Comments on my January 20 column suggest that the $825 billion Obama stimulus plan is an uneconomic bailout, and that more accountability is needed to administer federal spending programs. I agree heartily with the latter proposition and dispute the former. We need accountability, but stimulus does not equal bailout.
Accountability: Federal funds -- like private monies -- need to be disbursed according to clear guidelines and strict audit protocols are always warranted. Whistleblower protections are helpful, too. While I've grown skeptical of institutions and enterprises promising to be transparent -- transparency was allegedly a hallmark of the subprime mortgage industry and related securitizations -- the stimulus package now under consideration contains strong public reporting provisions, reasonably robust audit requirements, a watchdog board and protection for whistleblowers. These aspects of the stimulus package augur well for accountability.
Stimulus versus bailout: Is the stimulus plan an uneconomic bailout, as comments on my January 20 column argue? I'd counter that the stimulus package provides federal dollars to purchase needed goods and services, many of them green. Do we need the government to step in as purchaser of the last resort? History says yes. The Great Depression did not end until the economy was spurred by military procurement for World War II, which put America's factories and people back to work. And the Obama green stimulus targets would support expenditures deemed desirable by the reader who fears that stimulus equals bailout -- to buy renewable energy and hire sustainability consultants, as well as for numerous other uses. My reader notes that businesses need customers (not a bailout) -- and that's precisely what the new stimulus package would provide.
Economists from across the political spectrum are also calling for a federal stimulus program linked to the creation of green jobs, infrastructure repair and other national priorities. Economist Paul Krugman, a self-described liberal and the winner of the 2008 Nobel Prize in economics, is perhaps best-known for this view, but experts with more conservative credentials are also calling for additional federal spending to pull the economy out of crisis. See this advice from Wharton Business School professors Jeremy Siegel, Nicholas Souleles and Eric Orts: all call for a federal spending program to boost the economy, including programs to support green jobs and alternative energy. (Professor Siegel also has a strong and simple idea for fixing bailout problems: Explicitly require TARP recipients to lend to credit-worthy borrowers. Incredibly, this has not been a condition of previous TARP disbursements. Let's hope that the Obama team implements this fix.)
The economy is drowning. If the private sector had the wherewithal to pull us out of the depths, I'd be all for it. But the only life preserver in sight appears to be the one offered by the federal government. Free market purists might prefer to let the economy sink. I'd rather use the life preserver.
Leanne Tobias is founder and principal of Malachite LLC, an advisory firm that specializes in the development, leasing, management, financing and certification of sustainable or green real estate on a global basis. Write to Leanne about your thoughts on jumpstarting the economy at greenstimulus@malachitellc.com. She'll share the best ideas in future posts.