Undernews is the online report of the Progressive Review, edited by Sam Smith, who has covered Washington during all or part of one quarter of America's presidencies and edited alternative journals since 1964. The Review has been on the web since 1995. See main page for full contents

January 25, 2009


Sam Smith

One of the attractive things to a president about a fiscal crisis like ours is that it offers a chance to pass all sorts of legislation in a hurry that would otherwise take years or end up in the trash can. Some of this is good, but some amounts to little more than presidential earmarks, an easy way to pass some of the White House's pet projects.

For example, worthy of deeper examination is Obama's plan to computerize medical records. It would be more wisely considered more thoughtfully and leisurely. At present it has the smell not unlike that of the testing mania of the Bush administration that has provided huge profits for some of that president's friends. We googled Obama along with the name of a firm that would be a big beneficiary of his records plan and in the first 18 listings, 11 sent you to stock market or financial pages. That isn't the norm for simple virtue. There are also major cost, privacy and accuracy problems involved in the plan and it really doesn't belong in the bailout.

Based on the incomplete information we have been provided, here's a tentative guide to the good, the bad and the unknown in Obama's plan:


Plan will spend 75% of the funds in the first 18 months.

Expands food stamp program for 30 million Americans. This will have a rapid and large per dollar economic effect.

Will double renewable energy capacity over three years. This is good for the environment, but Congress should look closely at how many jobs are involved compared, say, with another good part of the program: increasing weatherization of existing homes. The latter program brings down heating costs as well as its environmental benefits but currently only covers two million homes.

Major school modernization program including upgrading 10,000 schools.

Improving the electricity grid.

Financial loan support for clean energy investments.

Helping fund state shortfalls in Medicaid and SCHIP.

Protecting access to COBRA health insurance for those who lose their jobs.

Increasing Pell grants and student tax credits.

Doubling Head Start which will produce 15,000 new teaching and related jobs. This is the sort of program there should have been much more of in the plan.


Puts too much emphasis on tax cuts which are not particularly effective as economic stimuli.

Computerization of medical records should be dropped from the plan and treated as normal legislation subject to close review of cost, accuracy and privacy.

Favoring still more highways while ignoring the critical need for a vast improvement in our rail system. This is clearly an earmark for the highway lobby.

There is a stunning lack of attention to homeowners and their current problems. This is perhaps the biggest gap in the program.

There is also a stunning lack of programs aimed at small business, the biggest job producer in America.

Those programs that will add true wealth to the society - i.e. public works - could be handled by printing, rather than borrowing, money.

There is a lack of revenue sharing - undirected transfer of federal funds to be spent at the state and local level, closer to the realities of the crisis.


Obama claims the plan will create or save 3-4 million jobs in the next two years. This won't be enough to correct the current situation but it will certainly help. Such predictions, however, do not have a great track record.

The bailout plan, like the ones before it, lack serious examination of how each portion will effect jobs and the economy. Do more science fellowships really stimulate the economy? How many jobs will they add? How soon? We'll probably never know.

Through such provisions, however, the White House is once again circumventing Congress' constitutional budgetary role and doing it at a time of crisis so that few will notice or be willing to object.

Overall, however, it is fair to say that about two-thirds of the plan makes sense; the rest is poor policy but not catastrophic - more typically a continuation of the sort of programs that helped create the fiscal crisis: too much for too few and not enough for the many.

The important thing for Congress is to act like Congress and answer basic questions such as:

- How many jobs will this produce and how fast?
- How much will this really help the economy and how fast?

Programs that don't fill the bill - such as the medical records proposal and more money for science fellowships - should be put off until later and the money transferred to things that will make a bigger difference and sooner.


Blogger Lars said...

What I haven't seen in the analysis is how this will affect state budgets. Here in Massachusetts, Gov. Deval Patrick is announcing massive budget cuts that are going to result in lots of lost jobs due to less state aid going to municipalities:


While the infrastructure improvements are welcome, a large question is how we'll keep police, firefighters, teachers, and DPW workers employed and doing their jobs.

And there seems to be some misguided ways that the infrastructure funds are going to be spent. Here in Massachusetts there is talk of distributing these infrastructure funds into private developments (retail, office, high end residential) and not much talk of building schools, increasing rail service, or really doing much that would have profound effects on our local economy.

January 25, 2009 1:43 PM  
Anonymous Anonymous said...

Wouldn't printing money increase inflation?

January 25, 2009 2:32 PM  
Blogger TPR said...

Printing mnoney doesn't increase inflation if it is used for works that increase the wealth of the country - i.e. many public works. For more on this, see:


Thanks to Lars for reminding us to include revenue sharing among the things Obama's program lacks

January 25, 2009 5:33 PM  

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