An Act with a Vision for the Future

Even prior to its enactment, there has been much heated opposition to the American Recovery and Reinvestment Act of 2009, a.k.a. President Obama’s economic stimulus plan. Opponents have tried to smear it as a bill laden with earmarks (which is not true) that wasted money on pointless projects. Opponents have also (correctly) pointed out that it is mostly paid with borrowed money (I’ll come to that later). However, the Recovery Act has gone further than any prior piece of legislation in the past half century in revolutionizing antiquated areas of our economy. And it truly has kept the economy from the brink of depression.

Perhaps the keystone effort of the stimulus plan was its investment in a variety of projects that will make America more energy efficient and less dependent on carbon fuels (and the despotic regimes that supply us with them.) One of my key concerns in the 2008 Presidential Election was selecting a candidate who would make energy independence their priority. This act was a big step in the right direction for a green energy economy and the investments it makes in new technologies has the potential to create tens of millions of jobs.

The notion that private corporations are primarily interested in the short term (to satisfy shareholders) and do not invest nearly enough in research and development that would primarily provide benefits in the long run is a well-established economic idea. Some of the most important inventions of the past 100 years, that are the backbone of today’s economy, have been supported by government-funded research. The cellular phone, computers, the Internet, and GPS are but a few of the most important inventions that have come about in large part due to research performed by U.S. taxpayer-funded scientists and engineers. Corporate America’s fiercest foreign competition significantly benefits from foreign government-sponsored research and development. A good example of this is Airbus, which is a consortium of French, British, German, and Spanish aerospace companies, that have received very heavy investment from their respective governments. As a result of all of the R&D; and other investment European taxpayers made into Airbus, that company has now surpassed Boeing as the world’s largest supplier of commercial airliners and has provided an incredible amount of high tech jobs to those countries. Perhaps the most important idea I learned in studying economics is the fact that more than anything else, new technology drives economic growth. Many if not most of the jobs lost during the Great Recession are not coming back. The way to get America back on its feet is to develop the technologies that will be the backbone of the future economy. We have plenty of tough competition. Europe, China, and India all invest a significant amount of money in research and development in support of their key industries. If America wants to lead in and reap the benefits of the future global economy, we must ensure we invest money into today’s research that will be tomorrow’s must-have technology. I cannot think of a better use of my tax dollars.

So in returning to the Recovery Act, a recent TIME Magazine article gave an impressive summary of what types of energy investments the Recovery Act is making.

The investments extend all along the food chain. A brave new world of electric cars powered by coal plants could be dirtier than the oil-soaked status quo, so the stimulus includes an unheard-of $3.4 billion for clean-coal projects aiming to sequester or reuse carbon. There are also lucrative loan guarantees for constructing the first American nuclear plants in three decades. And after the credit crunch froze financing for green energy, stimulus cash has fueled a comeback, putting the U.S. on track to exceed Obama’s goal of doubling renewable power by 2012. The wind industry added a record 10,000 megawatts in 2009. The stimulus is also supporting the nation’s largest photovoltaic solar plant, in Florida, and what will be the world’s two largest solar thermal plants, in Arizona and California, plus thousands of solar installations on homes and buildings.

The stimulus is helping scores of manufacturers of wind turbines and solar products expand as well, but today’s grid can only handle so much wind and solar. A key problem is connecting remote wind farms to population centers, so there are billions of dollars for new transmission lines. Then there is the need to find storage capacity for when it isn’t windy or sunny outside. The current grid is like a phone system without voice mail, a just-in-time network where power is wasted if it doesn’t reach a user the moment it’s generated. That’s why the Recovery Act is funding dozens of smart-grid approaches.

The Recovery Act’s clean-energy push is designed not only to reduce our old economy dependence on fossil fuels that broil the planet, blacken the Gulf and strengthen foreign petro-thugs but also to avoid replacing it with a new economy that is just as dependent on foreign countries for technology and manufacturing. Last year, exactly two U.S. factories made advanced batteries for electric vehicles. The stimulus will create 30 new ones, expanding U.S. production capacity from 1% of the global market to 20%, supporting half a million plug-ins and hybrids. The idea is as old as land-grant colleges: to use tax dollars as an engine of innovation.

Recovery Act money was also used as follows:

– Tax cuts for 95% of working Americans (Federal taxes now are at the lowest rates they’ve been in over 50 years for middle class Americans, so please remind me what Tea Partiers are complaining about again?)
– Bailed out most state governments to avoid laying off hundreds of thousands of school teachers, police officers, fire fighters, and other state and local officials.
– Provided record amounts of unemployment benefits to record numbers of unemployed workers.
– Funded upgrades to roads, bridges (recall the Minneapolis I-35 bridge collapse), schools, airports (ever flown through JFK?), military bases (recall reports about the decrepit Fort Bragg barracks, among others).
– Computerized paper health care records system (to reduce redundant tests and errors caused by doctors with bad handwriting).
– Invested in public transportation, including high speed rails.

This act provided for a smart balance of near-term projects to help prevent the economy from suffering a complete and utter collapse while assisting those most vulnerable in the Great Recession (the unemployed) along with long-term investment that would lay the groundwork for our future economy. As Kristin Mayes, the Republican chair of Arizona’s utility commission stated, “It will leverage a very different energy future… it really moves us toward a tipping point.” As an older post pointed out, there are key economic indicators that indicate we have stepped back from the brink and are moving in the right direction.

Despite all of the carping by the Tea Party types about the federal deficit and its contribution from the Recovery Act, the non-partisan Congressional Budget Office has indicated that the Bush tax cuts are the single biggest contributor to the structural deficit. (Extending the Bush tax cuts would add $2.3 trillion to the 2018 debt. I really hate the term “Bush tax cut” because they really were not tax cuts, but tax deferrals as they were paid for with credit. Congress and former President Bush essentially extended America a loan that would need to be paid for by our children.) The next biggest contributor to the long-term deficit are the two current wars. While the Bush Administration initially estimated that the Iraq War’s cost would be less than $100 billion, latest estimates are that it will be over $3 trillion. Has the Recovery Act contributed to the deficit? Of course it has. However, a concept that was taught to me by multiple economics professors at the not-at-all-liberal Brigham Young University was that truly the only time deficit spending by a government is warranted is in the case of a severe economic recession (which we were in), in order to stimulate the economy. These not-at-all-liberal BYU economics professors also supported a volume of economic data and research that indicates such stimulus spending helped the economy recover during the Great Depression.

So the next time a FOX News pundit laments how your tax dollars were completely wasted in the “stimulus act” and that it had no net affect, you’ll know their argument is hogwash.

12 Replies to “An Act with a Vision for the Future”

  1. Very good! I was going to say at the beginning, FDR had the same opposition to New Deal programs, but it also invested in new projects/programs that helped America.
    "If America wants to lead in and reap the benefits of the future global economy, we must ensure we invest money into today's research that will be tomorrow's must-have technology." This is such a good point; I never thought of that. Reminds me of that Fable book.
    It's also kind-of exciting to me to know that there has been a huge investment in new energy. Stimulus or not, I don't think that would be waste of money.

  2. Hey Aaron, I would like to know more about Ronald Reagan and the 2 sides who think he is either a god or a crook. I have heard good arguments for both, but I am genuinely interested in having them all laid out in one intelligent/well thought out format like you tend to do.
    Thanks

  3. I just read an article about the Tarp plan in Newsweek, that people don't want to realize that hey guess what it worked!

    People don't like the bailouts, like a child doesn't like medicine, but he also doesn't like being sick while everyone else is out sledding or something.

    Our economy was headed toward a total collapse, and that has been averted thanks to the tarp – without that no bank would've loaned anymore money for a long time after the collapse of Lehman, it was actually an amazing bi-partisan effort to do something to save our rear-ends.

    The tarp has a negative stigmatism, mostly from the bonuses the ceo's were still taking, which agreed was excessive, but when things got tough both sides of the isle came together: obama, mccain, pelosi, bush, reed, paulson, bernanke, etc… all agreed on the tarp.

    Without it – the entire economy could've collapsed, yet – of the huge bailout it's one move that is actually looking like it'll be paid off 90%.

    It just shows that it takes an emergency for Washington to work right, otherwise its completely broken, and next time it 'works right' it may be too late…

    (BTW – you commented on my blog about a link trade, I added you to mine, so feel free to reciprocate! Thanks!)

  4. Dave- That's a good question and topic (Reagan). Thanks also for the compliment! I don't think I know enough about Reagan's presidency to make a full post at this point. I'll have to do more research. I see Reagan as a mixed bag- there was both good and bad that came from his Presidency. A lot of the bad was in the foreign policy realm, like Iran-Contra. His administration supported unsavory characters around the world (Saddam Hussein and the Afghan mujaheddin in particular) in carrying out their foreign policy goals in a way that was really short sighted. That support has come back to bite us as our support helped create our big enemies of the past decade.

    However, though Reagan did not single-handedly bring down the USSR, as many conservatives love to believe, his administration took important steps aimed at further weakening an already faltering Soviet Union. He helped to facilitate and perhaps expedite the end of the Cold War.

    On the domestic side, one area where Reagan was successful was the deregulation of the telecommunications industry. By deregulating AT&T; and all of the "Bells", the administration created an opportunity for some fierce and healthy competition in telecommunications. This eventually contributed to a very significant drop in the price of phone calls, as new telecom providers were competing for customers and were offering some of the latest telecom technologies. On the other hand, as you would expect from a Republican administration, efforts to protect clean air and water, and the environment in general took a significant step back.

  5. Patrick- thanks for the comment. You're right- the record most certainly shows that TARP was necessary and largely successful. As ugly as it was to bail out a bunch of wealthy bankers, it was necessary to shore up the financial system, the backbone of any economy, as it was teetering towards collapse. With most of it on track to being paid back, it was a very appropriate use of taxpayer money.

  6. Aaron,

    We're kind of brothers you and me. (Your sister's husband's sister's husband) I'm glad to finally get a moment to write to you and start up some productive dialog. You've definitely got some views that are different from my every day discussions in Lehi, UT so it will be nice to discuss some variant ideas. I've been meaning to get on and start commenting for months but life is always too fast and busy. Hopefully I can dedicate a few minutes a week to a brother in the faith who also thinks civility is important in discussions and differences of opinion. Maybe it would be beneficial for both of us if you know exactly where I stand politically right off the bat. I am registered as an independent because I don’t trust Republican or Democrat politicians. That being said I don’t vote for Independent nominees by habit either. I carefully try to vote only for those candidates who seem most likely to move our country toward the American idea of a government to protect individual freedom.
    Rather than address your whole posts or articles it seems prudent that I select a few points to address at a time or you’ll get an exhausting novel from me.

    Recovery Act money was also used as follows:

    – Tax cuts for 95% of working Americans (Federal taxes now are at the lowest rates they've been in over 50 years for middle class Americans, so please remind me what Tea Partiers are complaining about again?)

    Tax cuts are a good thing but should benefit 100% of Americans. The Tea Partiers (at least some of them) are complaining about high taxes. A tax cut is a good start but it is a relative term. Tax cuts are better than no tax cuts like 3 bullet wounds are better than 4. There is still plenty to be upset about. Thus giving no validity to the Tea Partiers that scream for tax cuts on the basis of preserving their Medicare benefits. Taxes must be cut more…MUCH MORE. Don’t make the mistake of assuming the tax cuts I demand will increase gov’t deficits. I demand even more gov’t spending cuts than I do tax cuts.

    – Bailed out most state governments to avoid laying off hundreds of thousands of school teachers, police officers, fire fighters, and other state and local officials.

    Bail outs are hardly something to be applauded. If some state governments grow to fast and cannot balance a budget, how can it be ethical to have people in other states pay the price for that gov’t malfeasance? I seam to remember a certain group of settlers demanding independence from “taxation without representation”.
    One more point regarding these public worker bailouts. Are these not “servants of the people”? Why then must the people be taxed more to maintain public sector jobs when the private sector is struggling with high unemployment? Is the productive output of “public servants” greater? Do they have rights that “non-public servants” do not? More than just being morally wrong, this contributes to a government aristocracy that directly contradicts the intensions of our political framework. The “public servants” have become the public masters. They demand more money & security not on the basis of productivity or results, but on the basis of entitlement.

    -continued on 2nd post

  7. -continuation of very long post

    – Provided record amounts of unemployment benefits to record numbers of unemployed workers.

    Beating unemployment benefit records is once again nothing to be proud of. If workers choose (this is no longer a choice) to secure their future by means of insuring income in case of future job loss then they should be free to do so. When the government allows for up to 99 weeks of unemployment they increase the unemployment rate. (Remember that the welfare reform act was to prevent welfare from lasting over 104 weeks). It is unreasonable to assume that people don’t respond to incentives. If you pay me not to work, then guess what I will do… NOT WORK. Nancy Pelosi said it best when she said “Unemployment checks are the fastest way to create jobs.” She sees no difference between collecting a check and producing goods or services. Her “demand side economics” reveals an embarrassingly common lack of economic understanding common throughout Washington (Reps. and Dems. alike).

    – Funded upgrades to roads, bridges (recall the Minneapolis I-35 bridge collapse), schools, airports (ever flown through JFK?), military bases (recall reports about the decrepit Fort Bragg barracks, among others).

    Roads, bridges and military bases are legitimate gov’t expenditures (though surely mismanaged). Schools and Airports are another topic requiring much more deliberation.

    – Computerized paper health care records system (to reduce redundant tests and errors caused by doctors with bad handwriting).

    I haven’t seen any real evidence that money spent in this area has produced any reduction in redundant tests or errors caused by doctors with bad handwriting. Evidence of beneficial results would surely make the front pages if any existed. Either way the Federal gov’t is wrong to take money from Americans for spending in what should be private industry.

  8. -more of the long post

    – Invested in public transportation, including high speed rails.

    Once again this takes good money to throw after bad. If you think public buses & high speed rails aren’t a bad investment then please explain why they need subsidies. That money would have been invested by Americans for things that create real economic growth and returns.

    This is far longer than I hoped but you can see why I didn’t respond to your whole article. It would be a novel.
    In short, the economic stimulus plan and bailouts (Bush is guilty too) are not wise policy and they are not even honest policy. The gross infringement of government into the private sector caused the recession and more government spending as a solution would be a laughable approach if it wasn’t so devastating to individual freedom and economic prosperity.

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