Obama's 'Big Fix,' And Investment Deficit Disorder The president hopes a proposed $800 billion-plus stimulus package can jump-start the economy and lay the groundwork for long-term prosperity. If the plan doesn't work immediately, New York Times columnist David Leonhardt says the economy could dominate Obama's time in office.
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Obama's 'Big Fix,' And Investment Deficit Disorder

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Obama's 'Big Fix,' And Investment Deficit Disorder

Obama's 'Big Fix,' And Investment Deficit Disorder

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President Obama will be talking about his stimulus plan with congressional leaders again today, though this time, he's meeting with Democrats. The Senate debates the package this week. Republicans want some changes, and Mr. Obama wants some of those Republican ideas to end up in the bill. The president says the legislation will create or save millions of jobs as well as invest in the country's economic future. New York Times economics columnist David Leonhardt wrote about the plan in the paper's Sunday magazine. His cover story is called "The Big Fix," and he joined us to talk about it. Good morning.

Mr. DAVID LEONHARDT (New York Times): Good morning.

MONTAGNE: President Obama wants this stimulus package to do two things: to jump-start the economy immediately, and to provide an engine to keep it running and growing in the long run. Can it do both?

Mr. LEONHARDT: It has to do the first thing, and it can make some progress toward the second goal, which is making more long-term progress. The reason it has to do the first, which is stimulate the economy, is that if it doesn't, the state of the economy could end up dominating his entire first term.

MONTAGNE: Now, you write about something called investment deficit disorder. Very interesting expression - what does it mean?

Mr. LEONHARDT: Well, I think our economy has been far too dependent on consumption over the past couple decades, and not dependent enough on investment. There are all sorts of things that the government isn't that good at, and we've become very used to talking about those things. But there are some things the government is very good at. And in the 1950s, the government spent the equivalent of about 7 percent of GDP investing in things - highways, buildings. That 7 percent has declined to 4 percent, and that's really problematic for the economy. When the government has invested in basic things, like the highway system, like the Internet, the government has a very good record of that, and it's doing a lot less of that, and that's a problem. And one of the real challenges for the administration is how to fix that at a time when money, obviously, is not easy to come by.

MONTAGNE: Although that is much talked about by the president when he talks about this stimulus plan.

Mr. LEONHARDT: That's absolutely right, and he clearly has this notion of short term and long term in mind. His inaugural speech even talked about this notion of laying a new foundation for growth. So he clearly has this idea in mind, of trying to do more of these investments. Health care is one of the most interesting places because the stimulus package is going to include some money. It looks like it's going to include some money to pay for the installation of electronic medical records, which is precisely the kind of investment that can pay real dividends in the long term, because it can lead to a health-care system that not only wastes less money but also, actually treats people better.

MONTAGNE: Let's talk about the whole question of green jobs.


MONTAGNE: In both his campaign and also this stimulus package, Mr. Obama has pushed for green jobs, seemed to be the answer to our nation's many problems: environmental, dependence on foreign oil, manufacturing opportunities. You have written, to the effect, that this cannot be all those things.

Mr. LEONHARDT: That's right. They've oversold green jobs a little bit. The president has talked about green jobs almost like they're a free lunch, that they will bring a huge economic boom, and they'll bring these environmental and political booms. And the fact is, is that his climate policy over the long term is about raising the cost of dirty energy so that we can use cleaner energy, so that companies will use it. And raising the cost of dirty energy isn't a great force for an economic boom.

MONTAGNE: You have suggested in your writing that at this point in time, there is no long-term, major engine of the economy the way industry was in the 20th century.

Mr. LEONHARDT: Well, I would put it slightly differently, which is to say that the engines we have now don't look like they can be engines for decades to come. I don't think we're not going to have an engine going forward. I think we don't know exactly what it's going to be right now. I think one of the reasons that people latched onto green jobs is that it's very tangible. But I think it's very hard to know in advance what the engine of the economy is going to be going forward.

MONTAGNE: Now, you write that special-interest groups, as you describe it, have distorted the economy.

Mr. LEONHARDT: That's right. There's a really interesting writer named Manser Olsen, an economist from the '80s, who talked about how stable, prosperous, successful countries and economies, like this country, get in trouble, which is that over time, interest groups, whether it's Wall Street or whether it's the American Medical Association, end up getting enough power that they are essentially able to benefit at the expense of everyone else.

And I think Wall Street is a really interesting example. I mean Wall Street was able to go under-regulated and now, we're all paying a huge price for that. Wall Street benefited from that. People made enormous profits on Wall Street, and many of those profits, they'll get to keep. This is really an unusual chance to try to take on some of these interest groups that in normal times, you can't take on because the costs of what they're doing are too diffuse, so most of us don't care enough about it. And the benefits to them are so great that they're willing to fight very hard for these policies that are doing damage to the wider economy. And so these are the sorts of interest groups that you hope -that a really serious economic crisis like this gives the government and the rest of us a chance to take on.

MONTAGNE: David Leonhardt writes about economics for the New York Times. Thanks very much.

Mr. LEONHARDT: Thank you, Renee.

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