This past weekend, Laura Tyson made the case for a second stimulus in the New York Times. Things, you see, are looking down, particularly for the states. State budgets are being strained, and the prospect of teacher layoffs is a possibility without continued federal aid. Yet.....
The situation would be even worse without the $787 billion fiscal stimulus package passed in 2009. The conventional wisdom about the stimulus package is wrong: it has not failed. It is working as intended. Its spending increases and tax cuts have boosted demand and added about three million more jobs than the economy otherwise would have......
But by next year, the stimulus will end, and the flip from fiscal support to fiscal contraction could shave one to two percentage points off the growth rate at a time when the unemployment rate is still well above 9 percent. Under these circumstances, the economic case for additional government spending and tax relief is compelling....
Two forms of spending with the biggest and quickest bang for the buck are unemployment benefits and aid to state governments.
If not for recent action by the Congress, the school year would have gotten off to a rocky start this fall.
Some $10 billion in aid to school districts is set to flow after a 61-39 Senate vote Thursday — to be followed quickly by a House vote next week — in hopes that it will come in time for many school districts to reconsider teacher layoffs.
Thursday's vote was a hard-earned but partial victory for Democrats and President Barack Obama. Advocates said it could save the jobs of up to 300,000 teachers, police and other public workers.
A huge part of the problem lies in the fact that in many states property taxes remain an important source for school budgets. Further, the bursting of the real estate bubble has meant that total assessed value has dropped. Even in those areas in which the speculative bubble was not severe, total assessed value has been driven down by the loss of industry and other business closures. For the moment, the solution that the federal government has taken to the problems with school budgets has been temporary aid. Federal money is used to cover costs.
But what if there was a way for the federal government to step in with a program that would create a continuing revenue stream for schools? As the old saying goes, give a man a fish, and he'll have food to eat for the day. But if you teach a man to fish, he'll eat for a lifetime.
Direct aid to schools solves the budget problem... so long as the money last.
However, there's a new approach that's been taken by a school district in Indiana that may have wider applicability, and would create a new revenue stream while promoting green energy.
In Union City the local school district has partnered with a green energy firm in order to build two new 1 MW turbines, that are now generating revenue for the school district and local government.
Over the next 25 years, each 1-megawatt turbine is projected to pump a profit of $3 million into the budgets of both the Randolph Eastern School District and Union City government. And that's the kind of money attracting attention from other cash-strapped school administrators across the state....
The school system and city partnered with energy consultant Performance Services, based in Indianapolis, to study the financial and wind speed feasibility of erecting turbines. They liked what they heard, and a deal was struck for Performance to finance and build each of the $2.3 million turbines on city-owned land.
With the need for a second stimulus looming, this look like a project that deserves greater attention.
Imagine federal funds being used to finance the construction of wind farms across the country, with the revenues entered into a trust fund that provides aid to local school districts to help close budget gaps.
Done right, a program of this sort could be used to remove part of the cost of school budgets from property tax rolls. And that could be used to provide property tax relief, putting money into the hands of people who will most likely spend it. The point I suppose being that done right a stimulus plan can be thought of as a capital investment generating continuing returns. Combined with a national feed in tariff, a program like this could kill two birds with one stone.