How will President Obama's $825 billion plan to stimulate the economy work? It looks like it will create jobs for the people working on the projects. But how long will those jobs last and will they continue after the projects are over? And if there's something wrong with his plan, what would be a better alternative? I think that if these projects are investments that create revenue generating operations, they are worth doing -- especially if those revenues ultimately recoup the investment.
Here are some of the specific plan elements that I view as investments:
- Boost renewable energy supply. The plan seeks to double renewable energy generating capacity of over three years -- to power six million American homes. It would upgrade two million homes and 75% of all federal buildings to better protect against the heat and cold -- saving low-income homeowners $350 a year in utility costs and cutting government costs by $2 billion a year. It would also provide loan guarantees to boost the $100 billion in private sector investment in clean energy projects over three years.
- Upgrade 3,000 miles of transmission lines for a national electric grid to make more efficient use of energy.
- Build 1,300 waste-water projects which would provide an ongoing revenue source for cities and states and reduce the costs of cleaning up polluted water.
Here are some others parts of the program that look like worthwhile expenses to help those in need, rather than investments:
- Guarantee health insurance for those likely to lose their jobs. The plan would guarantee health insurance for 8.5 million Americans at risk of losing coverage by providing tax credits to pay for continuing coverage under Cobra, and by expanding Medicaid for those low-income workers who lack Cobra access.
- Increase food stamp benefits for 30 million Americans.
- Increase Social Security benefits $450 for 7.5 million disabled and elderly people.
Here are other elements that could be viewed as an investment in human capital -- although it is hard to quantify the financial returns:
- Modernize 10,000 schools, which could ultimately increase the value of America's workforce.
- Improve security at 90 ports, which could boost trade and reduce the risk of terrorism.
- Increase Pell Grants to help seven million students and offer a new tax credit for four million college students.
My conclusion is that there is much here that is worth doing. I particularly support the parts that are clearly investments and am encouraged by anything that boosts the development and spread of technology. No doubt there will be quite a bit of political horsetrading before the final package is passed.
What do you think?
Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College. Portfolio recently published his eighth book, You Can't Order Change: Lessons from Jim McNerney's Turnaround at Boeing.
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Reader Comments (Page 1 of 1)
1-25-2009 @ 2:13PM
Mary Brents said...
The things mentioned in this article seem much more in order than giving the banks another round of bail out money. I am not for a tax cut for the rich and as for as Social Secuity is concerned many people now do not draw sufficent money to even buy food. I am talking women who have lost there husbands and stayed home raising children all there lives and now draw less than 600 dollars a month. It is not always good for the woman to stay home. There is no pension or sufficent money and no medical insurance. I was also hoping to see a medical insurance policy for the masses. One that people can afford one that does not cost an arm and a leg like cobra. How do you pay that with no job?? There are flaws in this but at least it is a start to putting thing in this country in proper order. In my humble openion.
1-25-2009 @ 3:58PM
JOHN said...
I would like to equate the meltdown to a five alarm fire. When the firemen arrive there first job is to assess the fire and contain it. Once contained, they begin there investigation to determine the origin of the fire and to determine if arson was involved. It is also important to find a suspect who started the fire, and what accelerant's were used.
In this case lowering the criteria for loans purchased and bundled by Fannie Mae and Freddie Mac was the accelerant and the socialist Democrats experimenting on the taxpayer's nickel, lit the match, and stood back and watched this fire accelerate into chaos. Of course in any fire, the amount of damaged done to the structure is a result of the heat and ferocity of the fire, which we can equate to the greed and mindless attention to the problem.
I hope you get my drift? Please explain this to the American people, as we have a country that needs saving.
1-25-2009 @ 9:30PM
say what? said...
When most people hear 'stimulus' I believe they are thinking about 1-time spending/investment to get through this downturn. However, many of the items on your list, while perhaps worthwhile, appear to be a *permanent* expansion of spending: food stamps, social security, health care expansion, Pell grants, etc, etc.
1-26-2009 @ 10:26AM
rab9 said...
Most of this stimulus is construction related projects. All the construction workers in this area are illegal Mexicans. So we are going to create 4 million jobs for illegals. That will result in a new flood of illegals across the border and will not help one American citizen. I guess thats ok with obama because it creates 4 million new democrat voters.