Obama promotes economic stimulus plan

WASHINGTON (AFP) - - President Barack Obama on Saturday promoted his 825-billion-dollar stimulus plan to revive the reeling economy, saying it would make the United States more competitive in a new era.

Revealing new details of the plan as he sought to push for swift action in Congress, Obama said his proposal would provide relief to Americans through tax cuts and health care benefits while bolstering renewable energy and vital infrastructure.

In his first weekly radio address since he was sworn in on Tuesday, Obama said his plan was not "just a short-term program to boost employment.

"It's one that will invest in our most important priorities like energy and education; health care and a new infrastructure that are necessary to keep us strong and competitive in the 21st century," Obama said.

The plan would overhaul the country's power grid with 3,000 miles of new transmission lines, invest in renewable energy, expand broadband service to rural areas, bolster security at 90 ports, improve schools and deliver health insurance for millions who are at risk of losing their coverage, Obama said.

Touting the concrete benefits of his plan for ordinary Americans, Obama argued the package would allow more students to attend university, lower energy and health care bills and improve decaying schools and roads.

Obama's speech came after US unemployment claims hit a 26-year high and home building fell to half-century lows, highlighting the scale of the challenge faced by the new president.

Obama sought to rally support for the blueprint as he was to confer with his economic team Saturday, a day after holding talks with leaders of both parties in Congress.

"I am pleased to say that both parties in Congress are already hard at work on this plan, and I hope to sign it into law in less than a month," Obama said.

The president's stimulus package faces increasing signs of opposition from Republican lawmakers, who argue the plan is too expensive and should have more tax cuts.

But in his meeting on Friday with congressional leaders, Obama reportedly took a firm line with one Republican pushing for more tax cuts, saying he had a mandate for his approach having won a decisive victory at the polls on November 4.

Representative Eric Cantor said the president had told him, "You're correct, there's a philosophical difference, but I won, so we're going to prevail on that."

"He was very straightforward," Cantor was quoted as saying by US newspapers. "There was no disrespect, but it was very matter-of-fact."

Republicans lack the votes to stall the stimulus package, but the president is hoping for big majorities for his first major piece of legislation to both kick-start the economy and strengthen his political hand.

Obama warned in his address that grave economic problems would not be cured quickly but he expressed confidence that bold action would help put the country back on track.

"If we act as citizens and not partisans and begin again the work of remaking America, then I have faith that we will emerge from this trying time even stronger and more prosperous than we were before," he said.

Responding to skeptical Republicans over the stimulus spending, Obama said he did not plan to "just throw money at our problems."

He promised more transparency, saying all spending decisions would be made public and his administration would be fully accountable.

"We will launch an unprecedented effort to root out waste, inefficiency, and unnecessary spending in our government, and every American will be able to see how and where we spend taxpayer dollars by going to a new website called recovery.gov," he said

President Barack Obama's Inaugural Address

My fellow citizens: I stand here today humbled by the task before us, grateful for the trust you've bestowed, mindful of the sacrifices borne by our ancestors.

I thank President Bush for his service to our nation -- (applause) -- as well as the generosity and cooperation he has shown throughout this transition.

Forty-four Americans have now taken the presidential oath. The words have been spoken during rising tides of prosperity and the still waters of peace. Yet, every so often, the oath is taken amidst gathering clouds and raging storms. At these moments, America has carried on not simply because of the skill or vision of those in high office, but because we, the people, have remained faithful to the ideals of our forebears and true to our founding documents.

So it has been; so it must be with this generation of Americans.

That we are in the midst of crisis is now well understood. Our nation is at war against a far-reaching network of violence and hatred. Our economy is badly weakened, a consequence of greed and irresponsibility on the part of some, but also our collective failure to make hard choices and prepare the nation for a new age. Homes have been lost, jobs shed, businesses shuttered. Our health care is too costly, our schools fail too many -- and each day brings further evidence that the ways we use energy strengthen our adversaries and threaten our planet.

These are the indicators of crisis, subject to data and statistics. Less measurable, but no less profound, is a sapping of confidence across our land; a nagging fear that America's decline is inevitable, that the next generation must lower its sights.

Today I say to you that the challenges we face are real. They are serious and they are many. They will not be met easily or in a short span of time. But know this America: They will be met. (Applause.)

On this day, we gather because we have chosen hope over fear, unity of purpose over conflict and discord. On this day, we come to proclaim an end to the petty grievances and false promises, the recriminations and worn-out dogmas that for far too long have strangled our politics. We remain a young nation. But in the words of Scripture, the time has come to set aside childish things. The time has come to reaffirm our enduring spirit; to choose our better history; to carry forward that precious gift, that noble idea passed on from generation to generation: the God-given promise that all are equal, all are free, and all deserve a chance to pursue their full measure of happiness. (Applause.)

In reaffirming the greatness of our nation we understand that greatness is never a given. It must be earned. Our journey has never been one of short-cuts or settling for less. It has not been the path for the faint-hearted, for those that prefer leisure over work, or seek only the pleasures of riches and fame. Rather, it has been the risk-takers, the doers, the makers of things -- some celebrated, but more often men and women obscure in their labor -- who have carried us up the long rugged path towards prosperity and freedom.

For us, they packed up their few worldly possessions and traveled across oceans in search of a new life. For us, they toiled in sweatshops, and settled the West, endured the lash of the whip, and plowed the hard earth. For us, they fought and died in places like Concord and Gettysburg, Normandy and Khe Sahn.

Time and again these men and women struggled and sacrificed and worked till their hands were raw so that we might live a better life. They saw America as bigger than the sum of our individual ambitions, greater than all the differences of birth or wealth or faction.

This is the journey we continue today. We remain the most prosperous, powerful nation on Earth. Our workers are no less productive than when this crisis began. Our minds are no less inventive, our goods and services no less needed than they were last week, or last month, or last year. Our capacity remains undiminished. But our time of standing pat, of protecting narrow interests and putting off unpleasant decisions -- that time has surely passed. Starting today, we must pick ourselves up, dust ourselves off, and begin again the work of remaking America. (Applause.)

For everywhere we look, there is work to be done. The state of our economy calls for action, bold and swift. And we will act, not only to create new jobs, but to lay a new foundation for growth. We will build the roads and bridges, the electric grids and digital lines that feed our commerce and bind us together. We'll restore science to its rightful place, and wield technology's wonders to raise health care's quality and lower its cost. We will harness the sun and the winds and the soil to fuel our cars and run our factories. And we will transform our schools and colleges and universities to meet the demands of a new age. All this we can do. All this we will do.

Now, there are some who question the scale of our ambitions, who suggest that our system cannot tolerate too many big plans. Their memories are short, for they have forgotten what this country has already done, what free men and women can achieve when imagination is joined to common purpose, and necessity to courage. What the cynics fail to understand is that the ground has shifted beneath them, that the stale political arguments that have consumed us for so long no longer apply.

The question we ask today is not whether our government is too big or too small, but whether it works -- whether it helps families find jobs at a decent wage, care they can afford, a retirement that is dignified. Where the answer is yes, we intend to move forward. Where the answer is no, programs will end. And those of us who manage the public's dollars will be held to account, to spend wisely, reform bad habits, and do our business in the light of day, because only then can we restore the vital trust between a people and their government.

Nor is the question before us whether the market is a force for good or ill. Its power to generate wealth and expand freedom is unmatched. But this crisis has reminded us that without a watchful eye, the market can spin out of control. The nation cannot prosper long when it favors only the prosperous. The success of our economy has always depended not just on the size of our gross domestic product, but on the reach of our prosperity, on the ability to extend opportunity to every willing heart -- not out of charity, but because it is the surest route to our common good. (Applause.)

As for our common defense, we reject as false the choice between our safety and our ideals. Our Founding Fathers -- (applause) -- our Founding Fathers, faced with perils that we can scarcely imagine, drafted a charter to assure the rule of law and the rights of man -- a charter expanded by the blood of generations. Those ideals still light the world, and we will not give them up for expedience sake. (Applause.)

And so, to all the other peoples and governments who are watching today, from the grandest capitals to the small village where my father was born, know that America is a friend of each nation, and every man, woman and child who seeks a future of peace and dignity. And we are ready to lead once more. (Applause.)

Recall that earlier generations faced down fascism and communism not just with missiles and tanks, but with the sturdy alliances and enduring convictions. They understood that our power alone cannot protect us, nor does it entitle us to do as we please. Instead they knew that our power grows through its prudent use; our security emanates from the justness of our cause, the force of our example, the tempering qualities of humility and restraint.

We are the keepers of this legacy. Guided by these principles once more we can meet those new threats that demand even greater effort, even greater cooperation and understanding between nations. We will begin to responsibly leave Iraq to its people and forge a hard-earned peace in Afghanistan. With old friends and former foes, we'll work tirelessly to lessen the nuclear threat, and roll back the specter of a warming planet.

We will not apologize for our way of life, nor will we waver in its defense. And for those who seek to advance their aims by inducing terror and slaughtering innocents, we say to you now that our spirit is stronger and cannot be broken -- you cannot outlast us, and we will defeat you. (Applause.)

For we know that our patchwork heritage is a strength, not a weakness. We are a nation of Christians and Muslims, Jews and Hindus, and non-believers. We are shaped by every language and culture, drawn from every end of this Earth; and because we have tasted the bitter swill of civil war and segregation, and emerged from that dark chapter stronger and more united, we cannot help but believe that the old hatreds shall someday pass; that the lines of tribe shall soon dissolve; that as the world grows smaller, our common humanity shall reveal itself; and that America must play its role in ushering in a new era of peace.

To the Muslim world, we seek a new way forward, based on mutual interest and mutual respect. To those leaders around the globe who seek to sow conflict, or blame their society's ills on the West, know that your people will judge you on what you can build, not what you destroy. (Applause.)

To those who cling to power through corruption and deceit and the silencing of dissent, know that you are on the wrong side of history, but that we will extend a hand if you are willing to unclench your fist. (Applause.)

To the people of poor nations, we pledge to work alongside you to make your farms flourish and let clean waters flow; to nourish starved bodies and feed hungry minds. And to those nations like ours that enjoy relative plenty, we say we can no longer afford indifference to the suffering outside our borders, nor can we consume the world's resources without regard to effect. For the world has changed, and we must change with it.

As we consider the role that unfolds before us, we remember with humble gratitude those brave Americans who at this very hour patrol far-off deserts and distant mountains. They have something to tell us, just as the fallen heroes who lie in Arlington whisper through the ages.

We honor them not only because they are the guardians of our liberty, but because they embody the spirit of service -- a willingness to find meaning in something greater than themselves.

And yet at this moment, a moment that will define a generation, it is precisely this spirit that must inhabit us all. For as much as government can do, and must do, it is ultimately the faith and determination of the American people upon which this nation relies. It is the kindness to take in a stranger when the levees break, the selflessness of workers who would rather cut their hours than see a friend lose their job which sees us through our darkest hours. It is the firefighter's courage to storm a stairway filled with smoke, but also a parent's willingness to nurture a child that finally decides our fate.

Our challenges may be new. The instruments with which we meet them may be new. But those values upon which our success depends -- honesty and hard work, courage and fair play, tolerance and curiosity, loyalty and patriotism -- these things are old. These things are true. They have been the quiet force of progress throughout our history.

What is demanded, then, is a return to these truths. What is required of us now is a new era of responsibility -- a recognition on the part of every American that we have duties to ourselves, our nation and the world; duties that we do not grudgingly accept, but rather seize gladly, firm in the knowledge that there is nothing so satisfying to the spirit, so defining of our character than giving our all to a difficult task.

This is the price and the promise of citizenship. This is the source of our confidence -- the knowledge that God calls on us to shape an uncertain destiny. This is the meaning of our liberty and our creed, why men and women and children of every race and every faith can join in celebration across this magnificent mall; and why a man whose father less than 60 years ago might not have been served in a local restaurant can now stand before you to take a most sacred oath. (Applause.)

So let us mark this day with remembrance of who we are and how far we have traveled. In the year of America's birth, in the coldest of months, a small band of patriots huddled by dying campfires on the shores of an icy river. The capital was abandoned. The enemy was advancing. The snow was stained with blood. At the moment when the outcome of our revolution was most in doubt, the father of our nation ordered these words to be read to the people:

"Let it be told to the future world...that in the depth of winter, when nothing but hope and virtue could survive... that the city and the country, alarmed at one common danger, came forth to meet [it]."

America: In the face of our common dangers, in this winter of our hardship, let us remember these timeless words. With hope and virtue, let us brave once more the icy currents, and endure what storms may come. Let it be said by our children's children that when we were tested we refused to let this journey end, that we did not turn back nor did we falter; and with eyes fixed on the horizon and God's grace upon us, we carried forth that great gift of freedom and delivered it safely to future generations.

Thank you. God bless you. And God bless the United States of America. (Applause.)

One Trillion Dollar Deal

JAN 18 - One. Trillion. Dollars. That’s how much money Barack Obama says is needed to kick-start the economy. How he spends it could determine the fate of his presidency.

John Maynard Keynes, the trendiest dead economist of this apocalyptic moment, was the godfather of government stimulus. Keynes had the radical idea that throwing money at recessions through aggressive deficit spending would resuscitate flatlined economies – and he wasn’t too particular about where the money was thrown. In the depths of the

Depression, he suggested that the Treasury could “fill old bottles with banknotes, bury them at suitable depths in disused coal mines” then sit back and watch a money-mining boom create jobs and prosperity.

“It would, indeed, be more sensible to build houses and the like,” he wrote, but “the above would be better than nothing.”

As President-elect Barack Obama prepares to throw money at the current downturn – a stimulus package starting at about $800 billion, plus the second $350 billion chunk of the financial bailout – we all really do seem to be Keynesians now. Just about every expert agrees that pumping $1 trillion into a moribund economy will rev up the ethereal goods-and-services engine that Keynes called “aggregate demand” and stimulate at least some short-term activity, even if it is all wasted on money pits.

But Keynes was also right that there would be more sensible ways to spend it. There would also be less sensible ways to spend it.

A trillion dollars’ worth of bad ideas – sprawl-inducing highways and bridges to nowhere, ethanol plants and pipelines that accelerate global warming, tax breaks for over-leveraged McMansion builders and burdensome new long-term federal entitlements – would be worse than mere waste. It would be smarter to buy every American an iPod, a set of Ginsu knives and 600 Subway foot-longs.

It would be smarter still to throw all that money at things we need to do anyway, which is the goal of Obama’s upcoming American Recovery and Reinvestment Plan.

It will include a mix of tax cuts, aid to beleaguered state and local governments, and spending to address needs ranging from food stamps to computerised health records to bridge repairs to broadband networks to energy-efficiency retrofits, all designed to save or create 3 million to 4 million jobs by the end of 2010.

Obama has said speed is his top priority because the faster Washington injects cash into the financial bloodstream, the better it stands to help avert a multi-year slump with double-digit unemployment and deflation.

But he also wants to use the stimulus to advance his long-term priorities: reducing energy use and carbon emissions, cutting middle-class taxes, upgrading neglected infrastructure, reining in health-care costs and eventually reducing the budget deficits that exploded under George W. Bush.

Obama’s goal is to exploit this crisis in the best sense of the word, to start pursuing his vision of a greener, fairer, more competitive, more sustainable economy.

Unfortunately, while 21st century Washington has demonstrated an impressive ability to spend money quickly, it has yet to prove that it can spend money wisely. And the chum of a 1 with 12 zeros is already creating a feeding frenzy for the ages.

Lobbyists for shoe companies, zoos, catfish farmers, mall owners, airlines, public broadcasters, car dealers and everyone else who can afford their retainers are lining up for a piece of the stimulus. States that embarked on raucous spending and tax-cutting sprees when they were flush are begging for bailouts now that they’re broke.

And politicians are dusting off their unfunded mobster museums, waterslides and other pet projects for rebranding as shovel-ready infrastructure investments.

As Obama’s aides scramble to assemble something effective and transformative as well as politically achievable, they acknowledge the tension between his desires for speed and reform.

“We’re living that tension every day,” an adviser tells TIME.

In this four-alarm economic emergency (nearly 2 million jobs have vanished in four months), it’s easy to forget that shovel-ready doesn’t necessarily mean shovel-worthy. Many projects are shovel-ready now only because they failed to clear the spectacularly low bar Congress set for pork in the past.

Even if we’re freaking out about today – and we should be – we can’t afford to leverage tomorrow to build the infrastructure equivalent of buried banknotes, not when the deficit is a record $1.2 trillion and the debt a staggering $10.6 trillion.

A depression would make both problems worse – tax revenues plunge when incomes plunge – but every public dollar we spend on depression avoidance also plunges us deeper into our hole.

It’s a bit galling to hear Republican leaders warn that Obama wants to spend money borrowed from our children when their own appetite for pork and tax breaks helped double the debt during the Bush years, but their hypocrisy does not make them wrong. If we’re going to spring for another trillion, we need real returns on our investment.

That will require more than speedy spending. It will require a quick overhaul of Washington’s spending priorities and spending processes. In other words, speedy reform.


Not just a deal – a New Deal

Obama hasn’t yet released details of his plan, so the debate has so far focused on the overall dollar amount (liberals want more, conservatives less) and general makeup (liberals want fewer tax cuts, conservatives more) rather than specific strategies for priming the pump.

But the clichés are true: God – or the devil – will be in the details.

For example, if you want to upgrade infrastructure, there’s a big difference between fixing and building. When you fix a road, the dollars you spend reduce your need for future road repairs. When you build a road, you increase your need for future road repairs. Repairs are also quicker to get moving than new construction, and the Federal Highway Administration has calculated that repairs create 9% more jobs per dollar spent.

And while repairs eliminate potholes and other problems that cost motorists time and money, new construction tends to produce rural or exurban sprawl roads that promote speculative development, overstretch municipal services, lengthen commutes and increase gasoline consumption and emissions.

Of course, bike lanes, electric buses and light-rail extensions are even more efficient than road repairs when it comes to fighting global warming, volatile gas prices and our addiction to foreign oil; transit projects also create 9% more jobs.

Then again, transit projects like high-speed rail lines and subway stations tend to take more time to build than roads or repairs.

And while a recent study calculated that the average dollar spent on infrastructure ricochets into $1.59 worth of short-term growth – a bit better than aid to states or broad-based tax cuts and a lot better than tax cuts for businesses or investors – increasing food-stamp or unemployment benefits packs even more bang for the buck.

The point is, specifics really matter. And when specifics get left to Congress and the states, they tend to get screwed up. Politicians love to cut ribbons for new roads; repairs don’t have the same bringing-home-the-bacon oomph.

Most state transportation departments have become virtual asphalt factories, and most states have laws preventing the use of federal transportation dollars for anything but roads.

Yet Congress keeps writing the states blank checks, lavishing the most cash on the ones

that do the most driving and paving, actually mandating that federal officials “shall in no way infringe on the sovereign rights of the states to determine which projects shall be federally financed.” It’s our money, their choices.

The result is that Congress does a terrific job of spreading dollars around the country like peanut butter but a lousy job of identifying or promoting national priorities.

“There’s no performance measures, no environmental or economic analysis,” says the Brookings Institution’s Robert Puentes. “It’s just about dividing up the spoils.”

That’s one reason our critical infrastructure is in such critical condition. It’s crazy to pretend that all airports are equally deserving of renovation funds when New York City and Chicago have the worst bottlenecks.

We shouldn’t even think about new bridges in rural Alaska or rural anywhere when a quarter of our existing bridges are structurally deficient.

Before Hurricane Katrina, the Army Corps of Engineers spent more money in Louisiana than in any other state – most of it on useless and destructive navigation projects with influential godfathers in Congress – but it never completed those levees around New Orleans. Now the stimulus could include forward-looking efforts to help rebuild the city’s natural and man-made defences – or more-of-the-same projects that would increase the risk of another expensive as well as tragic catastrophe. It will depend on who is calling the shots.

Obama cannot expect to handpick every item that ends up in the stimulus. Even the New Deal required a deal. But the New Deal was also new. And it’s folly to expect the same dysfunctional spending habits that got us into this mess to get us out of it.


The Way Out

It’s not that speed and size aren’t important. We’re in a death spiral: businesses are shedding workers at a record pace, which saps consumer spending, which leads to more layoffs, and so on. The public sector needs to get an awful lot of unemployed workers and equipment back to work ASAP.

As Christina Romer, an expert on the Depression who will chair Obama’s Council of Economic Advisers, warns in a new YouTube video, we can’t “let that vicious cycle go all the way to the nightmare scenario.”

In fact, many Keynesian liberals have been dismissing the Obama proposal as overly timid, and Obama has suggested it could grow.

But it’s hard to spend a trillion dollars in a hurry if you don’t want to buy stupid stuff. “We keep hearing we need to spend more. On what?” a transition aide asked. Obama’s latest economic report predicted at least three more years of fairly high unemployment even if the stimulus succeeds, so speed can’t be the only criterion.

Democrat Jim Oberstar of Minnesota, chairman of the House Committee on Transportation and Infrastructure, has suggested that shovel-ready should apply to projects that can begin within a year, not just 90 days. This would give a real boost to mass transit; a two-year window would leave even more time to make thoughtful decisions. But if Congress decides that big and fast are all that matters, get ready for a legislative version of Brewster’s Millions.

The prospect of a haphazard stimulus exploding the national debt is scary too – partly because we paid $450 billion in interest last year, rivalling what we spent on Medicare, and partly because our liabilities could crush us if foreign investors sour on Treasury bonds.

That’s why Obama’s advisers want to focus on temporary initiatives that won’t drown us in red ink by creating long-term obligations, which they call tails. It would be nice to give cash-strapped transit agencies enough money to reduce fares for a year, but what happens when the year is over?

Similarly, some liberals have proposed temporary increases in Social Security benefits, but that kind of generosity tends to become permanent.

On the other hand, some initiatives have negative tails – spending money now saves it later. That’s one reason Obama is so keen on energy efficiency; retrofitting 75% of federal buildings would curb emissions and set a powerful example as well as slash government energy costs for years to come.

Obama also wants to invest in computerising health records, which would cost tens of billions up front but could save hundreds of billions in government health costs. “At some point, we’ve got to start turning this around,” says Democratic Congressman Ron Kind of Wisconsin, who wants the stimulus to create a new commission on US liabilities. “We can’t keep borrowing against our children’s future.”

But the most important stimulus principle will be change. Obama campaigned for it and won a mandate to pursue it. If he can make sure every initiative promotes his top priorities – reducing our dependence on fossil fuels, investing in our future competitiveness and rebalancing our economic playing field in a way Joe the Plumber would call spreading the wealth – the stimulus can succeed even if it fails to stimulate.


How to Get Smart

So where should the money go? And how can we make sure it gets there? In all three elements of Obama’s plan, there is great promise as well as potential pitfalls.

The first element will be giving money to state and local governments to offset their shortfalls and prevent them from raising taxes, slashing services and downsizing public employees. Just about every economist wants this aid approved yesterday because just as public dollars can have a big multiplier effect, public cuts that are imminent in New York, California and Florida can have a negative multiplier effect.

“You can’t let the safety net unravel just when people need it most,” says Len Burman, director of the nonpartisan Tax Policy Center. “A lot of states have been terribly irresponsible, but this probably isn’t the best time to teach them a lesson.”

But when will there be a better time? We should bail out the public sector, but only with serious strings attached; otherwise, we’ll repeat the bailout of the financial sector, which pocketed the federal handouts and kept doing whatever it pleased. Bailouts should be reserved for states and communities facing the most drastic contractions – and even

those shouldn’t be rewarded for frittering away surpluses on sunny-day tax cuts and race-to-the-bottom subsidies designed to lure out-of-state businesses. States shouldn’t be rewarded for keeping their fiscal houses in order by stiffing Medicaid programs either.

Obama’s team has proposed increasing the federal share of Medicaid in exchange for assurances that states won’t knock more families off their rolls. And his advisers hope to direct the aid where it’s needed most – a tough sell in the Senate, where every state has equal power.

But Obama should drive a hard bargain. He could provide more aid to states that promote energy efficiency through building codes and incentives for utilities. He could funnel aid directly to transit agencies and metropolitan governments, which tend to be more progressive than states.

He could take Senate minority leader Mitch McConnell’s advice and give loans instead of grants, which would both help the Treasury down the road and encourage states to make wise investments. He could require states that receive bailouts to promote wind and solar, expand health coverage or buy fuel-efficient police cars.

If they don’t want to, they don’t have to take handouts. The bottom line should be: federal money, federal priorities.

Obama’s second strategy will be giving money to people – through tax cuts as well as food stamps, jobless benefits and health care for the unemployed. Direct transfers are the fastest way to ship money out of the Treasury, but they don’t provide stimulus if they don’t get spent.

That’s what happened last year to a $168 billion stimulus package that relied on income tax rebates – remember when $168 billion was a big deal? – but foundered when many recipients hoarded the cash or paid down credit card debt. It turns out that smart personal-finance decisions make for a lousy stimulus.

It also turns out that the best way to boost the economy by giving away money is to give it to people who can’t afford to save it. That’s why food stamps work so well as a stimulus. And that’s why Obama is pushing a permanent $500-per-person credit on payroll taxes for every worker making less than $200,000 a year. But his rationale for broad-based relief goes beyond stimulus: he has repeatedly promised a fairer tax code that would make work pay for everyone, and this might be his last chance to play with an extra $1 trillion.

The main downside of tax cuts and benefit increases will be their tails; pity the politician who tries to taketh away what he’s already giveth.

That’s why the best test of any cash stimulus will be whether it makes sense on its merits. Obama’s aides have already dropped a proposal to give businesses a $3,000 credit for every job they create – an invitation to game the system. But payroll-tax relief will reward work and put money in the hands of the people who need it most. And there’s no time like the present.

The rest of Obama’s stimulus will be New Deal – style government spending on needed goods and services, often with modern twists. That means smart meters and weatherization programs to prevent wasting energy; transmission lines and solar panels to promote alternative energy; green school buildings and sewage-treatment plants; wetlands restoration in the Everglades and coastal Louisiana; repairs for aging dams, bridges and airports – plus broadband networks, research, job training and, as Obama

has suggested, anything else that seems like a good idea. This is an ideal time for the government to spend money on infrastructure, because labour and equipment are cheap. And improving our shameful infrastructure will improve our competitiveness.

The ideal focus of infrastructure spending would be green projects that help reduce our addiction to fossil fuels, but there’s only so much of that ready to go.

Nathaniel Keohane of the Environmental Defence Fund started ticking off his wish list in an interview: $1 billion for homeowners to install energy-efficient windows, $750 million for truckers to use fuel-efficient equipment, $600 million for smart boiler controls.

“Still $998 billion to go,” he said with a sigh. “Really, I spent time on this, and it’s a reach to get to $100 billion.”

Obama and his team are starting to sound irked by demands for more. Why retrofit only 75% of federal buildings? Uh, it’s not exactly cost-effective to retrofit a particle accelerator. What about more high-speed rail? Wonderful, if there were more projects ready to go. Why stop at weatherising 2 million homes? Sorry, there are only so many guys who know how to use caulk guns.

It will be tempting for Obama to let Congress and the states fill the gaps with their own wish lists. But as Obama adviser Larry Summers has warned, a poorly designed stimulus “can have worse side effects than the disease that is to be cured.”

Handouts for clean coal, ethanol and other misguided energy technologies would be worse than inaction. With apologies to Keynes, incentives to “build houses and the like” could help inflate the same bubble that burst last year.

And infrastructure spending has been one area where Congress has consistently exhibited an impressive bipartisan determination to do the wrong thing.

These days, House Transportation and Infrastructure chairman Oberstar is flacking a Rebuild America plan that pays new respect to transit, but it still puts highways first; you can’t expect too much reform from a guy who’s served as a staffer or member of Capitol Hill’s prime pork committee since 1963, a guy who earmarked a $3 million highway in the last transportation bill to relieve the notorious congestion between County Road 565 in Hoyt Lakes, Minn., and the intersection of Highways 21 and 70 in Babbitt. Meanwhile, states like Alabama, Kansas and Texas have been releasing lists of shovel-ready transportation projects that are dramatically skewed toward out-of-the-way sprawl roads. Missouri’s list was all roads, none of them in St. Louis. Obama has vowed to reject earmarks, but if Congress simply passes cash to the states according to the usual formulas – and it will unless Obama intervenes – America is in for yet another festival of asphalt. There is even talk of waiving the regular cost-sharing requirements for local and state governments, an excellent way to make sure they green-light oinkers they would never pay for themselves.

The obvious solution would be some kind of independent arbiter to establish performance measures and evaluate stimulus projects for timeliness and tails as well as competitiveness and carbon.

During his campaign, Obama proposed an infrastructure bank that wouldn’t finance projects that don’t produce economic or environmental returns. But Oberstar hasn’t put in 45 years just to cede power to a commission.

“It’s like turning around a battleship,” Puentes says. “And we just don’t have the time.”


The Psychology of Stimulus

So the scramble is on. The big splash water park – complete with a gym and “quality meeting space” – might sound like a waste of $22 million, but it would provide a nice stimulus for the people of Gastonia, N.C.

The travel industry wants a $10 million loan to promote the US as a destination, a tougher job these days. To the American Apparel & Footwear Association, this crisis only highlights the need to eliminate import tariffs on shoes.

“Building self-esteem is critical,” explains Matt Rubel, CEO of the parent company of Payless, “and not having a new pair of shoes – you know, having a pair that’s tattered and doesn’t fit – that does not create good self-esteem.”

Let’s face it: fiscal stimulus is a frustratingly inexact science. Nobody knows precisely what it will do in the short term, and in the long term, it isn’t that different from any other government spending, except that the point of the spending can be the spending itself. As always, there will be winners and losers; it’s impossible to stimulate everyone equally.

In two years, if the recession is over, sceptics will claim it would have ended regardless of the stimulus.

If it lingers, proponents will credit the stimulus for preventing a drearier outcome. As with the first round of the financial bailout, its most important short-term effect will probably be psychological, calming markets by sending a message of government engagement.

It will be an expensive message, and we’ll be paying for it for a long time. Obama can’t control how markets or employers react, but he can use the opportunity to start keeping promises and start moving the country away from dirty energy, crumbling infrastructure and economic inequality.

If he trades those goals for size and speed, he’ll blow a unique chance to chart a new direction. He doesn’t need to beg Congress to spend; that’s like begging Cookie Monster to eat. He needs to take a stand: No money without reform.

That won’t just rebuild consumer confidence; it will rebuild citizen confidence too. As the shoe guy said, at a time like this, self-esteem is critical. – TIME

Clear Victory For Pakatan Rakyat

KUALA LUMPUR, Jan 18 – Malaysia’s opposition today hailed a victory in a parliamentary by-election, declaring it showed strengthening support for its campaign to topple the government nearly a year after landmark national polls.

Opposition leaders and analysts also said Saturday’s win by Pas in Kuala Terengganu was a vote of no-confidence for Deputy Prime Minister Najib Razak, just three months before he takes over as premier.

The Islamic party, which is part of a three-member opposition alliance led by former Deputy Prime Minister Anwar Ibrahim, defeated the National Front coalition with a significant majority of 2,631 votes, the Election Commission said.

This reversed the government’s 628 majority in general elections last March. The seat fell vacant after the incumbent, a National Front member, died in November.

Anwar said the victory, which increased opposition seats in Parliament to 83, showed momentum for political reform had gained strength, after his People’s Alliance won a third of parliamentary seats and control of five states in national polls last year.

“The victory is proof that the people are still thirsty for change,” he said in a statement.

The by-election results will not change the National Front’s control of Parliament, where it still has a comfortable majority.

But Saturday’s defeat nevertheless dealt a blow to the government, which had hoped to recapture support after its losses last year.

It was the second consecutive electoral loss after Anwar won a by-election in September to return to Parliament as opposition leader after a 10-year enforced absence.

“The results are disastrous for Najib. This was a battle between an incoming prime minister, Najib, and a wannabe prime minister, Anwar. Najib will be much weaker when he takes power,” said James Chin, a political science professor at Monash University in Malaysia.

Najib has played down the importance of the by-election.

“This is a setback for us ... (but) we will not be disheartened by this result,” he said late Saturday.

Barisan Nasional will do some soul-searching and accept the defeat as a signal that it has to change, he added.

Barisan’s popularity plunged last year amid growing complaints by ethnic Chinese and Indian minorities of racial discrimination.

Many ethnic Malays also backed the opposition in general elections last March because of dissatisfaction with rising prices, corruption and crime.

Chin said Saturday’s results marked a personal victory for Anwar, who sought last year to seize power through defections but failed to get any lawmakers to switch sides.

“Anwar’s star is still rising. It shows voters still support his reform agenda,” he said.

Anwar has promised his government would be corruption-free and treat all races equally. He pledged to do away with an affirmative action program for Malays and abolish a law that allows detention without trial. – AP

Easy Loan For Grads Doing Business

KUALA LUMPUR, MALAYSIA: Malaysian university graduates this year may be offered loans without the need for guarantors or collateral.

Easy credit? No, just the government’s way of preparing for an expected shrinkage of jobs as the full impact of the global economic crisis makes itself felt in Malaysia.

Entrepreneur and Cooperatives Development Minister Noh Omar said on Dec 17 last year that the government was considering giving unsecured loans to graduates who want to start small businesses.

On top of that, the government has also set up a RM70 million (S$29 million) fund to retrain unemployed graduates. Human Resources Minister S. Subramaniam said recently that they will be taught skills such as communication, English language and creative thinking.

The government is gearing up for hard times this year, and hurrying to get safety nets in place as the economy shrinks. The political fallout from joblessness can be huge, as Malaysians are unused to high unemployment rates.

The government took a big hit last year when voters punished it for its apparent ineptitude in handling spiralling inflation at that time.

This year, unemployment will be its big test.

Malaysia’s 52 public and private universities and colleges produce 145,000 graduates and diploma holders annually, while several thousands more come back with overseas qualifications.

Even in good years, thousands of graduates struggle to get the white-collar jobs that they want.

For some like Ms Hajahfarhana Tarnudi, 23, starting a business could be the very thing she needs, having given up looking for a suitable job.

The journalism graduate from Universiti Teknologi Mara gave up her dream of working as a reporter after her parents objected, but could not find any alternative career. She now plans to plant chillies on a big scale.

‘My parents don’t like me being a journalist, so I thought why not start a business?’ she said. ‘Chillies are expensive these days and not many young people are willing to go into agriculture, which can be big business.’

Ms Hajahfarhana, however, does not plan to take up a government loan, as she can get help from her parents.

But while some graduates may grab the easy business loans that the government is planning to offer, others are still determined to find more traditional employment.

‘The programme is good for those who want to be young entrepreneurs but personally, I think it is better to work first before starting a business,’ said Universiti Tunku Abdul Rahman graduate Renu Gnana Pragasam, 24, who knew about the unsecured government loans but was not interested in starting a business.

Likewise, Ms Sri Shalini Devi Veeraya, 24, said she would still look for the ‘right’ job.

Her job-hunting experience was similar to that of many fresh graduates around Malaysia.

The industrial chemistry graduate from local Universiti Malaysia Sabah spent no less than four months hunting for the right job, sending her resume to at least 100 companies.

Only about 10 per cent responded, she lamented.

‘I went through a very difficult time and it is not easy to look for the ideal job that suits my degree,’ she said.

Fortunately, she managed to find a job recently in an oil and gas company in Kuala Lumpur.

But graduates are only one part of the picture. Millions more Malaysians are employed in lower-level jobs, and these are the jobs that are now at the highest risk.

The manufacturing sector, which employs 10 per cent of Malaysia’s 11 million workers, is expected to be hard-hit this year, as its biggest markets are the United States and Europe.

So far, job losses have been minimal, but the figures could spike in the first quarter. There are already reports of lower manufacturing output, fewer orders and factories cutting back on production.

Workers in Penang factories - the hub of Malaysia’s electronics industry - have already been asked to take long vacations or work fewer days as production lines shut down.

‘So far, retrenchments are low, but we should not be complacent,’ Malaysian Trade Union Congress (MTUC) president Syed Shahir Syed Mohamud told The Straits Times.

Mr Subramaniam, the Human Resources Minister, said last month that more than 4,700 workers will be retrenched in the next three months. These include 1,500 workers from Western Digital, an American hard disk manufacturer that closed down its plant in Kuching.

In the 1998 downturn, about 80,000 Malaysians were retrenched.

The Malaysian Institute of Economic Research recently warned that the unemployment rate may rise to 4.5 per cent, compared to 3.5 per cent last year.

‘The electrical and electronics sector in particular is very vulnerable,’ its executive director Mohamed Ariff Abdul Kareem said recently.

Malaysia is hoping to save jobs for its citizens by sending home foreign workers who comprise a third of its workforce. It has also allocated RM300 million to upgrade workers’ skills.

Mr Syed Shahir is, however, pushing the government to do more to meet retrenched workers’ pressing needs. He said the retrenchment benefits stipulated by law are inadequate.

‘We are asking the government to expedite a retrenchment fund. It’s not dole, but support for them until they can find a job,’ he said.

The MTUC has been pushing for this for years, though without much success as the government is strenuously opposed to what may appear to be dole.

But this year, the job imbalance is likely to become more stark: While Malaysia employs three million foreign workers, thousands of its graduates struggle to find a job.

The only survey available was done about three years ago, and it found that about 25,000 graduates were jobless as they lacked both technical and soft skills, and had a poor command of the English language. As they were mostly Malay, the situation was exacerbated by job seekers’ claims of discrimination by the largely non-Malay private sector.

This could put greater pressure on the government as an employer. Every year, thousands flock to the civil service for jobs. At one time - when the government still provided this data - figures showed that sometimes, there were more than 10,000 applicants for a single white-collar civil service position.

Over the years, the government has absorbed so many workers that its staff strength grew from 800,000 to 1.2 million. It may not be able to hire more people in a downturn.

For some graduates, the dearth of jobs has meant giving up their dream jobs.

Universiti Teknologi Mara graduate Nuraingnee Ya, 24, from Kelantan, for instance, found herself taking up odd jobs, working in fast-food outlets and customer service centres.

Instead of putting her journalism degree to use, she had to resort to using her Form Five qualification - equivalent to a Secondary 4 education in Singapore - to land a job.

‘Several employers told me they would rather hire me on Form Five qualification so they don’t have to pay me a graduate’s salary,’ she recalled. ‘So I had no choice because if I were to be picky, I would be jobless.’

PAS Predict Victory In KT by-election

KUALA TERENGGANU, Jan 16 — Barely 24 hours before polling day in the crucial Kuala Terengganu by-election, Pas for the first time declared that the party was leading in a close race, but remained cautious that its opponent Barisan Nasional (BN) may resort to what it calls dirty tactics.

“We will win, comfortably, unless something big happens tonight. That is why we are taking extra precaution. If something happens beyond our control, it may tilt the balance,” said the Islamist party election operation director Datuk Wan Mutalib Embong.

He told reporters today that the party has mobilised central party leaders to work with state leaders in every polling station tomorrow as it suspects “phantom voters” may turn up at the polling stations tomorrow.

The Terengganu Pas deputy chief however said the party would ensure all party officials comply with the laws and promised that there would be no disorderly conduct on polling day.

“We are very mature; I already told them to behave well,” said the Ladang assemblyman.

“We have compiled a list of postal voters, and if they don't carry civilian’s identifications tomorrow to vote, we would be prepared to stop them, so I urged the phantom voters to think twice before coming to the polling stations,” said Wan Mutalib, insisting that he was not making a wild allegation.

“This is our suspicion,” he added, claiming that BN was desperate and has to resort to dirty tactics to win the election.

On the resignation of the returning officer Datuk Mat Razali Kasim yesterday, Wan Mutalib said he was glad with the Kuala Terengganu Mayor’s withdrawal, but was non committal when asked about the replacement, Wan Mustafa Wan Hassan.

Wan Mutalib added that the party would decide later today whether to oppose the appointment of the Kuala Terengganu City Council Secretary as the returning officer.

“I do not know the real reasons behind the resignation, but it is clear that we have made our objections,” said Wan Mutalib.

The party had accused Razali of campaigning for BN candidate Datuk Wan Ahmad Farid Salleh at an assembly of City Council staff.

Language Debate In Malaysia

KUALA LUMPUR, Jan 16 - The English debate is raging again in Malaysia - in all the country's languages.

Six years after Malaysian schools first began using English exclusively to teach maths and science, some race-based interest groups are demanding a return to the old ways.

The policy, referred to as PPSMI, was introduced by former premier Mahathir Mohamad in 2003 to arrest the decline in English standards, but many objected vehemently from the start.

Before 2003, the two subjects had been taught in Malay in national schools, and in Chinese and Tamil in vernacular schools.

The issue is being revisited following the roundtable talks held by the Education Ministry on it last year, from July to December.

Some groups said PPSMI erodes their respective languages and cultures. And politicians fear that if they support it, they will lose the support of the many rural Malaysians who say their children cannot cope with English.

On Monday, the five states under opposition coalition Pakatan Rakyat united against the policy. PPSMI had dealt a blow to the "sanctity of Malay", its executive council members in charge of education said.

On the same day, opposition leader Anwar Ibrahim spoke out against the policy on his blog. The importance given to English showed that "after half-a-century of independence, the narrow-minded colonial mentality still haunts us", he wrote.

Barisan Nasional member parties - such as the Malaysian Chinese Association, Gerakan and the Malaysian Indian Congress - have also been calling for a return to the mother tongue.

Joining them are groups such as Chinese educationists Dong Jiao Zong (DJZ) and the Federation of Malay Writers Associations (Gapena).

On Feb 15, Gapena plans to organise a protest in KL dubbed the 152 Rally after Article 152 of the federal constitution, which holds that Malay is the official language.

Eight Chinese associations, including DJZ, have urged the government to abolish the policy.

Otherwise, they say they will take part in protests held by the Malay organisations.

Community opponents of the policy have been waiting for this day. It was pushed through over their objections, with the government insisting that dissenters wait for the first batch of primary school pupils to finish six years of studies under this system before passing judgment.

Last year, the six years were up. In December, the keenly awaited results of the UPSR - the equivalent of Singapore"s PSLE - were announced.

But nothing was resolved, because the figures were interpreted differently by opposing camps.

"The Education Ministry says the results are better. We beg to differ," a Gapena spokesman told The Straits Times.

The ministry noted a surge in the number of pupils who chose to do this year"s maths and science papers in English - they could have done them in Chinese, Tamil or a mix of the languages - as a sign the policy was working. The number who opted to sit for the exams in English shot up by
200 times for maths and 100 times for science.

Education director-general Alimuddin Dom also told reporters that the trend was positive. Pupils were doing "marginally better" in maths and science, and showing a "big improvement" in English.

But Chinese educationists note that many students in vernacular schools still chose to answer maths and science papers in their mother tongue - almost 40 per cent in Tamil schools and nearly 98 per cent in Chinese schools.

Bumiputra Participation Coordination Unit acting director Zainal Abidin Che Omar singled out PPSMI as a possible reason for the drop in the number of Malay pupils scoring 5As, down 16 per cent last year compared with 2007.

Still, the policy has a quietly supportive group - the urban crowd.

Families in cities have more access to English-language materials than those in the countryside and are thus better equipped to help their children learn. Like Tun Dr Mahathir, they feel improving English is a step in the right direction.

Take part-time tutor Stephen Arokiasamy, who finds no validity in the argument that using the mother tongue helps preserve a community"s culture.

"Look at the Punjabi community. The language didn"t die although there is no such thing as Punjabi schools," the 50-year-old told The Straits Times. "This is because the community has such great love for its culture and language."

Last month, Mr Wong Chun Wai, the group chief editor of The Star daily, urged these moderate voices to speak up. In his blog, he noted that groups opposing the policy "claim to represent their respective communities but...many of us do not share the strong-arm tactics of these
groups".

Still, groups such as Gapena do not think their demands are unreasonable. They feel that if the government wants to raise English standards, it should increase English lessons, not use the language to teach other subjects. "By insisting on English, you turn kids off not only English,
but also maths and science," Gapena"s spokesman said.

The decision is out of their hands. Going forward, there are several choices: revert to the old system, stick with PPSMI or tweak it.

The policy is set to stay put for at least another year. Changes, if any, will not be implemented till next year at the earliest, officials have said.

Deputy Education Minister Wee Ka Siong said last week the ministry had considered many views and the decision would now rest with the Cabinet.
He added he expected a decision soon.

Education Minister Hishammuddin Hussein also stood firm, saying the push by various groups to scrap the policy would not affect the Cabinet's decision. He said "the ministry will not budge", adding "the decision depends on the views of all quarters - not just certain groups". - Straits Times