Hypothetical Mean

Commentary from an Actuarial and Economic Perspective

This is how we are going to save the economy?

with one comment

Like Cowen, I’m confused and disappointed about Obama’s economic stimulus plan (from Calculated Risk).  To expand on Cowen, here’s how I read his objectives:

1) Increase the share of energy-efficient technologies purchased by government.  Given the supply difficulties in the solar panel market, (here’s just one example), it’s hard for me to see how increased government purchases in that sector will act as an efficient stimulus;

2) Decrease the cost of using carbon-based transportation by building new roads (and repairing old ones).  Setting aside the direct carbon costs of laying tons of new concrete, one has to question his goal of “millions” of job creation.  Using an estimate of 35,000 jobs per $1.25b in federal expenditures (from this FHWA study) plus a 20% state match, that means that a total of $43b (federal + state) is required to “support” one million jobs.  Notice also that the FHWA explicitly says that these jobs are NOT created, but just supported.  Lastly, the FHWA suggests that only 27% of projects are spent in the first year, suggesting that you’d need more than $160b to “support” one million jobs in the first year alone.

3) Purchase thousands of new computers and repair thousands of new schools.  Again, is the computer industry in crisis?  I can only imagine the bureaucracy associated with applying for new school renovations.  Such a construction stimulus might begin to be effective in time for the 2012 Presidential run, I suppose.

4) Increase broadband adoption.  I’ll pass on this other than to again ask: does Cisco need our help, too?

5)  Reduce administrative salaries in the healthcare sector via electronic medical records.  Obama, physician office assistants are people, too.  How does taking their jobs away qualify as “stimulus”, no matter how much you good you think will come of it.  And are you absolutely sure doctors will be able to cut staff after you’ve mandated the filing of government mandated electronic forms?  Remember the 1996 HIPAA claim form simplifications that were going to accomplish the same thing.  How will this differ?

And how in the heck do any of these get us out of our current mess?

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Written by Victor

December 8, 2008 at 2:05 am

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