just in in-tray
Hello again,
Here is a little update on Obama's infrastructure spending plans. If you all don't mind, I'll do these in dribs and drabs for the sake of timeliness.
From the WSJ online today, Obama's people now talking $1T in stimulus. My feeling has been, if they talk $600B, it will be closer to $1T. If they talk $1T, it could be closer to $1.5T or $2T. In order for the stimulus to work in this dire situation, it has to have a psychological as well as monetary effect - it has to be bigger than people expect it to be. So, now that they're talking $1T, I am thinking closer to $2T. We have heard rumors of this as well, but I can't yet report on the source. I don't know how they'd possibly spend $2T well, but I can certainly think of better ways than dismantling small Middle Eastern countries.
A few relevant links:
online.wsj.com
investors.com
online.wsj.com
californiaprogressreport.com
Another idea I am working on, and which I'm sure has occurred to many of you: buy commodities, sell those who produce them (unless they're in really good financial shape). The credit crisis will greatly limit investment in exploration and production of commodities (Oil and Metals are most interesting to me). I believe this will swamp demand destruction in the near future. This is in no way an investment recommendation, just something I'm thinking about. The reason I mention this in this post on infrastructure, is that Obama's infrastructure spending could affect demand for commodities. Not sure of impact on my thesis yet.
seekingalpha.com
Best, Jamie
From: James
Sent: Monday, November 24, 2008 1:26 PM
To:
Subject: Obama's infrastructure spending
hope you find this useful. If you are, like me, interested in this subject and have other sources, I am happy to receive docs and share my own with you. If such missives are a nuisance, please also let me know. Cheers, Jamie
Want to know what Obama will spend infrastructure money on? The Center for American Progress may be a good place to look for clues. The Center for American Progress is a think-tank established by Clintonite John Podesta to compete with right-wing think tanks like the Heritage Foundation and Competitive Enterprise Institute, with the goal to develop progressive policy solutions to be implemented when the Bush years came to an end. Lots of CAP people will be moving into the Obama Administration, and lots of CAP ideas will be implemented. Podesta himself is heading up Obama's transition effort.
It is widely speculated that Obama will enact a major new stimulus package, focused on creating jobs through rebuilding US infrastructure. It is likely to be on the order of at least $600B and up to $1T, and a good chunk will go to green initiatives. Here are links to CAP publications, that may give some clue as to where Obama will spend money on green infrastructure.
1) Sponsored by CAP, Robert Pollin and his UMass-Amherst colleagues recently released a paper entitled "Green Recovery: A New Program to Create Good Jobs and Start Building a Low-Carbon Economy". It proposes to direct funding, including $46B in direct government funds, toward six energy efficiency and renewable energy strategies:
· Retrofitting buildings to increase energy efficiency
· Expanding mass transit and freight rail
· Constructing “smart” electrical grid transmission systems
· Wind power
· Solar power
· Advanced biofuels
americanprogress.org
The report says that public building retrofits will produce the quickest pulse in job creation, a hint that this may be one of the first things Obama will do. Of the $46B CAP proposes in direct government funding, $26B is proposed for government spending on public building retrofits. Expanding smart grid and high-speed rail initiatives will take a year or two to start producing large numbers of additional jobs, but do have significant job creation potential. $20B in direct government spending is proposed for those two areas. Advanced biofuel projects are a pretty obvious bet given Obama is from Illinois and has supported biofuel subsidies in the past (we hope he does not push biofuel boondoggles at the expense of more worthy projects). The CAP report does not propose direct government spending on biofuels, but does propose other kinds of support. Wind and solar can't be expanded greatly with an ITC given the current dearth of tax equity to make use of it, and without upgrading of the power grid…so, we HOPE the economic crisis will make Obama and the Democratic Congress seriously contemplate a European-style tariff system for at least a decent chunk of big renewable power projects - massive solar farms in the Southwest and big wind projects in the North Central states (The CAP report does not propose such tariffs for renewables). We are not especially confident of this, however, since Congress has a fetish for disguising its subsidies as tax cuts, even if it is ineffective. We do believe Obama will champion construction of major new high-voltage DC transmission lines to "plug in" such renewable projects.
2) See also this paragraph from the end of the above paper, in an addendum by Podesta:
"Invest in low-carbon transportation infrastructure: Less fuel-intensive transportation options means less greenhouse gases. To boost greater use of alternative low-carbon transportation we propose new investment in more diverse and inter-modal transportation networks such as local mass-transit networks, regional and interstate long-distance high-speed rail systems, and green city programs to encourage the redevelopment of urban areas and reduce long commutes and suburban sprawl."
To the extent that Podesta's thinking reflects Obama's thinking, it would appear that a big focus of the Obama administration will be encouraging urban revitalization and discouraging suburban sprawl. We know that much of US urban infrastructure is decaying and in need of upgrade. Much of this upgrading work is directly relevant to the green economy: mass transit, water pipes, pumps, water and sewage treatment facilities, smart grid (superconducting cable, SCADA and outage management, smart metering, etc.), ports (dirty! and overlooked)…AND, encouraging land remediation.
3) Here's a separate CAP article on proposed high-speed rail investment:
campusprogress.org
4) Finally, CAP has just released a book entitled "Change for America: A Progressive Blueprint For the 44th President" that outlines the Obama agenda. It is authored by a who's who of Democratic policy types.
americanprogressaction.org
The book includes the following environment-related chapters:
· National Energy Council, Todd Stern and David Hayes
· Overview: Building a Vibrant Low-Carbon Economy, Bracken Hendricks and Van Jones
· Department of Housing and Urban Development: Meeting 21st-Century Metropolitan Challenges, Bruce Katz and Henry Cisneros
· U.S. Department of Transportation: Green Reforms for Environmental and Consumer Safety, Joan Claybrook
· Environmental Protection Agency: Restoring Scientific Integrity, Sound Regulation, Fair Enforcement, and Transparency, Carol M. Browner
· Department of Agriculture: Tackling Food and Energy Crises Amid Global Warming, James R. Lyons
· Department of the Interior: Natural Resources Serving Society, John Leshy
· Department of Energy: Implementing the New Energy Opportunity, Ronald E. Minsk and Elgie Holstein
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