How do you spend an estimated $775 billion over two years without wasting money? That's the challenge President-elect Barack Obama has been struggling with in recent days as he assembled pieces of the economic recovery plan he is expected to present to Congress later this week.
Economists of every stripe have urged that Congress quickly enact a massive short-term spending program to propel the economy out of a deepening recession that threatens to produce double-digit unemployment by the end of this year. But Republicans, and even some of Mr. Obama's economic advisers, have warned that the economy can absorb only so much public investment over the next two years. It's difficult to identify projects with long-term value that can be financed in the short run.
The preliminary plan Mr. Obama presented to congressional leaders yesterday goes a long way toward successfully meeting the challenge of spending the money quickly and well. It promises to push a large share of the money directly into the pockets of individuals, businesses or revenue-starved states without delay or diversion. It includes $200 billion in personal tax cuts - $500 for most workers and $1,000 for couples - and $100 billion in tax benefits for businesses, including a $50 billion one-year credit for companies that hire workers or invest in new equipment.
Another $200 billion would help states pay for health care for the poor and cover looming budget deficits. Much of the rest would go to repair roads and bridges, increase energy efficiency, rebuild health care information systems and fund other infrastructure projects.
Mr. Obama's pledge to raise taxes on the wealthy has been sidelined for now, but achieving a balanced tax burden that is more fair to the middle class should be a primary objective once the economy improves.
Democrats hoped at one point to have legislative work on Mr. Obama's American Recovery and Reinvestment Plan completed in time for the new president to sign on Inauguration Day. Now they are aiming to finish by early February, in part to allow time for careful review and hearings requested by congressional Republicans, who say they want to be part of the process.
Careful scrutiny of the plan's details is important to identify investment targets likely to pay long-term dividends and to avoid the confusion and lack of accountability accompanying the $700 billion federal rescue package for financial institutions. So far, $350 billion of that money has been spent with little to show for it.
But members of both parties should remember that it's important not to loiter unnecessarily. The faster the money is distributed and spent, the better our chances for a speedy economic recovery.