Stimulating a new economy
January 19, 2009
Feldstein and Stiglitz both warn ‘what after the stimulus money is gone?’. We have been propped up by two bubbles the last decade. What will prop us up after we’ve used our borrowed money in two years?
Friedman puts it nicely: “If we spend $1 trillion on a stimulus and just get better highways and bridges — and not a new Google, Apple, Intel or Microsoft — your kids will thank you for making it so much easier for them to commute to the unemployment office or mediocre jobs.”
Fortunately I do see the foundation for a new economy in two specific elements of the emerging package:
- A telepresence economy enabled by universal broadband.
- Dirt cheap energy (not counting initial infrastructure costs).
A third element of the package is a wildcard: Healthcare reform. Universal healthcare is a moral imperative, but the real value of reform is in increasing efficiency. The current system is so expensive it is a real drag on the economy. We must reduce costs and optimize delivery using technology, standardization, regulation and reorganization to a point where cost per insured is cut in half, otherwise we will still be at a disadvantage. Most of this change will depend on Obama and Dashle’s reform skills, and not on how much we spend via stimulus package.
A fourth one is necessary for a world-wide recovery: Chinese people must start spending and enjoying the fruits of their labor. The China-lends-us-money-so-we-can-buy-their-products dynamic is over. This is obviously beyond our control, but well within the command of the central party committee. Credit cards anyone?