I am less concerned about who will succeed outgoing OMB Director Peter Orszag than what the new budget director will do. We face an unusually high unemployment rate of 9.7 percent and ridiculously low interest rates, even out to 30 years. Cheap credit and idle resources present a great opportunity to borrow and spend, particularly for things we know we need.
I have long been a fan of countercyclical government investment. In January 2008, I proposed a better way to deal with downturns and a budget that plans for the future as a means of substantially increasing our infrastructure investment at the most opportune times in the business cycle. At the time, I was trying to push back against calls for "timely, targeted, and temporary" measures that would widen the deficit without building anything of lasting value. While that phrase has fallen out of fashion, the sorts of policies being discussed -- like the patchwork of relief programs that died in the Senate last week -- are the same old stuff. It is a sign of how poorly our system of governance works that we cannot even plan for something that we have been enduring for two and a half years.
I wanted to see a federal spending program that got serious about capital spending. Today, I still want that. There is some sign that such spending will pick up this summer, based on prior measures that have been passed. From an article last week in The New York Times:
For all the talk of “shovel-ready” infrastructure projects when the stimulus first passed, construction projects made up a comparatively small slice of the package, and many required considerable administrative spade work — planning, permitting and contracting — before actual dirt could be turned. The stimulus initially injected money into the economy mainly through tax cuts and aid to states and individuals.
Stimulus-financed construction is set to explode this summer: 10,700 highway projects should be under way next month, up from just 1,750 last July. States expect to weatherize 82,000 homes this summer — 27 times the number of homes that were weatherized last summer, when the program got off to a slow start. And there will be 2,828 clean-water projects under construction, a twentyfold increase over last year.
There will be 218 federal buildings under construction next month, nearly four times the amount last July, according to the White House tally. California will have 450 stimulus highway projects under way this summer, up from 9 last summer. Roughly 29,244 miles of road will be improved this summer, officials said, up from just 9,185 miles last summer. (During the New Deal, by contrast, the far bigger Works Progress Administration was credited with building or fixing 650,000 miles of roads.)
Now industry groups and officials are already wondering about what happens when this burst of money is spent. In Ohio, Mr. Obama spoke of the need to invest more in infrastructure projects in order to compete globally. “We’ve got to get serious,” he said, “about our infrastructure.”
The scale of what's being done is still too small. I would much rather spend money paying people to work than paying people extended unemployment benefits. So the one-item to-do list for the next OMB director is to implement that plan, to get as much value out of deficit spending as possible. And President Obama should back up his words with his actions and staff the position appropriately.