economy facing what now seems sure to be the sharpest downturn since the 1930s, the financial system balky and the government facing towering budget deficits, economists and policy makers acknowledge that there is no playbook.

"We have very few good examples to guide us," said William G. Gale, a senior fellow at the Brookings Institution, the liberal-leaning research organization. "I don't know of any convincing evidence that what has been proposed is going to be enough."

In part because Mr. Obama wants and needs bipartisan support, the package is being shaped by political as well as economic imperatives, complicating the process by putting competing ideological approaches into the mix.

It includes $300 billion in temporary tax cuts for individuals and businesses, in part to attract Republican support. It includes a big expansion of safety-net programs like unemployment insurance, which Democrats say makes both economic and social sense. It includes more money for highways, schools and other public infrastructure; more money for "green" energy projects; and more money to help state governments pay for health care and education.

Republicans, as always, are advocating for more and broader tax cuts. But the evidence is ambiguous about whether tax cuts will really spur economic activity at a time when consumers and businesses alike are frozen in fear and reluctant to let go of their money.

The risk is that Mr. Obama and the Congress will weigh down their effort with measures that cost many billions of dollars but may not have much impact on economic activity.

Tax breaks, for example, usually produce less than $1 of stimulus for every dollar they cost, economists say. Spending on public construction projects, like highways and bridges, produces the most economic activity - but there is a limit to how many projects are "shovel-ready," and even those take time to generate jobs and ripple through the economy.

You can read the rest here.  For more on our take on all this you can find many posts from recent weeks on the blog, and be certain to review this recent compilation of our economic writings over the last few years.  Be sure to review what has become one of our more influential works, A Stimulus for the Long Run.

With President-elect Obama and congressional leaders meeting this week to discuss the economic recovery and reinvestment package, NDN is re-releasing a selection of its economic policy analysis and recommendations from the past few years. I hope you find these essays, memos, and papers helpful.

Background: Economic Recovery and Reinvestment

• Getting the Stimulus Right by Michael Moynihan, 1/6/2009 - Moynihan makes a number of suggestions for ensuring that the upcoming, record-size stimulus package is a success, including a board to oversee the vast expenditures.

• A Vision for a Modernized Electric Grid: Clean Infrastructure for a 21st Century Economy, 11/18/2008 - NDN's Green Project hosted this discussion with Congressmen Jay Inslee and Earl Blumenauer, FERC Comissioner Jon Wellinghoff, Kurt Yeager, and Reid Detchon on the benefits of modernizing the nation's electric grid as part of a clean infrastructure agenda.

• A Stimulus for the Long Run by Simon Rosenberg and Dr. Robert Shapiro, 11/14/2008 – This important essay lays out the now widely agreed-upon argument that the upcoming economic stimulus package must include investments in the basic elements of growth for the next decade, including elements that create a low-carbon, energy-efficient economy.

• Accelerating the Development of a 21st Century Economy: Investing in Clean Infrastructure
  by Michael Moynihan, 10/18/2008 – NDN Green Project Director Michael Moynihan outlines a strategy for investing in clean infrastructure that will help create long-term prosperity.

• Solar Energy: The Case for Action by Michael Moynihan, 8/1/2008 – This major paper on the dynamic solar industry argues that accelerating the deployment of solar energy must become a top economic policy priority of the United States.

• The Green Economic Opportunity and Energy and the American Way of Life, 8/1/2008 - This two-part event featured an address from U.S. Senate Assistant Majority Leader Dick Durbin on the benefits of a low-carbon economy and Roger Efird, Greg Kats, Jack Hidary, and Shyam Kannan discussing green buildings and clean technology.

• Investing in Our Common Future: U.S. Infrastructure by Michael Moynihan, 11/13/2007 - This
  far-reaching paper proposes a set of measures rebuild and advance our aging infrastructure. These proposals include a GREEN Act to require that federal infrastructure and buildings meet a higher set of environmental standards that not only address issues such as global warming but also establish American leadership in green technologies.
• Tapping the Resources of America's Community Colleges: A Modest Proposal to Provide Universal Access to Computer Training by Dr. Robert Shapiro, 7/26/2007 – This innovative proposal details how every American can have access to computer training, thereby upgrading the skills of the nation’s workforce.

• A Laptop in Every Backpack by Simon Rosenberg and Alec Ross, 5/1/2007 – Rosenberg and the One Economy Corporation’s Ross offer a modest proposal for putting a laptop in the backpack of every American sixth grader, as connectivity to and facility with the global communications network are essential for success in the 21st century.

Background: Keeping People in Their Homes, The Bailout

• If Detroit Goes Down, Will It Take the Economy -- and the GOP -- With It? by Dr. Robert Shapiro, 11/19/2008 - Shapiro argues that, since the Bush Administration is at least partially responsible for the economic situation facing the automakers, it should put its weight behind helping the industry and its workers.

• Notes on the Financial Crisis by Michael Moynihan, 9/26/2008 - Moynihan examines the panic fueled by the Bush Administrations inadequate response to the financial meltdown.

• Back to Basics: The Treasury Plan Won't Work by Dr. Robert Shapiro, 9/24/2008 - As the financial crisis unfolded and the Bush Administration offered its response, Shapiro argued that, while major action was needed, the Treasury's plan would be ineffective. 

• Keep People in Their Homes by Simon Rosenberg and Dr. Robert Shapiro, 9/23/2008 – At the beginning of the financial collapse, NDN offered this narrative-shaping essay and campaign on the economic need to stabilize the housing market.

• NDN to Congress: "Keep People in Their Homes" by Simon Rosenberg and Dr. Robert Shapiro, 9/17/2008 - NDN made this leading statement on the need for the federal government to keep people in their homes.

Background: A New Economic Strategy for America

• The Idea-Based Economy and Globalization: The Real Foundations of American Prosperity in the 21st Century by Dr. Robert Shapiro, 1/23/2008 – In this important paper, NDN Globalization Initiative Chair Dr. Robert Shapiro examines how and why U.S. companies and workers lead the world in developing and applying new intellectual property, and why this leadership in innovation constitutes a critical U.S. advantage in globalization.

• NDN Poll Memos: American Voters' Views on the Economy and Globalization - Clamoring for Change, Persistent Pessimism, Democrats dominating on economic issues, 11/2/2007; Americans’ Views of the Present and Future Economy: Anxiety and Opportunity, 11/6/2007 - NDN’s comprehensive polls of American attitudes in 2007 about the economy make it clear that that the American people understand the current era of globalization, but are frustrated with the inability of their leaders to provide an economic framework that adequately and effectively deals with its impacts.

• The New Landscape of Globalization: The Real Foundations of American Prosperity in the 21st Century by Dr. Robert Shapiro, 6/20/2007 – Shapiro offers this forward-looking paper on the current state of globalization and how America can thrive in this new economic era.

• Meeting the Challenges of the 21st Century: Crafting a Better CAFTA by Simon Rosenberg, Dr. Robert Shapiro, and Joe Garcia, 6/9/2005 - NDN calls on progressive policymakers to face squarely our own vision of how globalization can and should work, as well as how America can best promote economic and political progress by our Latin American neighbors.

The stimulus package, no longer on track for an Inauguration Day signing but still the largest stimulus in modern history, is working its way rapidly through Congress.  The timetable remains so short, and the stimulus so large, that the job before Congress and the skeleton Obama economic team remains huge.  There is still time to get the stimulus right.  But there is also a risk that things may go wrong.  Here are a few thoughts on how to make the largest stimulus in history something we can all be proud of that will live up to its goal of aiding our economy in the short term and the long term.

First, we need to recognize that fiscal spending is messy, and accordingly, requires real effort and supervision.  Not for nothing is it a fiscal tool that is rarely taken out of the shed.

Unlike monetary policy, which is highly virtual and information age -- you flip a switch, the target rate for federal funds, and the economy (ideally) responds -- or tax cuts, which at most involved mailing out a rebate, fiscal spending is very sticks and mortar.  Clean infrastructure stimulus -- vital as it is to our future at this point in our history -- involves truck rolls, deliveries of heavy materials and actually putting shovel to earth.  So far, the debate around fiscal stimulus has resembled the discussion prior to a monetary move -- what should the level of stimulus be, 600, 850 or perhaps a thousand billion.  It must now take equal account of the process by which that number, whatever it is, gets translated into real economic activity.

Second, we need to face up to the fact that this level of stimulus is massive.  For those not used to calculating in twelve digits, $850 billion is 6% of GDP (3% for each of the two years the stimulus will run), about one sixth of the annual budget per year and equal per year to almost all current discretionary spending.  While yesterday, President Elect Obama signaled that a large chunk of the stimulus (about $300 billion) will take the form of a tax cut, reducing the size of the spending package, we are still talking about a massive amount of spending.

This is important because Congress must generally do two things to spend a dollar.  It must first write law to authorize the spending and, second, appropriate money against the law.  The first step, the "how," usually requires years of deliberation.  The second step, the "how much," is easier once the spending authority exists.  To meet the exceptional timeline, lawmakers are now combing previous authorization bills for authority to spend.  However, even allowing that a substantial chunk of the stimulus will go to reimbursing state medicaid expenses -- in essence to state budget relief -- and another chunk to to a middle class tax cut, finding ways to spend this much money is no walk in the park.

For this reason, it is likely that substantial sums will have to go into holding pens of one type or another, where some official, a governor or perhaps a cabinet Secretary, will have the money available to spend once he or he has identified where to spend it.

So what potential holding pens exist?

State block grants are one potential holding pen for money.  With a block grant, the money is sent to governors with light strings attached for them to spend.  There is much to be said for pushing spending decisions as far down the line as possible. 

However, the governors themelves have requested only $180 billion.  Moreover, money dispatched to states risks being used to relieve pressing budget pressure, rather than on projects that create real jobs.  As an example, in the 1990s Icetea legislation, billions that Congress wanted to go into new transportation projects were diverted by governors to covering ordinary transportation overhead when the economy weakened.  If the Obama Administration is serious about rebuilding our infrastructure and creating new jobs, block grants are not a comprehensive answer.

Another potential form of holding pen is money allocated to a department, such as the Energy Department.  However, again, money dispensed in this matter is likely to sit around until bureaucrats determine how to spend it.  This, also, is inadequate to the crisis at hand.

Since this much spending is not easy and will require massive supervision to avoid waste and generate jobs quickly, the following two ingredients are critical to a successful plan.

Congress should empower a board to oversee the spending program.  As I have written in a prior post, business as usual won't work when we're talking about almost doubling normal discretionay expenditures.  A board would have the ability to act quickly to keep the money moving and oversee the entire process.

Second, Congress should establish a national state-by-state supervisory structure, staffed with auditors, engineers and managers, responsible to the board to oversee spending.  During the New Deal, one state director of the youth activities of the WPA in Texas was Lyndon Johnson. 

In short, it is important that we get this right.  It is neither practical nor responsible to double discretionary spending without creating a supervisory mechanism to oversee and monitor it.

President-elect Barack Obama today announced his energy policy team (excluding the Secretary of Transportation, who will play a huge role in energy policy and Secretary of the Interior, who will oversee many environmental issues). Obama has signaled his strong desire to create a coherent energy policy and tackle climate change by creating a White House position (Assistant to the President for Energy and Climate Change) tasked with coordinating this portfolio.

From the transition's press release:

President-Elect Barack Obama Announces Key Members of Energy and Environment Team

CHICAGO – Today, President-elect Barack Obama announced key members of his energy and environment team, including Dr. Steven Chu, Secretary of Energy; Lisa Jackson, Environmental Protection Agency (EPA) Administrator; Nancy Sutley, Chair of the White House Council on Environmental Quality (CEQ); Carol Browner, Assistant to the President for Energy and Climate Change; and Heather Zichal, Deputy Assistant to the President for Energy and Climate Change.

President-elect Obama said, "In the 21st century, we know that the future of our economy and national security is inextricably linked to one challenge: energy.  The team that I have assembled here today is uniquely suited to meet the great challenges of this defining moment. They are leading experts and accomplished managers, and they are ready to reform government and help transform our economy so that our people are more prosperous, our nation is more secure, and our planet is protected. I look forward to working with them in the years ahead."

Yesterday my family went shopping at a local Apple Store for a new iPod for my wife (she chose a Nano). In between chasing my kids as they ran through the store, we were all greeted with a remarkable sight - a youngish Apple employee patiently teaching a class of 10 or so middle-aged adults about all this new fangled technology pouring out of Apple these days. Since then, I've thought a a lot about that image of seeing learning happening at a retail store right in the middle of the holiday rush. To me, it could become an inspiring image for this new age of Obama - America and its people retooling, together, for the new economy of the 21st century. 

The new economy of the 21st century will be many things, but we know it will and must be technology-rich, built on a low-carbon foundation and with the rise of nations like China, India, Brazil and Mexico, much more globally competitive. Successfully transitioning America and its people to this new economy is one of the incoming President's most daunting challenges, and one he seems to understand. 

NDN was pleased and excited last week when the incoming President embraced some ideas we've been aggressively advocating for - investments in greening government buildings, health IT, creating universal and ubiquitous broadband and computer access, including in our nation's public schools and overall investment in our nation's aging infrastructure. These are smart investments, ones that will not only help address the short-term challenges we face but also help accelerate our transition into this new economy.  

As he and his team consider other measures that have similar dual short- and long-term benefits, we hope that they take a serious look at another idea NDN has been promoting - offering free computer training to all Americans. NDN first proposed this idea in a compelling paper by Dr. Rob Shapiro last year, Tapping the Resources of America's Community Colleges: A Modest Proposal to Provide Universal Access to Computer Training. In it he wrote:

It is time that America ensures that all workers have real opportunities to build
the skills necessary to operate one of the most important new technologies of our time, computers. Young Americans are increasingly adept at working with computers, but many American workers still lack those skills. Here, we propose a direct, new approach to giving U.S. workers the opportunity to develop those skills, by providing federal government grants to America’s community colleges to keep open their computer labs three nights every week, staffed by instructors who will provide basic instruction to any person in the community who walks in and requests it.

The primary way any nation can ensure that its people enjoy broad‐based upward mobility is to raise the productivity of its workers and businesses. Achieving that goal, as the United States has done throughout most of its history, depends largely on three critical factors. First, the economy must promote the development and spread of new technologies, new ways of organizing and operating businesses, and other innovations that create new value and new efficiencies. Second, companies must invest in those technologies and in other business and economic innovations, so workers can use them to perform their jobs more productively. Finally, workers, companies, and the government must provide continuing support for all workers to acquire the skills to operate new technologies and perform well in innovative business environments.

The program proposed here, fully implemented, could provide that support and enable all American workers to learn basic computer skills at a total annual cost of less than $125 million a year.

Later in 2007, Senator Obama's campaign embraced the idea, and Democratic Caucus Chair John Larson has been working on a bill that would introduce the idea in the House. We discussed this idea, and a sister idea - putting a laptop in every backpack of every American child - at a forum last year with Rob, Rep. Larson and Transition Advisor Alec Ross.  

There is great societal power in this program, well beyond its surface appeal. Imagine if the President launched a multi-year campaign to challenge Americans to upgrade their skills, and become fluent in the new ways of the Internet and computers. That he would offer training, ubiquitous access and in exchange, we would all go back to school - making it patriotic to retool around these new technologies and this new way of working. Older public officials could take these classes and encourage their fellow citizens to do so. Community leaders could engage in public chats with students in newly wired schools. And so on. It could become a national, communal effort to move our society and people to this new economy, together, embodying this new ethic already articulated by President-elect Obama that what must be done must be done together, that there is a limit to what government can do.  That by embracing this national effort to retool we will ensure that no American is left behind in this new economy of the 21st century.

My hope is that this moment I witnessed in the Apple Store yesterday - Americans learning, retooling - becomes a a model for an entire generation, and that together we work to make sure all Americans have the tools they need to live, learn and prosper in the new economy of this daunting new century.

In his Saturday address this morning, Barack Obama started filling in details of his emerging economic strategy.  Major elements of this speech - massive investment in our infrastructure, putting computers in our schools and making universal connectivity to the internet a national priority, health IT and making our government buildings more energy efficient (for both see here) - should be familiar to NDN readers, as they are ideas NDN has been championing for some time.  

Needless to say we are pleased with the direction the President-Elect is taking, and are anxious to work with him to turn these powerful words into reality next year.  

Here is the full text of this important speech: 

Good morning.

Yesterday, we received another painful reminder of the serious economic challenge our country is facing when we learned that 533,000 jobs were lost in November alone, the single worst month of job loss in over three decades. That puts the total number of jobs lost in this recession at nearly 2 million.

But this isn't about numbers. It's about each of the families those numbers represent. It's about the rising unease and frustration that so many of you are feeling during this holiday season. Will you be able to put your kids through college? Will you be able to afford health care? Will you be able to retire with dignity and security? Will your job or your husband's job or your daughter's job be the next one cut?

These are the questions that keep so many Americans awake at night. But it is not the first time these questions have been asked. We have faced difficult times before, times when our economic destiny seemed to be slipping out of our hands. And at each moment, we have risen to meet the challenge, as one people united by a sense of common purpose. And I know that Americans can rise to the moment once again.

But we need action - and action now. That is why I have asked my economic team to develop an economic recovery plan for both Wall Street and Main Street that will help save or create at least two and a half million jobs, while rebuilding our infrastructure, improving our schools, reducing our dependence on oil, and saving billions of dollars.

We won't do it the old Washington way. We won't just throw money at the problem. We'll measure progress by the reforms we make and the results we achieve - by the jobs we create, by the energy we save, by whether America is more competitive in the world.

Today, I am announcing a few key parts of my plan. 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.

Second, 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. We'll invest your precious tax dollars in new and smarter ways, and we'll set a simple rule - use it or lose it. If a state doesn't act quickly to invest in roads and bridges in their communities, they'll lose the money.

Third, my economic recovery plan will launch the most sweeping effort to modernize and upgrade school buildings that this country has ever seen. We will repair broken schools, make them energy-efficient, and put new computers in our classrooms. Because to help our children compete in a 21st century economy, we need to send them to 21st century schools.

As we renew our schools and highways, we'll also renew our information superhighway. It is unacceptable that the United States ranks 15th in the world in broadband adoption. Here, in the country that invented the internet, every child should have the chance to get online, and they'll get that chance when I'm President - because that's how we'll strengthen America's competitiveness in the world.

In addition to connecting our libraries and schools to the internet, we must also ensure that our hospitals are connected to each other through the internet. That is why the economic recovery plan I'm proposing will help modernize our health care system - and that won't just save jobs, it will save lives. We will make sure that every doctor's office and hospital in this country is using cutting edge technology and electronic medical records so that we can cut red tape, prevent medical mistakes, and help save billions of dollars each year.

These are a few parts of the economic recovery plan that I will be rolling out in the coming weeks. When Congress reconvenes in January, I look forward to working with them to pass a plan immediately. We need to act with the urgency this moment demands to save or create at least two and a half million jobs so that the nearly two million Americans who've lost them know that they have a future. And that's exactly what I intend to do as President of the United States.

Thanks for listening.

More Background: Note this passage from an essay Rob Shapiro and I released in early November, A Stimulus for the Long Run: 

This change should be directed toward creating a 21st century, low-carbon, innovation-driven economy, as the development, spread and efficient use of economic innovations will continue to be the most important factors driving all our future progress in growth, productivity, and incomes. For example, productivity gains are increasingly tied to an employee's capacity to operate effectively in workplaces dense with information and telecommunications technologies. Within a decade, workers who cannot perform in such work environments will be marginalized economically. Therefore, the stimulus should help businesses and workers prepare for the ideas-based economy, through grants to community colleges to keep their computer labs open and staffed in the evenings and on weekends for any adult to walk in and receive free computer training, a plan Obama endorsed as Senator. The stimulus also could include an innovative program to provide inexpensive laptops to every sixth-grader in America and spread broadband installation to schools, local libraries, and human services offices that currently lack it.

There is already a broad consensus on the need to include infrastructure investment in the stimulus, but instead of addressing only roads and bridges, America can also take this opportunity to invest in a new generation of clean infrastructure. The federal government can lead the way, through greening its buildings and vehicle fleets and putting 1,000 megawatts of solar power on its roofs. It also can provide funding to help modernize the electrical grid and build a new generation of light rail systems for urban areas, as well as greater support for research and deployment in renewable energy and energy efficiency technologies, and tax credits and other incentives for greening America's homes and private buildings.

Aside from energy, the other rapidly rising business cost squeezing wages and jobs is health care. To help hold down these costs for the long haul, the stimulus can provide support for hospitals, clinics and physicians to purchase and install the hardware and software for standardized electronic medical records systems. This will serve as a first down payment for 21st century health care reform, and will ultimately reduce costs and promote best-practices at the nation's hospitals.

These are all investments we know we have to make if we intend to make the U.S. economy more efficient, innovative and sustainable. They also are all investments that will ultimate pay for themselves several times over. Congress and President-elect Obama can use this opportunity not only to create more jobs, but to do so in ways that will help drive the development of a real, 21st century workforce and genuine 21st century economic infrastructure. And taking this course by passing a stimulus for change could be an early and important opportunity for him to practice both his new politics and a new form of economic leadership.