A Stimulus Package We Can Believe In

Author and columnist Tom Friedman described the nation’s current predicament as when Roy Scheider’s character from Jaws gets his first glimpse at the shark, goes to the captain’s cabin and declares: “We’re going to need a bigger boat.”

Policy makers and wonks have also focused on the size of the forthcoming economic stimulus package. It started out at what now seems like modest levels of some $300 billion during the election campaign, and has now risen to the current $825 billion package which President Obama is pushing on Capitol Hill today

According to the White House, three-quarters of the spending would work its way into the economy within the first 18 months. But according to the Congressional Budget Office, only 64 percent of the package will spread to the economy through spending and tax cuts within 19 months.

Political leaders have emphasized that a bold stimulus plan is needed. But in addition to the economic stimulus plan being bold, it must also be wise. What do I mean by wise? The plan must spend money in areas vital for the long-term prosperity of America, and in areas where we currently face serious deficiency. A wise stimulus plan will invest in a power grid system to distribute solar and wind energy through the length and breadth of this vast country. It will create a modern and innovative power grid. We should invest in mass transit systems in the top 100 metropolitan areas of the nation. And we should invest in education, from early childhood to higher education. Higher education should be free for any American with a serious intent to study. The federal government should invest the people’s money in the noble endeavor of higher studies. We need to train people for jobs of the 21st century, and this will mean a greater emphasis on science and engineering training. The stimulus plan should contain programs to repair the roads, bridges and public buildings that are in dire need of repair and modernization.

But bold and wise is not sufficient. The economic stimulus plan should be implemented with integrity. The people’s money should be spent in a manner that upholds the highest standards of accountability and transparency. Waste should be minimized, and corruption eliminated. By most accounts, the New Deal programs were cleanly implemented. We will have to strengthen the oversight mechanisms to ensure that the large sums of money in the stimulus plan are spent for their intended purpose and in the full view of the American people. The Obama administration plans to post information about implementation on the Internet. Technology alone is not sufficient; watch dog groups will have to keep a close eye on how the people’s money is being spent. Information on program expenditures, award of contracts, benchmark targets, and performance should be made available to the members of the public and the media.

A major flaw of the New Deal programs was that they were not inclusive. Much smaller proportions of minorities than whites were able to avail of the GI Bill programs in the areas of higher education and home ownership. The Civil Conservation Corps had racially segregated work units. The Social Security program did not cover domestic servants and agricultural labor, sectors in which a great many non-white Americans worked. This will obviously not do in a 21st century stimulus plan. The stimulus plan needs to be inclusive by design and careful monitoring. In addition to inclusivity by race, ethnicity, and regions, the programs should avoid cronyism in the staffing of positions and in the award of contracts.

This is not to minimize the importance of the plan being bold. I support an even bolder plan than the one being debated in Congress. We need stimulus spending to the tune of 5% of GNP each year, for two years at least. That would be $750 billion a year, or $1.5 trillion in the next two years. We are a wealthy nation — a nation with vast natural resources, entrepreneurial talent, and a productive work force. Furthermore, U.S. economic recovery is directly linked to recovery of the global economy.

And after we have implemented a successful economic stimulus plan, let us transfer our technology and expertise to other nations and aid in their reconstruction. American companies can implement infrastructure programs in foreign nations in partnership with the local companies in these nations. An international reconstruction program does not have to be “post-war reconstruction.” It can exist even without a war. Economists believe that it was not the New Deal but World War II that got America out of the Depression. But what sustained the prosperity, and brought at least two decades of dynamic prosperity to America was the post-war reconstruction in Europe. We will have to expand our markets for infrastructure development beyond our shores. For example, after we have established a power grid to distribute alternative energy in our country, we can implement similar projects in other parts of the world. That is a necessary trajectory for our long-term prosperity.

Nandinee Kutty
Dr. Nandinee K. Kutty is an economist and a policy consultant. She is an editor and contributor for the book Segregation: The Rising Costs for America (Routledge 2008). She is the author of numerous research papers published in peer-reviewed journals of economics and public policy. Dr. Kutty was formerly a professor at Cornell University. Her published research papers and op-eds are currently on the reading lists for courses taught at various universities in the U.S. Her e-mail address is nndkutty@aol.com.

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