Stimulus packages

As the economy tanks, we are being inundated with suggestions for what to do. Most are standard macroeconomic stimulus ideas. But a few are in the same vein as my earlier comment that stimulus needs to do more than boost consumer spending. From Rob Atkinson at the ITIF comes this call for a Timely Targeted Temporary Transformative package:

As talk of a possible recession grows, so too does consideration of a second economic fiscal stimulus package. Rather than craft a conventional spending-oriented stimulus package focused solely on tax cuts for individuals and spending increases, Congress should craft a stimulus package of which at least a portion not only gives a quick shot in the arm to the economy but at the same time also boosts investments that spur productivity growth and innovation, especially in information and communication technology, which has been the engine of U.S. economic growth for the past decade.
. . .
1. Allow IT Investments to be Completely Expensed in 2009
2. Provide a Tax Credit for Investments in Health IT Made in 2009
3. Provide $2 Billion to Colleges and Universities That Invest in Needed Research Infrastructure in 2009
4. Provide a Tax Credit of 50 Percent for Investments in Energy Efficient Equipment in 2009
5. Provide $1.6 Billion for Computers and Broadband for Low-Income Families with Children at Home
6. Provide an $8 Billion One-Time Infusion into the Highway Trust Fund to Spur Ready-to-Go Surface Transportation Infrastructure Investments
7. Allow U.S. Companies to Bring Back Foreign Earnings at a Lower Corporate Tax Rate in 2009
8. Provide Forgivable Loans to States to Shore Up Budget Shortfalls, Provided That States Expand “Rainy Day” Funds in Later Years

I generally agree with this list, except for the repatriation of foreign earnings. I'm not sure the evidence is convincing that this worked in the past.

I'm also a little surprised that Rob didn't call for something he has advocated in the past: the knowledge tax credit for worker training. I have long supported this proposal. As I've said before, If we can provide a tax incentive to invest in physical assets such as equipment (including IT), we should also provide tax incentives in the intangible assets of worker skills needed make those physical assets work. Such a training tax credit is especially important in a time of slower production. Rather than send workers to the unemployment office, let's send them to the classroom.

James S. Henry and Jim Manzi writing in The Nation also call for a plan to Invest in Innovation:

In the midst of our deepening recession, the United States faces another economic crisis that is less visible but may be more important than house foreclosures, bank failures, plant closings or stock market avalanches: the systematic under-investment in technology and innovation. Our global economic leadership may be at stake because of it.

Specifically, they want to boost R&D spending and other technology programs

Bernard Schwartz and Sherle Schwenninger at the New America Foundation proposed their Economic Recovery Program for the Post-Bubble Economy earlier this summer - but it is getting renewed attention (see Steve Clemons comments in his blog The Washington Note). According to Schwartz and Schwenninger:

A longer-term economic recovery program must therefore steer the economy onto a new growth path that is less dependent on the debt-financed consumption that has driven economic growth over the past decade. The most promising new sources of growth are America's enormous public infrastructure needs and the increased global demand for American technology created by the drive for greater efficiency in economies around the world. An economic recovery program built around public infrastructure investment and demand for American technology would be more effective in stimulating the economy in the short term, and far better for it in the long run, than would another round of tax rebates for American consumers.

Even David Brooks in the New York Times is writing about a more expanded plan. His is a A National Mobility Project. Brooks argues in favor of infrastructure spending, but not as a short term stimulus measure:

Major highway projects take about 13 years from initiation to completion — too long to counteract any recession. But at least they create a legacy that can improve the economic environment for decades to come.

A major infrastructure initiative would create jobs for the less-educated workers who have been hit hardest by the transition to an information economy. It would allow the U.S. to return to the fundamentals. There is a real danger that the U.S. is going to leap from one over-consuming era to another, from one finance-led bubble to another. Focusing on infrastructure would at least get us thinking about the real economy, asking hard questions about what will increase real productivity, helping people who are expanding companies rather than hedge funds.

Finally, but maybe most importantly, comes this call from Michael Porter Why America Needs an Economic Strategy - BusinessWeek:

The stark truth is that the U.S. has no long-term economic strategy—no coherent set of policies to ensure competitiveness over the long haul. Strategy embodies clear priorities, based on understanding the strengths we need to preserve and the weaknesses that threaten our prosperity the most. Strategy addresses what to do, but also what not to do. In dealing with a crisis, experience teaches us that steps to address the immediate problem must support a long-term strategy. Yet it is far from clear that we are taking the steps most important to America's long-term economic prosperity.

In that article, Porter ends with the following:

We will need some new structures to govern strategically. I served on the last public-private President's Commission on Industrial Competitiveness—in 1983! This time we need one that is less politically motivated. Congress would benefit from a bipartisan joint planning group to coordinate an overall set of priorities.

On the last point about a structure: we had one. It was a bipartisan Congressionally created organization - the Competitiveness Policy Council. It was created in the 1988 Trade and Competitiveness Act and operated from 1991 until 1997, when the GOP-controlled Congress cut off its funding. There was also legislation submitted in 2004 by Senator Lieberman to create a Commission on the Future of the US Economy -- which Athena Alliance consulted on and supported.

Maybe the new Administration and the new Congress will look more favorable on these efforts.