Obama’s New Old Deal

Barack Obama announced the creation of a massive new public-works program aimed at updating the nation’s infrastructure while creating millions of jobs.  This comes as no surprise, as Obama and Joe Biden talked constantly about resurrecting the least-successful elements of FDR’s New Deal as an answer to the current economic crisis.  The new administration won’t just contain itself to roads, either:

President-elect Barack Obama added sweep and meat to his economic agenda on Saturday, pledging the largest new investment in roads and bridges since President Dwight D. Eisenhower built the Interstate system in the late 1950s, and tying his key initiatives – education, energy, health care –back to jobs in a package that has the makings of a smaller and modern version of FDR’s New Deal marriage of job creation with infrastructure upgrades.

The president-elect also said for the first time that he will “launch the most sweeping effort to modernize and upgrade school buildings that this country has ever seen.”

“We will repair broken schools, make them energy-efficient, and put new computers in our classrooms,” he said in the address.

The president-elect is bringing new elements of his domestic agenda into his economic recovery plan, committing to a path toward giving every American access to an electronic medical record as part of an “economic recovery plan … that won’t just save jobs, it will save lives.”

Obama invokes both FDR and Eisenhower in his new program.  Ike built the interstate highway system in the 1950s as a national-defense measure, which most people forget today.  The grid of north-south and east-west highways and bridges didn’t get built as a jobs program, but as a way to ensure that American military equipment could move rapidly to the borders of the nation in case of attack.  It had the salutory side effect of enhancing mobility for Americans, most of whom only had one generation of car ownership at the time.

The key difference between Ike and Obama is that America could afford that public works project, and its need went further than creating public-sector jobs for political purposes.  We hadn’t sunk ourselves into tens of trillions in future entitlement liabilities or trillions of existing debt from previous public-works projects.  We faced an existential threat from the rise of Communist nations who had already begun invading other nations to expand their sphere of influence.  Eisenhower saw how critical roads and bridges had been in Europe during the war and wanted to ensure that America was prepared for the worst.

Now, with the federal government deep in debt, unwilling to address an entitlement disaster, and throwing hundreds of billions of dollars at private enterprises in a vain attempt to rescue them from their own bad management and labor practices, Obama wants to create a new WPA to renew American infrastructure not because it’s needed as much as Obama needs to ensure his re-election.

The original WPA should serve as an object lesson for us now.  It was bureaucratic, inefficient, and since it served mainly as a work-to-welfare program, had almost no way of disciplining its employees to improve production.  The massive resources it ate could have been much more efficiently utilized by the private sector, which could have produced higher-quality work at a lower price.  That has been the lesson of privatization in infrastructure that we have seen in Minnesota with the St. Anthony Bridge project and the rebuilding of Southern California freeways and overpasses after the 1994 Northridge earthquake.

Furthermore, Obama’s plan falls outside the scope of government in a big way.  The federal government should work on interstate highways and its bridges, and state governments should remain responsible for their transportation infrastructure.  However, it’s not the government’s business to order health-care providers to put medical records on the Internet.  In the first place, many of them already do — mine included — due to pressure from consumers to provide the service.  It didn’t take Obama, a village, or a government bureaucracy to demand it.  Second, some people may not want their medical records on the Internet, which is why my provider has it as an opt-in program.

None of this comes as a great shock, though.  While Obama has given some indications that he doesn’t intend a massive shift to the Left on defense and foreign policy, his economic plans have always favored statism, class warfare, and a striking ignorance of history and reality.  Recreating the WPA and proposing even more massive spending programs in the face of our precarious financial condition and debt load finds its equivalent only perhaps in the apocryphal fiddling of Nero while Rome burned.

Update: Nick Allen says that national debt as a percentage of GDP was significantly higher under Ike than now, but that’s not quite true.  Gross national debt as a percentage of GDP was at 71.3% at the beginning of Ike’s term, but it was a debt mostly due to the costs of World War II and the Korean War, and it was already descending.  By the time Ike proposed the interstate highway system (1956), it had dropped to 63.8%, and by the end of Ike’s term it had declined to 56.1%.

In contrast, our gross national debt to GDP percentage is 67.5% for 2008 and estimated to rise to 69.3% in 2009 before adding this public-works program to the budget for the next four years.  (OMB report, pages 127-128)

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