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The jobs jolt: According to the administration’s economic analysis, the stimulus bill will result in more than three million jobs over the next two years. Last year, the Information Technology and Innovation Foundation predicted that a $30 billion investment in digital infrastructure would mean nearly a million jobs. Its analysis assumed that the money would be paid out over a year (for the smart grid, the estimated spending was $50 billion over five years), but a report from the Congressional Budget Office estimates that much of the technology spending will not reach the economy until 2012 or later.

The theoretical justification for the government’s stimulus package derives from John Maynard Keynes, the 20th-­century British economist. Writing during the height of the Great Depression, Keynes famously suggested that if better job-creation schemes were not available, the British Treasury should fill ­bottles with money and bury them in old coal mines for people to dig up. That idea is central to the ITIF’s policy suggestions, Atkinson says: “Our main message is that innovation could be ­Keynesian in nature. In other words, solar-energy bottles.”

Atkinson has little patience with critics who object that investing in long-term technology growth requires a more deliberate strategy; they are “being naïve to the real world,” he maintains. “This is our one chance,” he says of the massive infusion of government funding for new technologies. “It’s almost like free money.” Those who criticized the bill’s provisions for technology spending didn’t understand that innovation could have a big short-term stimulus effect and, at the same time, “have a much better long-term effect than virtually anything else in the package,” he says. “They couldn’t walk and chew gum at the same time.”

Indeed, that deliberate mixing of two goals–immediate job creation and economic growth through the development of IT and energy technologies–is just what rankles many economists. Paul Romer, an economist at the Stanford Institute for Economic Policy Research, is one. “If I sat down and tried to design a stimulus bill most likely to be effective to getting us back to full employment, there is a good chance that this kind of spending on technology would not have been a part of that bill,” says Romer, who has spent his career studying the relationship between technological progress and economic growth. The prospect of spending so much money on technology projects and science programs provoked a “feeding frenzy,” he says. “Everyone was trying to grab as much as they can.”

“If we believe subsidies will speed up technological change, we should do that on its own terms, separate from a stimulus,” says Romer. And he worries that the heavy technology spending in the bill could eventually deter innovation strategies that would prove more effective. “The cost here is not only the dollars,” he says. “[It] may also be the dog that doesn’t bark–the truly important program that we could have put in place if we went about encouraging innovation in a thoughtful way. Having prominent failures can undermine the whole case for using resources wisely to encourage innovation.”

Broadband Boondoggle?
One area of technology spending in the stimulus package that appears to flunk economic analysis is the program to extend broadband Internet to areas not currently served. Broadband has already been built out to the areas where it makes economic sense, says Shane Greenstein, a professor at Northwestern University’s Kellogg School of Management. “If there was money to be made, someone did it,” he says. “It’s 2009, not 2003.”

According to a recent survey by the Internet and American Life Project of the Pew Research Center, a nonpartisan organization based in Washington, DC, less than half the adults in the United States lack broadband service. Most of those people say they don’t want it, either because it is too expensive or because they’re just not interested. Only 4.5 percent of U.S. households (roughly 5.2 million) say they want broadband access but don’t have it. The problem, says Greenstein, is that these households tend to be in isolated or rural areas where supplying broadband is extremely expensive. Whereas it costs approximately $150 to bring the service to an urban household and $250 to bring it to a suburban one, he says, no one really knows how much it will take to bring it to areas not currently served, since the costs for different residences will vary widely. The most optimistic estimate is that it will cost at least a thousand dollars per household to extend broadband coverage; for some isolated houses, the cost will be far greater. Even in the best-case scenario, Greenstein says, the stimulus package won’t extend service to many who want it. “It easily falls short,” he says. “And if it is even more expensive per household [than a thousand dollars], the money goes really fast and doesn’t accomplish much.”

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Credits: Technology Review, Tommy McCall
Video by Conrad Warre

Tagged: Business

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