In my column today, I mention some of the downsides of the infrastructure projects that are likely to be financed by the stimulus package. For more detail, you can read the following paper by Phineas Baxandall, a senior analyst for tax and budget policy at the U.S. Public Interest Research Group.
Exactly. Even Rep. John Mica, the ranking Republican on the Transportation Committee, is ridiculing the lack of vision in the stimulus plan. He proposes building high-speed train lines across the country that is akin to Eisenhowever’ interstate highway system, a tangible project that people can viscerally become attached to and use in their daily life. High speed train corridors are precisely what you would think Obama would support: it builds new infrastructure that is ecologically green – a passenger on a high speed train has a tenth of an impact as an airline passenger – and would finally offer a viable alternative and relief from crowded skies. Results in Europe and Asia demonstrate that when high speed trains appear, it grabs the majority of passenger traffic: Paris to London is now majority train travel and many other intercity routes show the same results. It’s a wonder why so few people think of building an alternative to air travel as one of the tools to reduce the stress on the air transit system, as well as the constant pressure to build more and more airports and runways.
Essentially, this is a one-shot deal and if we don’t get it right, the approaching asteroid is not diverted and life is all but extinguished. Republicans, ever faithful to failed or impotent
solutions
seek (surprise) tax cuts. In this context they are suggesting that we can divert the
asteroid by having everyone, on the count of three, blow real hard!
Only extreme action will do (of course we’ll
not get it right…we never have) but the prime factor here is time. There isn’t time for a lot of dithering here. TAKE THE SHOT!
This is not a stimulus package. It is a spending package; a souped up supplemental appropriations bill hiding behind the guise of a stimulus package. Approximately 30 of the 647 pages of HR1 has something to do with improving human resources or investing in infrastructure. Approximately only $98 billion of this package has anything to do with increasing production possibilities and may generate aggregate demand of $245 billion over the next two years. Just because a government agency wants to build an office doesn’t mean that is infrastructure that will lead to growth. Nor does hiring new inspector general staff for a number of agencies do that. We don’t need an economic blip. We need supercharged, constant, annual 3% growth.
Alton E. Drew
//www.altondrew.com
There could be no better investment in America than to invest in America becoming energy Independnet. We need to utilize everything in out power to reduce our dependence on foreign oil including using our own natural resources.OPEC will continue to cut production until they achieve their desired 80-100. per barrel. The high cost of fuel this past year seriously damaged our economy and society. Oil is finite. We are using oil globally at the rate of 2X faster than new oil is being discovered.Jeff Wilson has a really good new book out called The Manhattan Project of 2009 Energy Independence Now. He explores our uses of oil besides gasoline, our depletion, out reserves and stores as well as viable options to replace oil. We have so much available to us, bio fuels, wind, solar, hybrid technology etc. Oil is finite, it will run out in the not too distant future. WE need to take some of these billions in bail out bucks and bail America out of it’s dependence on foreign oil. The historic high price of gas this past year did serious damage to our economy and society.If all gasoline cars, trucks, and SUV’s instead had plug-in electric drive trains, the amount of electricity needed to replace gasoline is about equal to the estimated wind energy potential of the state of North Dakota. WE should never allow others to have that much power over our economy again. Every member of congress needs to read this book.
Many thanks for the article. It cogently recognizes that government decision-makers and policy makers need to be aware of the scientific literature, which does take awhile to appear in the press, since such articles are reviewed by scientific peers. Leonhardt gets that “building more'” does not mean that one is “building better.” Just think of the Braess paradox! In my new blog RENeW; //annanagurney.blogspot.com we give references to recent publications that demonstrate the benefits of system-wide analyses of transportation networks, coupled with users’ actual travel behavior, in order to quantifiably assess the impacts of road deteriorations/improvements on system-wide performance. In another article, in press in the International Journal of Sustainable Transportation, we go further, and show how the lack of road maintenance affects the environment (and how, clearly, proper investments) can yield the opposite!
The biggest issue I have is the infrastructure. Living in Long Island we see the waste of the LIRR and the mess that it has become. The idea of increased fares or service cuts is always made during times of crisis where “ridership is down” . Are there ever any staff cuts to meet the demand ? There needs to be accountability at the infrastructure level as well as in the private sector, and that is the most troubling thing about this type of legislation. Also has healthcare been addressed ?
Want a really effective stimulus plan? Stop taxing labor. Tax consumption. Reward savings and investment. These are seemingly simple policy changes (read: not simple for Congress to enact or implement them due to selfish and petty turf wars and conflicts-of-interests) that won’t cost the taxpayer a cent in terms of bailout or stimulus money. Our economy is not suffering because a lack of economic activity but rather a lack of imagination, ideas and concrete plans to make our society more productive. That is the great failure of our democracy – and we’re reaping the rewards as the clock ticks. The big question remains, when all that fiscal spending and monetary policy fail to improve our economic condition, who will bailout our government? You can’t handle the truth.
To say it more pointedly, we are missing the single biggest opportunity in generations for real Change. The recovery plan is mediocre at best and lacks any kind of vision. At its worst, it patches structural problems and renders America LESS competitive. The voters expect from Obama nothing less than changing the world and making America more competitive. Pretty much everything is broken.
Taxes: drop the 16th Ammendment, throw out all income taxes immediately and bring in VAT over time (not sales tax). Yes, saving (building equity) is part of the solution. Without equity, house prices keep on falling and banks keep on loosing.
Energy: get rid of fossil fuel and jump start a geothermal/hydrogen economy.
Infrastructure: Think of a new start that replaces air and rail travel with super fast (magnetic) ground based transportation.
Education: Introduce a competition based system, where students compete for the next grade. The lowest tier is out. Sorry. The government finances all education, and the individual beneficiary has to pay it back.
Government: anti-trust rules that prohibit alliances and monopolis, just like in the good old business world, would bring forth competition for bright ideas.
Obama needs to roll out a vision that replaces the old, worn out and broken systems. America is done with them and ready for real change. Our forefathers have done it over and over again.
H.R. Tschudi, economist and entrepreneur, Vancouver
By and large, the spending projects that are ‘ready to go’ in any large organisation include mainly the ones that were worked up and then put aside in favor of others. they are not the ones we would want to start planning today, That applies for corporations as for states and municipalities.
Corporationslive happily with that. Government organisations are the ones that have had to and will have to implement stimulus packages from time to time, and they could do better. It would make sense for them to always have a shelf of good spending projects ready to go. In normal times they would just take off the shelf those that have been there longest and include them in this year’s spending program. In times like the present, they would take everything off the shelf at one go. The costs of that bit of prudence would be negligible.
The list of transit agency cutbacks, also cited in the print edition, can be found here: //t4america.org/transitcuts
I’m a progressive democrat, and I have to say this bill stinks. I don’t want it to pass. It doesn’t give enough money where it is truly needed, like mass transit, and gives tax breaks that aren’t needed and that will do nothing to stimulate the economy. The bill is wasteful, expensive, and ineffective. The product of cowardice. We can do better and we must demand that our representatives find the intelligence and political courage to craft better legislation.
I can appreciate the write up, but I truly am a realist. I know this bill will not solve all of America’s problems, but for those who are fighting it, and throwing rocks at it, where are the solutions? It’s
easy to say something “stinks” but what are the solutions that counter it and do good for the nation.
One final thing…the title of Mr. Obama was left on the Capital stairs on January
20, 2009. I would appreciate this author giving respect where it’s due…President Obama is the correct title to use.
This analysis is thin gruel for an electorate eager to learn more about this enormous package and uncertain whether to support it or demand major revision.
Looking at the bill with rose colored glasses is not helpful to us. It should be “greener?” There are tens of billions for green research and model projects. What exactly do you want?
Roads, bridges and sewers are hugely expensive, unsexy projects that have been neglected across the country for decades. It’s a farce to throw a few billion at them now, when we have the chance to renew our infrastructure AND we heard that was what we were going to do in the election AND it will provide actual short term stimulus AND it will not add to the government burden of future generations (quite the contrary, they needed it anyway).
Beyond the infrastructure question (as in, where is it in this bill?) I am perplexed by throwaway statements like the following:
“It will indeed try to encourage significant changes in health care and K-12 education, for example.”
Where is the evidence for this statement? Health care at least gets computerized (I’m not sure who this helps or why but I accept that it is a “change”). What innovations are we spurring by throwing tens of billions at schools? Our poorly taught students will now have access to the internet. Big whoop. Pell grants will grow. WOW, only to be swallowed by the hugely inefficient higher ed juggernaut. This is not reform. This is feeding the beast. It gets us nowhere.
You seem afraid to really look at this bill, as though it would be an act of disloyalty to President Obama. Get over it. Stop being a lapdog and help us understand what is going on. That is your job. We deserve no less. Obama deserves no less. He can’t govern if you give every crappy bill that comes off Pelosi’s desk a free pass. Be critical. An informed public is our only hope for real change. So inform us already.
The proposed subsidy of COBRA and infusion of cash into Medicaid won’t work for a number of reasons: COBRA, even at 35% of the cost, will be unaffordable for many; it directs money to insurance companies for profit and margin; many doctors don’t accept Medicaid patients so access will be a challenge for many sick people; and, it forces people to spend money on health care plans that cover non-essential services.
I propose an alternative: The Unemployment Safety Net Health Care Plan. People really need a health care plan when they suffer a catastrophic event, when they receive a “dreadful diagnosis” or when they have a chronic medical condition. If we wish to help as many unemployed people as possible, then we should limit our health care spending to catastrophic events, dreadful diagnoses and management of chronic conditions, particularly prescription drugs. Our goal should be to keep the newly unemployed out of bankruptcy for medical bills and provide “enough” coverage to meet major needs.
Catastrophic Event Coverage. A catastrophic event is an episode of care that costs more than $25,000 (add up all the bills). When such an event occurs, the patient will be enrolled in Medicare to cover expenses related to the event. Hospitals and doctors will receive normal Medicare reimbursement and the patient’s share will be limited to the Medicare co-pays and deductibles.
Dreadful Diagnosis Coverage. Any diagnosis for a condition that if it goes untreated will create grievous bodily harm, permanent disability, or death is a “dreadful diagnosis” for purposes of the Safety Net Plan. Solely for care related to the “dreadful diagnosis”, the person will be enrolled in Medicare. Hospitals and doctors will receive normal Medicare reimbursement and the patient’s share will be limited to the Medicare co-pays and deductibles.
Chronic Condition RX. For major chronic conditions, an approved list of prescription drugs will be available with a small co-pay (to cover the cost of program administration).
Sources of funding:
On a sliding scale, premium contributions will be deducted from unemployment benefits. If a person has coverage from another source (and can prove it), then they don’t have to join
the Safety Net plan. Otherwise, you must enroll.
Employers will pay a termination fee to the Safety Net Plan. If an employee elects COBRA coverage, the employer does not have to pay the fee; or, if the employee
or the employee’s spouse is pregnant and in the last trimester of pregnancy and has no other coverage available, then the employer has to continue coverage through the time when mom and baby are discharged
from the hospital. Otherwise, the employer pays a one-time fee for every full-time employee and half that fee for every part-time employee when they are laid off.
If the unemployed person has auto or personal liability coverage that includes medical payment amounts, those amounts must be paid to the Safety Net Plan trust fund to reimburse it for medical care expenses paid. Health care providers may not assert liens.
The Feds will pay the rest using the money that has been earmarked for health care for the unemployed.
And, to help with medical expenses not covered by the Safety Net Plan, providers can charge no more than 115% of the amount that Medicare allows for the same services (this limit already applies to professional service providers who don’t accept Medicare reimbursement levels).
Is this ideal? No. Does it solve the chronic problem of the uninsured? No. Does it encourage preventive care? No. But, it does provide peace of mind to people struggling to make ends meet and directs our limited resources to those most in need of our support. It also provides a predictable, stable revenue stream to providers (particularly hospitals, many of whom are in danger of sinking). It a quick start solution that uses our existing systems and resources effectively.
Rep. Mica’s call for high-speed trains is delusional. For trains to work you need relatively short distances and high population density — features found in both Europe and Japan. The US lacks this outside of the Boston-NYC-DC corridor.
Trains are shiny cool toys, but they don’t make a lot of sense. For some reason they seem to get people pretty excited, however, which seems to drive the public debate more than cold hard logic.
Why should we become energy independent? Doing so would drive energy costs much higher and make us poorer. This is perfectly obvious — if we had a cheaper alternative to imported oil we would be using it. Furthermore, our #1 source of imported oil is not Saudi Arabia but Canada, and anyone creeped out by the Canadians needs to get a grip.
Yes, oil is a finite resource. And as its supply declines the price of it will go up. This is basic economics. Higher prices will make alternatives more attractive and drive investments into non-fossil fuel sources. Prices drive decisions. When prices rose last year people drove less and consumed less of it. People make adjustments. To anyone with an elementary grasp of economics this should be thoroughly unsurprising.
I suspect that a lot of people are simply mesmerized by cool sounding alternative energy sources and want to turn much of the economy upside down simply based on fanciful visions of a green economy run by wind, solar and hydrogen. Such people have been reading too much Thomas Friedman, for these visions are not rooted in either science or economic reality.
It would be helpful if Colin’s posts displayed some of that “cold hard facts” and logic he seems so keen to accuse others of lacking. Rep. Mica and other transit planners are calling for 11 high speed corridors in exactly the locations where they make sense, focused around dense metropolitan areas where there is demand and great stress on both road and air travel. Congress has already designated 11 high speed corridors and a look at a map of them shows that none of them are in the Alaskan wilderness:
//en.wikipedia.org/wiki/File:High-Speed_Rail_Corridor_Designations.png
As you can see, no one is calling for a 3000 mile train ride from New York to LA. Instead of throwing out baseless charges against an infrastructure project, perhaps Colin, you should learn something about it.
In today’s column, you describe the allocation of infrastructure and resources in a somewhat incomplete way. You seem to feel that states have no rational prioritization schemes, doling out all funding for public works at the whims of powerful state politicians, whereas the federal govt makes funding decisions on a more rational, cost-benefit analysis. In the states I am aware of, many if not most, road, building, public transport, etc projects are ranked, discussed, and finally presented to the state legislatures [and typically to the Federal agency that provides matching funds]. State bonds are floated on the basis of these rankings. Much of the process is open, clear [if boring] and reduces the level of politics in the decision matrix. Do politicians get some of their “pet” projects funded ? Of course. But the level of analysis at the state level is much more complete than you give credit for.
Mr. Leonhardt:
You make some valid points in your article but you also ignore history to a large extent. FDR ballooned Federal spending to get us out of the Depression, but that spending did very little to stimulate the economy or create real, lasting jobs. We trudged through the Depression for years with high unemployment despite the huge influx of Federal money until WWII eventually spurred us out of our morass. “Make work” jobs, which the Obama plan is chock full of, are temporary and will disappear once the projects are over (hopefully). If these “make work” jobs do not disappear, we will have created a new class of worker that is entirely dependent on government money to continue working. This may check the unemployment rate to some small extent, but it will not permit actual economic growth, which is almost always driven by the private sector. Just look to Japan in the 1990’s for proof of this. The government basically paved the entire island nation in concrete to keep people working, but their economy just limped along without growth. Government spending is obviously not a long-term solution.
I also disagree with your point about “admirable increases in financial aid.” There is no reason that college costs should rise way beyond the CPI or any other cost of living index each and every year. Yet, they invariably do. If you put stimulus money into increasing financial aid or expanding Pell Grants, all that the colleges will do is increase their tuition to match the new influx of funds. Consequently, no new opportunities will be given to “deserving” students, rather, endowments will just continue to grow. Spending the stimulus on this, without tuition caps, is just pouring money down the drain.
Lastly, we definitely approach this problem from different directions. You place a lot of faith in state and local government to spend the stimulus funds (read: pork) wisely. I am not sure where this faith comes from, but in my experience, government is the least effective or efficient channel for investing in our country’s future. Money should be given directly (read: tax cuts; targeted if you prefer) to the ones who earn and invest it (the individual taxpayers, and especially businesses). If some of that money is put in the bank, so be it. It will go to improving the credit ratings of those taxpayers who will then invest (maybe in a house or more workers) at a later date. I am always amused when I hear about “shovel ready” government financed projects. All I can see in my mind when I hear that phrase are the Big Dig, the Second Avenue Subway and the Atlantic Yards project. Poster child projects for government waste and inefficiency.
Thanks for your time.
Hi Peter,
Thanks for making my case for me. By looking at the map you can see what a joke the whole thing is. High speed rail from Birmingham to Meridian, MS? Texarkana to Little Rock? These are not major metropolitan areas. High speed rail in the Southeast US makes little sense.
Granted, you could also take the trains on longer routes than the ones I pointed out, but as the distance increases so does time and air travel becomes a better alternative. For example wikipedia says that with high speed rail the trip from DC to Charlotte would be reduced from over 9 hours to over 6 hours. Well, that’s great, but I can fly there in 1.5 hours at a cost of about $150 on AirTran from BWI doing a Friday departure and Monday return. Even granting 2 hour trip to the airport plus security I still come out ahead.
Now, going over to Amtrak.com the cost is about the same, and that’s for a slow 9 hour train ride. The cost for high speed is bound to be higher. Plus I have more departure times to choose from with the airlines than Amtrak and can find something that better works with my schedule.
Go ahead, go to amtrak.com and sidestep.com and play around with the numbers yourself.
I stand by my original contention that a cold hard look at the facts makes clear that high speed rail in the vast majority of the US makes little sense.
David Leonhardt correctly notes that the fact that the total spending listed in the table was $355 billion rather than $800 billion provided a clue that the table didn’t cover the entire bill. An even bigger clue was the note at the bottom of the table stating:
“Provisions of this legislation that are being developed by other committees are not included in this table.”
Leonhardt states that the numbers caused a “minor media sensation.” I think it would be more precise to say that it caused a minor sensation in those portions of the media that have decided that fact checkers are an unnecessary luxury.
Mr. Leonhardt, I have a comment about your Sunday Magazine article, “The Big Fix,” which has just been posted online as a preview.
I’m a Democrat, enthusiastically voted for Obama, but I’m
uncomfortable with your article and its argument.
Excuse me, but isn’t this just warmed over Schumpeter? This fascination with “creative destruction” theories was bad enough when it
was championed by Republicans – indeed it was downright sinister (see Naomi Wolf’s recent book). How is the same nihilistic philosophy any more prudent in our hands? I’m uncomfortable with
such an approach to our challenges, from either political direction.
Also, didn’t the British hit their nadir in the 70s in no small part because they’d lost almost all of their former (lucrative)
empire by the early 1960s? I have not had a chance to read Olson’s book, but have no mention of that significant fact of British history in your article.
Call me a Northeastern elitist, but I don’t see how high speed rail between San Antonia and Little Rock, Houston and Mobile, or Eugene and Canada or cost effective.
However, none of this is the point. These are not effective STIMULUS projects. Projects like high speed rail, or alternative energy may have social benefits or long term derivative economic benefits that justify the cost. What they are extremely unlikely to do is stimulate the United States economy in the next 8 quarters.
A litany of long existing spending projects is being rammed down the throat of the American public in the guise of an economic stimulus package in an attempt to pass large scale projects with little or no debate on the utility or value of individual projects.
Projects such as high speed rail, alternative energy investment, and broadband expansion should stand or fall on their own merits.
Lastly, to add some hard facts:
Japan has roughly 4 times as many people as California in about 10% less area. The proposed Pacific NW rail project would serve 2 American states – Oregon and Washington
– that have a combined population of 10 million people – almost half the total population of the NYC metro area.
Projects like this are not stimulus or progress, just pork.
Dear Sir/Madame:
In order to provide the economic stimulus the country so direly needs, we need to be frugal and bold at the same time. Instead, I see much of the stimulus plan’s resources funneled into
old and trusted channels that consume great overhead, diminishing the investments’ impact.
For example, for every dollar that federal agencies allocate to scientific research roughly another 50 cents are provided to the academic hosts for the recovery of indirect cost. Some even collect as much as another dollar. This post should be limited to absolutely necessary expenses. The money should mainly support the science, the principal investigators, technicians, students and postdocs who actually carry out the work.
The fastest and most effective path of action to concentrate valuable resources on the research may require the creation of new small and mid-sized research institutes that can be operated with small overhead. But such step needs courage, because it involves taking a new direction with own risks. There is a great need for such courage, however, if we wish to overcome the current economic crisis.
As to the widely discussed investment in high-speed rail, I would gladly take the train, if I was able to travel from Nashville to Washington D.C. and back in a day. Building such rail link would provide an enormous boost to the struggling local economy. Once completed, it would bring unprecedented and lasting change to life in Appalachia. President Lincoln supported the development of rails with such considerations in mind. Why should not the idea work for yet another president from Illinois?
Read more here:
//www.brainmindinst.blogspot.com/
Peter,
The airplane hadn’t been invented yet when Lincoln was president.
Also, your proposed Nashville-DC link is ridiculous. The distance is over 600 miles, or 6 hours at 100mph (which is wildly optimistic — average top speeds for new high speed rail is projected at about 85mph). So a roundtrip in one day would take 12 hours of travel. Furthermore, that is assuming express service without stops anywhere in between at other population centers to pick up passengers.
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