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Obama stimulus plan aims to boost digital economy

Debate may focus on whether U.S. tech investments can drive long-term productivity

December 9, 2008 12:00 PM ET

Computerworld - WASHINGTON -- In pledging to "renew our information superhighway," President-elect Barack Obama has offered a broad outline of an economic stimulus plan likely to lead to major increases in IT spending -- especially for broadband deployment and technology for schools and health care.

Obama is mixing proposals that could offer a combination of gains, such as short-term spending on equipment and longer-term investments aimed at lasting productivity gains for the economy. The spending plan, outlined in barebones detail in Obama's weekly video address on Saturday, would mean new computers for schools, expanded broadband access -- particularly in rural areas -- and funding on technologies to reduce medical costs. That could mean increased spending on networking technologies to support services such as telemedicine.

Obama hasn't yet put a price tag on his plan, but since his overall stimulus package is expected to be in the hundreds of billions of dollars, money for any Internet-related initiatives could be large. But in spending big sums on technology, the Obama administration will have to show that these tech investments will deliver. Linking the bottom line to IT investments is not an easy case to make.

James Gabberty, a professor at Pace University's Seidenberg School of Computer Science and Information Systems in New York, said that determining the impact of tech spending on productivity is still difficult to measure. There's no quantitative figure that shows, for instance, "the growth of a nation's goods and services will be 'x' if you spend 'y' number of dollars on hardware, software and communications gear," Gabberty said.

He pointed to the recent financial meltdown as an example. How is it, he said, that among financial firms with similar growth rates, revenues per employee and roughly equal amounts of IT spending some failed while others did not. ''How can you have disparate yields?" Gabberty said.

But Robert Atkinson, who heads the Information Technology and Innovation Foundation (ITIF) in Washington and is also on the Obama transition team, believes tech investments will stimulate the economy. While many traditional economists focus on state and local government projects such as building roads and bridges, "we need to expand our vision," he said.

Obama's plan will represent the first major stimulus effort since the creation of a "digital economy," said Atkinson. As a result, the U.S. can't afford to focus only on a "consumption-based [effort] that leaves the nation with little to show after consumers spend the money and the economy gets back on track," according to a paper published by the ITIF in October. The ITIF argues that IT investments produce outsized productivity gains.



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