American recovery and reinvestment will be Obama's huge challenge

WASHINGTON — An economic-stimulus plan is one thing. And unless one is mired in a Herbert Hoover-type mindset, it's tough to question the need for strong, immediate fiscal measures to reverse the course of the deepening recession we're now witnessing.

But how about a full-scale "American Recovery and Reinvestment Plan" with the power to both fight recession and start building a truly competitive, world-class 21st-century economy?

We should expect nothing less from the incoming Obama administration, according to Larry Summers, the former Treasury secretary tapped to head the new White House National Economic Council.

That means immediate action to create new jobs — Obama's goal is 3 million in two years. But it also means an early start on future-oriented investments in areas where the nation has been lagging, such as crucial infrastructure, renewable energy, and information technology to start modernizing our health-care system. And, says Summers in a Washington Post op-ed, "investments to build the classrooms, laboratories and libraries our children need to meet 21st-century educational challenges."

Yet there's an immediate problem. The stimulus projects congressional committees are considering, as part of an overall package of close to $800 billion that Obama hopes to sign after taking office, seem heavily weighted to very large but relatively unimaginative expenditures.

About $200 billion, for example, would go to middle-class tax cuts and tax credits for tuition and small businesses. Another $200 billion might be channeled to states to help them cover soaring Medicaid and food-stamp costs and prevent some of the threatened layoffs of state and local workers that would only intensify the recession. More than $30 billion would go to highways and bridges. Lesser but still significant billions would go for long-neglected school modernization, dams and water systems, environmental cleanups, transit, rail and aviation.

Some of those outlays do represent important new departures. And it's true that the draft legislation does include important long-term tax credits for renewable energy.

What the draft legislation lacks are many new "green-collar" jobs and projects, such as new solar arrays, wind farms and power grids. But it has proved difficult to identify enough of these projects ready to field for early anti-recession impact.

And if the package has one serious flaw, it's in designating, without clear rules, huge infrastructure dollars to flow through state transportation departments. Critics claim the lion's share of funding will go to standard highway construction, especially on exurban and suburban highways.

In South Carolina, for example, the state highway department wants $2.4 billion to construct a new interstate through one of the most rural sections of the state. The Missouri Transportation Department's "ready-to-go" infrastructure projects — $510 million worth — include none whatever for St. Louis city, the hub of a region that generates 46 percent of the state's economic output.

"Fix it first!" is the rallying cry of those who want to see first dollars go to deteriorated, often dangerous bridges and roads. But, warns John Norquist, former Milwaukee mayor and president of the Congress for the New Urbanism, "When existing highways are deemed 'functionally deficient' merely because moderate lane widths and ramp lengths prevent them from becoming raceways, don't allow them to be lumped in the 'fix it first' package."

We've been "flying blind, lacking a national investment plan to make the country competitive in the 21st century," warns the policy organization America 2050. At a minimum, says the group "Count!" — set aside some funding for strict measurement of all the new federal investments in terms of job creation, cost-effectiveness, increased energy efficiency and greenhouse-gas reduction.

I'd go further — cut back federal funding for states that fail to fund high-quality, energy-saving, non-sprawl projects from the get-go. The same should apply to funds flowing directly to local governments, and to metropolitan planning organizations.

But it will take extraordinary leadership — i.e., a clearheaded White House, determined departments and engaged, committed state and local leaders — to get strong performance. The signals are that we'll have a solidly capable president in Barack Obama. But a great one in building our strength, domestically and thereby globally, for the century? Shaping and guiding the enormous expenditures of the "American Recovery and Reinvestment Plan" will be the acid test. If there were ever a time for transformational leadership, this is it.

Neal Peirce's column appears regularly on editorial pages of The Times. His e-mail address is nrp@citistates.com