President-elect Obama this morning laid out a plan to create jobs mainly by building and repairing roads, bridges, and schools. The emphasis on creating jobs in the short run is important, but the focus of the work they do is equally important. There is no economic benefit in having huge numbers of people out of work. Even economists who subscribe to the discredited notion of a natural level of unemployment would hesitate to defend the current 7 percent unemployment rate. But there is not much economic benefit in make-work either. A jobs program does not provide any economic recovery in itself, so it is important that the work it does creates a platform for economic recovery. In other words, it has to be an investment with an immediate return, saving time, reducing costs, reducing risks, or improving productivity.
Building and repairing roads, bridges, and schools does that, assuming the projects are sensibly chosen. In some schools, simple improvements in the walls and lighting can allow students to learn 10 percent faster, just because they can see and hear a little better. That’s the kind of improvement in productivity a good jobs program can make. A bridge-building project that eliminates a 20-minute rush hour delay can give thousands of people an extra four hours a week to do something constructive. Again, it’s an immediate improvement that takes place as soon as the work is done. These are investments we should have been making all along; now, we really need to.
Productivity, or giving people a way to get more done, is what gets a country out of a depression. The current recession has some of the dynamic of a depression, and there is a risk that a depression could occur, so a jobs program ought to be the kind could overcome a depression.
Obama also mentioned solar panels and electric cars. These are also a good choice for a jobs program, and for a different reason. They reduce the United States’ need to import energy. Imports are the main reason the national economy is out of whack, and energy is about half of all imports, so the economy cannot be brought into balance until the energy deficit is reduced. Again, solar panels and electric cars start to pay back as soon as they are built and put into use. There is an immediate return on the investment.
I emphasize this idea of an immediate return on investment because that was one of the failures of the jobs programs of the Great Depression. Many of those programs focused more on long-term rewards because economists at that time thought that the work itself was what would pull the economy out of the depression. The depression did not end until after enough accidental improvements in productivity occurred. Even today, despite the risk of a depression, many people are calling for more stimulus for the economy. But economic stimulus now is like pushing a car because its engine has broken down. Pushing rewards you with a kind of movement, so it seems like it is doing something, but if you are not pushing the car into a repair shop, no one should expect it to get the car running again.