Clean Infrastructure

Despite the bumps in the road over the last few weeks, there can be no doubt that President Obama and the new Congress have acted decisively, quickly and with great force in passing the Recovery and Reinvestment Act so quickly.  After years of politics and dithering, the nation should be relieved they have leaders in place willing to take on the hard challenges of our day. 

Speaking for the NDN team we are very pleased with where the new bill has ended up.  Many of its core ideas - investments in health IT, clean and traditional infrastructure including greening federal buildings, 21st century schools and uiversal broadband access, support for unemployment insurance and backstopping the states, weatherization - are ideas NDN championed publically and privately before the President-elect outlined his original stimulus plan in early December.   Consider this passage from an essay, A Stimulus for the Long Run, Rob Shapiro and I released in Mid-November originally on the Huffington Post: 

When Congress goes back to work next week, its first job should be another stimulus package for the sinking economy. President-elect Obama also has said he wants another stimulus of his own design after he is sworn in. We know that more stimulus is necessary, because the ongoing financial and housing market crises will very likely produce an unusually long and deep recession. We also need additional stimulus as insurance against the possibility of another economic shock that would worsen the downturn, such as a run on the dollar that drives up interest rates, or worsening housing foreclosures that trigger more failures in financial institutions and further drive down consumer and business confidence.

The path of least resistance to deliver that stimulus is another round of tax rebates for American families, which in theory families would spend to jumpstart demand and, ultimately, the business investments and jobs to meet that demand. However, the catch is that approach is very unlikely to work this time. Most of the rebates from the spring 2008 stimulus were saved rather than spent; and given the recent, sharp decline in confidence, even a greater share of another round would be saved and so provide little stimulus. Moreover, President Obama and Congress can put those billions of dollars to uses that will stimulate long-term growth and income gains much more effectively.

Instead of tax rebates, congressional leaders and President-to-be Obama should look to targeted tax changes and targeted spending increases, with the lion's share going in a new direction: investments in the basic elements of growth for a 21st century economy. The stimulus should and will include traditional measures such as aid to the states facing serious revenue shortfalls and an extension of unemployment insurance. But for its major thrust, President-elect Obama should use the stimulus to drive policy reforms that will affect the shape and strength of the economy for the next decade, rather than simply affecting the timing of the next recovery. The stimulus should be first steps toward delivering on the change that President-elect Obama has pledged to bring to America.

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.

Or this passage from Michael Moynihan's excellent October essay, Accelerating the Development of a 21st Century Economy: Investing in Clean Infrastructure: 

Below are six proposals NDN offers to accelerate the building of clean infrastructure now. Each of these will help get money onto the street quickly to stimulate demand, help American families solve problems related to high energy costs and build the clean infrastructure America needs to compete effectively in the 21st century. Congress should pass legislation to:

 Fund the National Infrastructure Bank to leverage federal resources to fund
worthy, approved clean infrastructure projects (which would not only increase
funds available to infrastructure, but also represent a vast improvement over the
earmark system).

 Modernize the electrical grid through use of smart computer technology and
more transmission capacity, both to manage demand and move America's
tremendous wealth of wind and solar power to where it is needed.

 Provide tax credits for Americans to winterize their homes as the cold weather
approaches.

 Provide tax credits for the purchase of Energy Star appliances to reduce
demand for electricity.

 Provide aid to states and cities to expand mass transportation service and
perform maintenance on overburdened systems.

 Provide a tax credit to people who buy a new, fuel efficient car and take an old gas guzzling jalopy off the road, which has the added bonus of aiding the
weakened automobile industry.

There are other ways for Congress to promote clean infrastructure going forward -- through funding rail, promoting green national building standards and updating our electricity regulation regime to promote distributed generation of renewable power, among other approaches. But these six proposals can help us move toward clean infrastructure now as we get the economy moving again.  

So in other words NDN is very invested in this new legislation, and will be working hard with our Congressional leaders and all of you to ensure that as the plan moves from bill to implementation it is done in a way consistent with the opportunties presented to us and the nation.  More on this historic piece of legislation in the days ahead. 

And again Congratulations to your new President and Congress for stepping up, standing tall and doing the right thing for a nation in need.

Update - Jake Berliner did a comprehensive summary of our recent economic essays on Friday.  You can find it here. 

In an article today, Spend or Save? Trick Question, The New York Times' David Leonhardt looks into a question I posed a week ago, and which NBC's Chuck Todd asked the President  Monday night - whether it is best for American consumers now to spend, or save.  He begins:

It's your fault. Part of it is, anyway. You, the American consumer, spent too much money. You bought too much house, took on too much debt and generally lived beyond your means. Your free-spending ways helped cause the worst financial crisis since the Great Depression.

And now you're going to have to do your part to end the crisis. How? By spending. Enough already with the saving that many of you have suddenly begun doing. This very moment, Congress and President Obama are preparing to send you a tax rebate, to inspire you to stimulate the economy. So go out and stimulate. Spend as if the future of your country depended on it.

John Maynard Keynes, the great 20th-century economist, would have appreciated the apparent absurdity in these mixed messages. He coined a phrase, "the paradox of thrift," to point out that what was rational for an individual during hard times - saving money - could be ruinous for an entire economy. Eventually, many of the savers may end up out of work because everyone else is saving, too.

It's enough to make you wonder what exactly you're supposed to do. At his news conference on Monday night, Mr. Obama was asked directly whether people should spend or save their rebate checks. He ducked the question.

Fortunately, though, it has an answer. There are a few ways to help both your own finances and the country's.

Read on.  How Americans answer this question will go a long way to determining the length and depth of the current global recession.  Leonhardt concludes that the best course is for America to invest in projects that provide both short term stimulus and prepare America for future growth and prosperity.   This is the same conclusion Rob and I reached in our November memo, A Stimulus For the Long Run, and has been at the core of our advocacy these past few months.

We are very proud that many of the items we advocated in this memo - health IT, greening federal buildings and vehicle fleets, extending unemployment insurance and backstopping the states, investing in broadband and 21st century schools, modernizing the electrical grid - are still in the mix for the final Economic Recovery legislation and are at the very core of our emerging economic strategy.  

(Click here for a PDF version of this essay)

Yesterday, NDN Globalization Initiative Chair Dr. Robert Shapiro and NDN President Simon Rosenberg released a compelling essay that provided further analysis of and additional recommendations for addressing the worsening financial crisis. In their essay, Shapiro and Rosenberg make it clear that stabilizing the housing sector and keeping people in their homes must be a top priority of any bailout plan.

In the midst of the contentious and historic debate on the financial crisis, Congress also has been considering the need for a second stimulus package. Today, NDN Fellow and Green Project Director Michael Moynihan challenges policymakers to jumpstart the economy in a manner that both creates jobs now and helps ensure America's future prosperity through investment in new, clean infrastructure. NDN applauds Congress for its substantial progress on tax credits for renewable energy and encourages policymakers to remain focused on creating a 21st century low-carbon economy through clean infrastructure investment.  In an essay below, Michael offers six specific recommendations for a second stimulus package focused on clean infrastructure.

Such a stimulus package will begin the crucial task of accelerating our nation's development of a 21st century economy.

Accelerating the Development of a 21st Century Economy: Investing in Clean Infrastructure
by Michael Moynihan
The debate now underway in the Congress on a financial bailout is not the only important piece of business before the Congress in its waning days. With a real economic recession now all but certain, Congress is considering a second stimulus package. But at this critical moment in our nation’s history, how Congress addresses the need to get our economy moving again may be as important as whether it passes a second package. Hindsight shows that the tax rebates provided in the first package were spent mainly on foreign oil and other imported goods. A second round of rebates will do little to jumpstart the economy. They will do even less to address America’s long-term economic challenges -- coping with higher energy and commodity prices and increasing the incomes of working families who have faced stagnating incomes for years. Fortunately, there is a way to stimulate short-term demand while investing in our future. Congress should move forward on a stimulus package that includes investments in new, clean infrastructure.

Infrastructure investments have an innate appeal as stimulus measures. America’s infrastructure needs are so great, and funding so scarce, that a long list of projects are teed up and ready to go, lacking only disbursements to begin stimulating our economy while creating the basis for future growth. Infrastructure spending stays at home and, for that reason, has a higher multiplier effect than money spent on imports. And, in general, construction jobs pay well, particularly for those who lack a college education. For these reasons, Speaker Pelosi and other leading Members of Congress have included infrastructure spending measures in the packages they have proposed.

The shock to our economy this summer from soaring energy prices showed that our infrastructure needs going forward are both greater and different than they appeared until recently. America’s physical plant, from the types and location of buildings to our transportation network to the electrical grid, was not built for $4 per gallon gasoline. As we look at higher energy prices -- not just for oil, but also natural gas and coal, whose prices have steadily risen as well -- and the challenge of climate change, we must also look at retiring our nation's outdated energy-inefficient infrastructure and replacing it with a new low-carbon, efficient infrastructure that is second to none.

Travelers to Asia and the Middle East leaving from New York’s Kennedy Airport may rightly wonder which part of the world is developed and which is developing. The state-of-the-art infrastructure that China displayed at the Olympics will power immense productivity improvements in coming decades. And while the headlines are still of pollution and dependence on dirty coal, China is moving rapidly ahead with building a smart electrical grid that automatically switches power to where it is needed, investing in biofuels and electric cars, building out solar infrastructure and creating a fast-growing, dynamic economic sector. In contrast, unless we put in place incentives to retrofit or replace it, will be a drag on productivity and growth in coming decades. 

Below are six proposals NDN offers to accelerate the building of clean infrastructure now. Each of these will help get money onto the street quickly to stimulate demand, help American families solve problems related to high energy costs and build the clean infrastructure America needs to compete effectively in the 21st century. Congress should pass legislation to: 

Fund the National Infrastructure Bank to leverage federal resources to fund worthy, approved clean infrastructure projects (which would not only increase funds available to infrastructure, but also represent a vast improvement over the earmark system).

Modernize the electrical grid through use of smart computer technology and more transmission capacity, both to manage demand and move America’s tremendous wealth of wind and solar power to where it is needed.

Provide tax credits for Americans to winterize their homes as the cold weather approaches.

Provide tax credits for the purchase of Energy Star appliances to reduce demand for electricity.

Provide aid to states and cities to expand mass transportation service and perform maintenance on overburdened systems.

Provide a tax credit to people who buy a new, fuel efficient car and take an old gas guzzling jalopy off the road, which has the added bonus of aiding the weakened automobile industry.

There are other ways for Congress to promote clean infrastructure going forward -- through funding rail, promoting green national building standards and updating our electricity regulation regime to promote distributed generation of renewable power, among other approaches. But these six proposals can help us move toward clean infrastructure now as we get the economy moving again.

Our nation now faces a critical choice: do we make 20th century investments or do we invest in a 21st century economy -- clean infrastructure, renewable energy and new skills for our workers? If Congress takes these steps, it can pass a stimulus measure that will not only create jobs and help our economy in the short term but also accelerate the creation of a prosperous 21st century economy.