bottom up change

I can’t believe I just found out about this yesterday.  It’s funny, because I had actually thought about printing out the stimulus bill and blogging about it as I read the whole thing.  Aren’t you glad I didn’t?  Well, I fully support Steve Coll’s efforts here, and I’m going to become a regular reader of this blog.  I will report back on what he finds in his Talmudic study of the American Recovery and Reinvestment Act.

By the way, Steve Coll is also President and CEO of the New America Foundation.

Continuing the theme of transparency from my last post, there’s an interesting piece in the Washington Post today about the use of crowdsourcing to monitor the spending of stimulus money.  Crowdsourcing is a notion that was developed by an article in Wired a few years ago and it seems to be spreading in popularity.  The basic idea is that, using the internet, we can outsource work on a task or project to a large group of unknown people.

While “crowdsourcing” is one of those trendy buzzwords that is being thrown around a lot on the internet,  Stimulus Watch is an example of how the interactive nature of the web can increase transparency.  Stimulus Watch is not tracking the specific projects of the stimulus–at least, not yet.  Instead, it is seeking input from citizens around the country about the list of “shovel ready” projects that were proposed recently at the US Conference of Mayors.  The website asks its users to identify local projects and then allows them to comment on them and rate the projects in terms of their perceived importance.  The hope is that, as a result of this kind of citizen feedback, when Mayors do receive the stimulus money it will be spent on those projects that are viewed as being most critical by the public.  Here is how the site’s co-founder, Jerry Brito, describes the significance of crowdsourcing as a means for allowing citizens to keep on eye on government spending:

“You don’t have to hire an army of auditors, because it’s impossible for them to follow every single dollar and every single transaction,” Brito said in an interview. “However you can augment their work with citizens, who can keep tabs on things that go on in their neighborhood.”

There are many useful features at Stimulus Watch.  First, projects are divided into categories such as “Most Expensive”, “Most Critical,” and “Least Critical”.  There is also a search function so that users can easily find proposed shovel-ready projects in their area.  Finally, using a Wiki, the site provides users with a description of each project and a chance to offer more qualitative feedback in the form of comments and a discussion thread.

One question that I have with a site like this is how it prevents users from gaming the rating system.  I can imagine a city administrator seeking federal funding for a project sending an e-mail to employees asking them to rate the project favorably when, in fact, most citizens in the community would oppose the project.  It is unclear how a website like this can prevent bias and manipulation from distorting the results.  But that seems to be one problem with the idea of crowdsourcing in general.

With all the depressing economic news these days, I found this CNN report to offer a little bit of hope. Here’s how the economic stimulus package is already beginning to help workers in green technology:

At a summit in Philadelphia on Friday, Vice President Joe Biden
said people who make $20 per hour before a green jobs training program
can make $50 per hour after. On average, the clean-energy jobs pay 10
to 20 percent more than similar work outside the field, he said.

Adding to the enthusiasm, Biden cited a recent case in Chicago where a
maker of energy-efficient windows intends to gradually rehire 250
workers who were laid off when their window company closed late last
year.

There is a “very direct” correlation between the stimulus
package and Serious Materials’ ability to reopen the plant, said Sandra
Vaughan, chief marketing officer for the California-based company.

I’m a strong believer that what is going to help get us out of this crisis is innovation and growth in the green tech sector. But as this report suggests, in order for these companies to grow, banks are going to have to lend again. That is why, as unpopular as the bank bailouts are, I believe they are necessary.

N700 Bullet Train Debuts in Japan, July 1, 2007 (Photograph by Ren Zhenglai/Xinhua/WPN)

Apparently the stimulus may make high-speed trains in California a reality, and this is great news. America badly needs an updgrade in its rail system. It’s a national shame that Japan, China, and Europe have high-speed rail but we do not. The N700 bullet train in Japan is pretty amazing, and when you read about it you just have to shake your head in wonder at the fact that don’t have one of these here in the US.

Here are the corridors that have been proposed at the Department of Transportation for high-speed rail:

Dept. of Transportation Designated High-Speed Rail Corridors, January 2002

Unfortunately, this is a very expensive undertaking and it’s unlikely that even the $8 billion will be enough to make it possible in more places than California. In fact, it’s questionable as to whether high-speed rail will really happen in California since that $8 billion will be spread out among competing parts of the country.

High-speed rail obviously has many benefits, including lessening our dependence on foreign oil and protecting the environment. There would be an obvious economic benefit in job creation that the construction of a high-speed rail network would entail. But there’s also a lot of symbolism in undertaking this project. When John F. Kennedy decided to put a man on the moon, his critics thought that he was crazy for spending so much money on a project that didn’t have any clear economic benefit. But President Kennedy knew that the innovations that were involved in the project would boost America’s leadership role in science and technology, giving us an edge over the Soviet Union. It gave rise to many more young people studying science and engineering and it provided the country with a sense of confidence and optimism. In the same way, green cars and high-speed trains are two innovations that could leave President Obama with a legacy of bringing the United States into the 21st century.

As a patriotic citizen, I’m sure you’re wondering how to spend your extra $8 a week in stimulus tax cuts.  Here are some ideas from economists on how to maximize the multiplier effect and help get our economy back on track. A few of my favorites:

Ethan Harris, Barclays Capital: Get a haircut. It is a
purely domestically produced service with extremely high labor content.
This means no drain in spending power out of the country: it is “Buy
American” without violating any trade agreements. It also has a high
impact on employment due to the high labor content. Finally, an $8
haircut–as opposed to the $100 variety– is probably being done by a low
income person who is likely to spend rather than save the 8 bucks,
ensuring strong second round spending effects. We will groom our way to
recovery…

A haircut for $8? Where? Not in this city.

Tyler Cowen, George Mason University: In my view,
fixing the banking sector is more important than getting the stimulus
right. So if you can afford to lose the money, go to a large bank (more
likely to be insolvent), find their most overpriced service, and buy as
much of it as you can. That way you are doing your part to recapitalize
our banking system.

If you’re stuck for ideas, just keep on using ATM machines, owned by
other banks, so you can pay large fees to take out small sums of money
from your checking account. When you need to, take all of your
withdrawals and deposit them back in the account once again and start
all over with the process.

The only problem with this advice is that using ATMs that are not owned by my bank  and having to pay those fees reflexively causes me to become angry and probably raises my blood pressure. High blood pressure may cause health problems leading to increased health care costs. If you extrapolate from me to the rest of the nation, this probably isn’t the best idea.

Robert Gordon, Northwestern University: Don’t go to
an $8 movie, that won’t create jobs. Save it for three weeks and get a
$24 meal, which will directly help restaurants avoid layoffs and
closures.

Ah, now we’re talking! Who wants to join me at a steakhouse in three weeks?

Ricardo Reis, Columbia University: You should use the
money in the way that is best for you and your family, whether that is
saving or spending, buying this or paying that. Doing what is in your
best interest usually leads to doing what is best for the economy. (And
when it is not, the economic policymakers should have figured that out
when deciding whether to, and how to, give you the $8, so that by
pursuing your best interest you end up doing what is best for all.)

Wait: aren’t laissez-faire economic principles what got us into this mess?

The Tax Policy Center has a nice breakdown of the tax cuts in the stimulus bill. Not great grades, I must admit. The biggest let-down for me is the “Making Work Pay” tax credit, even though the TPC gives it a B+. Personally, I would have preferred a lump-sum check. Now how am I going to justify that smart phone I was thinking about buying? It turns out that the $400 per individual and $800 per family will be allocated by reducing the amount of withholding on each paycheck over an entire year. According to the TPC, the money is more likely to be spent rather than saved as a result, thus adding to the tax cut’s stimulative effect.

I suppose the reasoning is: if you’re not even noticing the extra $15 you’re receiving in your paycheck, you’ll probably spend it without noticing. On the other hand, if you have some credit card debt or you’re concerned about saving money, a check for $400 will definitely not be spent. And, this may indeed have been what the administration was thinking in spreading the $400 out for the whole year. Here’s an interesting analysis from the New Yorker:

You might think that handing people a big chunk of change is a perfect way to get them to spend it. But it isn’t, because people don’t treat all windfalls as found money. Instead, in the words of the behavioral economist Richard Thaler, people put different windfalls in different “mental accounts,” which in turn influences what they do with the money. Where the money comes from can have a big impact on whether people spend it or save it: casino winnings are more likely to be spent than, say, money from an inheritance. The framing of a windfall is important, too: a recent study by the business professors Nicholas Epley and Ayelet Gneezy showed that when a tax rebate was presented as a bonus it was more likely to be spent than when it was presented as a refund. And the size of the windfall matters a lot: the bigger the windfall the more likely it is to be saved.

I was prepared to spend a lump-sum, but maybe most Americans would have saved that money with the economy so shaky and the danger of unemployment in everyone’s mind. It’s a lot harder to be disciplined enough to save an extra $30 a month than it is to save a single check worth $400.

An interesting analysis here that is more insightful than anything I’ve read thus far about the incentives in the stimulus bill for green cars. I know the plug-in neighborhood electric vehicles (aka “golf carts” to Republicans) have gotten a lot of criticism as being pork, but this analysis suggests that the spending on NEVs may have the most immediate impact among all the spending on green cars in the bill.

Recovery.gov launched today as I’m sure you noticed. Nancy Scola has a pretty good summary of the site at techPresident. I think this is a decent start, but the site is pretty empty at this point. What will be worth watching is how much transparency will really exist here. Will they post the bad stories in addition to the good?

One thing that stood out to me was that the same data on investments provided is in two different graph styles: bubbles and bars. I’m more of a bar graph man myself:

Great pictures by White House photographer Pete Souza showing President Obama working to pass the American Reinvestment and Recovery Act. Here are a few of the pictures, documenting Obama’s efforts to reach out to Republicans:

Well, now we know that Rep. Eric Cantor really knows how to rock.

If it wasn’t so ridiculous you’d have to feel a little bad for them. Let me see if I understand their logic. The House GOP loses badly in two consecutive elections. Then a Democrat is elected President. Then, the President passes what may be the most significant piece of progressive legislation affecting the economy since the New Deal. But nevertheless, because the entire Republican caucus in the House votes against this legislation, they are “back in the saddle.” Maybe this means: they are back to being the party of Hoover.

[Shout out to Fake Virginia for originally pointing me to this.]

UPDATE: Aerosmith didn’t like Rep. Cantor using their song “Back in the Saddle” without their permission and the video had to be pulled. It was fun while it lasted. Young voters: you really missed out. But don’t worry, Michael Steele has some plans for the GOP that he promises will be “off the hook.”