The American Recovery and Reinvestment Plan

Larry Summers outlines the incoming administration’s plans for economic recovery:

Obama’s Down Payment, by Lawrence Summers, Commentary, Washington Post: …President-elect Barack Obama … will face what may well be the bleakest economic outlook since World War II.  …

As difficult as these conditions are, however, the Obama administration also inherits an economy with great potential for the medium and long terms. Investments in an array of areas — including energy, education, infrastructure and health care — offer the potential of extraordinarily high social returns…

In this crisis, doing too little poses a greater threat than doing too much. Any sound economic strategy in the current context must be directed at both creating the jobs … and doing the work that our economy requires. … Our president-elect … is crafting a broad proposal, the American Recovery and Reinvestment Plan, to support the jobs and incomes essential for recovery while also making a down payment on our nation’s long-term financial health.

A key pillar of the Obama plan is job creation. In the face of deteriorating economic forecasts, Obama has revised his goal upward, to 3 million. …. The Obama plan represents not new public works but, rather, investments that will work for the American public. Investments to build the classrooms, laboratories and libraries our children need to meet 21st-century educational challenges. Investments to help reduce U.S. dependence on foreign oil by spurring renewable energy initiatives… Investments to put millions of Americans back to work rebuilding our roads, bridges and public transit systems. Investments to modernize our health-care system, which is … key to driving down costs across the board. …

We must focus not on ideology but on drawing the best ideas from all quarters. That is why, for example, in key sectors such as energy, Obama is pushing for both public investments and the removal of barriers to private investment. It is also why his plan relies on both government spending and tax cuts to raise incomes and promote recovery. …

There will be no earmarks. Investments will be chosen … based on what yields the highest rate of return for the economy and monitored closely not just by officials but also by the public as government becomes more transparent. We expect to evaluate and to be evaluated rigorously to ensure that Washington is held accountable for how tax dollars are spent.

Some argue that instead of attempting to both create jobs and invest in our long-run growth, we should focus exclusively on short-term policies that generate consumer spending. But that approach led to some of the challenges we face today — and it is that approach that we must reject if we are going to strengthen our middle class and our economy over the long run. …

Originally published at Economist’s View and reproduced here with the author’s permission.

5 Responses to "The American Recovery and Reinvestment Plan"

  1. Anonymous   December 28, 2008 at 9:10 am

    Many of the proposed projects re based on “externalities” being the main ingredient in the justification for a project. This has two drawbacks. The first is that without a measurable profit contribution the projects are selected on their political correctness which results in more “bridges to no where” and one can see these proposals in every city and state. The second is that they need massive subsidizes just to survive. Businesses will back them if the subsidizes are big enough but when the subsidizes end businesses will go away. When this happens millions of dollars will be lost the taxpayers and this can go on for a long time.What is needed is “Industrial Policy” branch. For instance in every city there is a financial gain for the public by designating heavy duty highways Between one plant and a nearby plant, between a plant and a rail siding, or a port and a grain silo. The advantages are immediate and measureable. The driver is more productive, the fuel use may be incrementally less but more important because the destinations are well designed, the switch to other fuels such as natural gas is nuch easier, and the final product, 50% or more of which is probably domestic is less expensive.

  2. Guest   December 29, 2008 at 1:41 pm

    To say “we must not focus on ideology…” in the implementation of a full-blown Keynesian plan is like a Bishop saying “we must not focus on sectarianism” in the implementation of the Inquisition.The entire project is ideological. It may well work but let’s not pretend that we’re making a choice devoid of ideology.

  3. Anonymous   December 31, 2008 at 11:01 am

    Sorry to read such ideological diarrhea. There is a donkey in the pile, to be sure, but the politically driven propaganda blinds me to the reality of where it is.

  4. Dr. Fred in PA   January 1, 2009 at 11:06 am

    “No earmarks.” Yaaah! Oh puh-lease. HRH Queen Nancy is going to stop them, eh? I’m really beginning to wonder about you guys in academia. We have a global problem that is fundamentally based on WAY too much borrowing and spending. The supergeniuses on Wall St. borrowed billions of dollars using borrowed money as collateral(!). Obama’s solution is more borrowing. We don’t need more “investments” in education. We need the little brats to put away the idiot video games and for their parents to give a crap. On the flip side, we need their grandparents to stop insisting that they have a right to bankrupt the nation because they payed x dollars into Social Security. And most of all, we as a nation need to get back to some of the founding principles of our nation, ie., self reliance and thrift. Far too many people seem to think that they are owed everything merely because they exist. Now, I don’t claim to have the answer to problems such as a declining manufacturing base due to globablization, but our problems appear to be a more fundamental one of attitude and laziness and I don’t see the Dems making that problem any better at all.

  5. Anonymous   January 4, 2009 at 9:43 am

    The only thing I see in this plan, that might have any value, is clean energy. I agree, schools do not need updated stuff. They need a better quality of teacher and they need to look at the students in quality not quantity. Most of all I have wondered who is going to pay for this plan? Tax payers are alreasy supporting those unemployed. WE can only pay for so much here and I see a serious debt ratio problem. As mentioned above I agree an alternate source of funding the ideas should be used. Even if they create jobs such as these..who is to say people will actually work anyway? Jobs are out there. They might not pay top dollar but they are out there.