A Stimulus Package We Can Believe In

President-elect Obama made his campaign about change and promises to do the same with government. One area to start is with the proposed stimulus package.

Already he has said this one will be different. His transition team released a statement yesterday that they were going to ban all earmarks from the proposed stimulus package.

But with the stimulus package having a proposed price tag of around $775 billion, of which approximately $300 billion is in tax breaks for low- and middle-income earners, we also need change in how the money is spent.

In the past, to the extent stimulus packages did more than spur additional consumer demand, they usually included some investments in traditional infrastructure — building or improving roads, bridges and sewers — to create jobs, and quite literally, dig our way out of a recession. Given America’s decaying infrastructure, these projects are also needed today and will help cash-strapped states move forward with projects that have been stalled.

But the fact is that investing in physical infrastructure will not have the same short-term impact on American jobs, or long-term impact on U.S. competitiveness, productivity, and quality of life as a similar investment in our "digital infrastructure."

ITIF released a report today that finds that a $30 billion investment in our IT network infrastructure would create almost 1 million jobs. The report looks at a $10 billion investment in each of three technologies: broadband networks, health IT, and the smart power grid. It finds that by spurring or supporting this level of additional investment would create or retain 498,00 jobs from broadband, 212,000 jobs from health IT, and 239,000 jobs in the smart grid. Approximately 525,000 of these jobs would be in small businesses.

Investing in these IT infrastructures has a number of benefits. For one, IT jobs are generally higher-skill, high-paying jobs from telecommunications line installers, to software engineers, to electric utility workers.

In addition, these types of IT infrastructure enable a whole host of innovations and new industries that a comparable investment in physical infrastructure would not. For example, broadband has spawned entirely new industries — from Internet search to online retail — creating employment not just in the new firms in these industries (e.g. Google, E-Bay) and the new occupations needed to support them (e.g. user interaction designers and online experience managers) but also through jobs created by individuals leveraging or using these technologies and services. To take but one example, Ebay has found that more than 724,000 Americans report that Ebay serves as their primary or secondary source of income. While obviously these are not all full time jobs (though many are), this lone example demonstrates the powerful ability of digital infrastructure to create jobs from this “network effect.” These are new jobs being generated far upstream from the direct jobs associated with the initial investment to lay fiber optic cable, purchase hardware, or develop new software that supports health IT or a smart electric grid and the ensuing indirect and induced jobs.

Finally, these technologies are transformative — that is they have the potential to fundamentally improve our society. Take the smart grid. Modernizing our grid infrastructure with sensors and two-way communication will not only allow utilities to generate and distribute energy more efficiently and reliably, it will allow widespread use of new technologies like plug-in hybrid electric vehicles, commercial energy storage, and residential solar generators. It will also time-of-use pricing which will create new demand for smart appliances that not only use energy more efficiently, but also they will use it more intelligently.

President-elect Obama has promised to do things differently in Washington. Let’s start with new ideas for a stimulus package.