There’s No i in Barack Obama, But There Is One in Bailout
January 12, 2009 Timothy Prickett Morgan
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If I don’t hear the word stimulus again this year, I will be just fine, thank you very much. The past year has been stimulating enough, and I would like for all of us to get back to business. Apparently, to get there is going to require some economic stimulus, rather than the kind you get from listening to the news for hours on end, as I do. Like the kind that President-elect Obama outlined last Thursday in a speech at George Mason University in Virginia. The numbers are absurd, beyond real human reckoning when an average salary is in the low five-digits in this country. The federal government has an estimated $1.2 trillion deficit for Uncle Sam’s current fiscal year, thanks in no small part to the $700 billion bailout for the banks that was put into effect last fall. And now the president-in-waiting is talking about an $800 billion or more in additional spending by the Feds to goose the economy. That such numbers sound normal–the deficit for the federal government for this year is about the same size as the entire, global IT market, meaning all hardware, software, and services revenues with lots of telecom and other goodies added in–is a kind of indicator of the magnitude of the problems we face. I still think 50 bucks is real money, and I must admit, I sometimes feel like I have been asleep under an apple tree in Upstate New York for a decade or two. Soon-to-be President Obama and the newly seated Congress are talking about providing maybe $300 billion in tax cuts and maybe $500 billion in spending on projects that are not just geared to get people working–America lost 2.6 million jobs in 2008, and 1.9 million of those in the last four months of the year–but to do some of the infrastructure upgrading and investment that is necessary to make the country run more efficiently. He outlined a plan that doubles the production of energy from alternative sources aside from coal and oil within three years; computerizing all the medical records in all of the doctor’s offices, clinics, and hospitals in the land that haven’t done so already; upgrading 75 percent of Federal buildings to be energy efficient, then doing the same for 2 million homes; upgrading the electrical distribution system with so-called “smart grid” technology; providing broadband Internet service to the 40 percent of households that do not have access to it today; and then the standard bridges, roads, and other infrastructure projects that are typical of Federal stimulus packages. Everybody wants to get a piece of this stimulus package–and I use those words very carefully, just as did pornography kingpins Larry Flynt (famous for Hustler magazine) and Joe Francis (famous for those Girls Gone Wild videos) when they asked the 111th Congress on Wednesday last week, their first day on the job, to kick in a $5 billion stimulus for the adult entertainment industry. As with other industries, the adult entertainment industry has had to wrestle with the Internet beast, and the Internet has come out winning. In 2008, according to Flynt and Francis, DVD sales and rentals for porno have slipped by 22 percent, and they claim that Internet visits are on the rise, presumably as people are more thrifty with their cash these days. They said further that half of the people on the Internet visit so-called adult sites–stupid me, I thought that meant National Public Radio and A Prairie Home Companion–and presumably the $5 billion would be used to upgrade their server and network infrastructure as well as their video and audio recording techniques. Maybe a little script writing. The question they didn’t answer was how many jobs a $5 billion investment in adult entertainment would create. (You can finish that joke all by yourself. . . . ) IBM’s Sam Palmisano, just like Larry Flynt–OK, there’s a phrase I never thought I would write–was prepping Senator Obama for an IT stimulus package only a few days after the election in a speech to the Council on Foreign Relations. (I wrote about this back in early November.) We heard the same themes again, even before P-e Obama made his pitch for infrastructure improvements to the country, the top brass at IBM and a think tank in Washington, D.C., called the Information Technology and Innovation Foundation, were making their pitches to the transition team of the incoming president. As 2008 was winding down, IBM and ITIF were asked to gin up some numbers to show how many jobs would be created or retained in the U.S. economy if portions of the stimulus package were aimed at three areas that have a big IT component: expanded broadband Internet access, health IT (which is shorthand for computerizing medical records, which as you know from your own life has not happened at most medical offices), and smart grids. ITIF put out a report last week ahead of the speech by Mr. Obama, and said that $30 billion invested in healthcare IT, smart grids, and expanded broadband access would add 900,000 jobs to the American economy in one year. If you read the fine print in the report, which is called The Digital Road to Recovery: A Stimulus Plan to Create Jobs, Boost Productivity and Revitalize America, the number of direct jobs actually created by plunking $10 billion into each of these three areas is pretty small–the numbers are so fuzzy with the smart grid estimates you can’t say–and the vast majority of the jobs come from jobs that are added or retained as IT company employees doing the work for these projects spend their money living their lives. These are indirect, induced, and “network effect” jobs, the latter being job multipliers that economists use to show how investment rippled through the economy, spurring new jobs or supporting existing ones. Of the two projects where details were diced and sliced so we could separate real jobs created or retained versus these stimulated jobs–that would be the broadband Internet and health IT initiatives–there were 107,070 jobs that the ITIF, with some math help from IBM, estimated would be created. The remaining 602,990 jobs were from secondary effects of the investment. And ITIF has been careful in the report to say that this is new or retained jobs, not just new ones, because with IT budgets on the decline IT vendors have started cutting payrolls. (As you will read elsewhere in this issue, IBM is rumored to be getting ready to layoff as many as 16,000 employees.) And despite all the smart economics talking about induced and network effect jobs, I don’t think we can count on the kinds of multiples we see when times are good. People are going to hold on to their money, even when good times return. And maybe that’s OK. There is so much witchcraft in the smart grid electrical system modernization numbers that I won’t say any more than this: It seems like a good idea, but we can’t tell from this data how many real jobs it creates. So jobs may not be a good reason to do smart grids, while saving money for companies and consumers who depend on electricity–and being more efficient in power use and distribution, for that matter–are good reasons to do it. Ditto for healthcare IT efforts. I was listening to my local NPR station this week and an expert said that only one in 20 medical offices have computerized patient record keeping systems. A doctor can’t do a query on paper files, after all, and that makes preventive care impossible. With what looks like a new senator coming into power in the state of Minnesota who might just want to be preserving and extending jobs in a little city we like to call Rochester, it might just be time to tack another $1 billion or so of stimulus onto the little thing we used to call the AS/400 and then the iSeries and now the Power Systems i. IBM Rochester has, at least as of early 2008, some 4,400 real employees and their jobs and their continued efforts to make a good Power server and a decent, integrated i 6.1 platform matter to all of our respective economic well-beings. I think with $1 billion in cold, hard cash, we could do a little i stimulus package. Maybe break the i back into a separate division with its own employees and budgets again, or set it free from IBM entirely to port the platform to generic X64 iron so it can better compete over the long haul. (Hey, this worked for Apple.) Or maybe they could just do a little development and a lot more sales and marketing to goose product sales so it can get back to business all by itself. The i platform is good enough, after all, and it is smart enough, and gosh darn it, people like it. RELATED STORIES Soltis Exiting IBM, But He’s Not Leaving the ‘400 A Little More Detail on the Smart Cube and Its Market Big Sam Speaks–And That Doesn’t Happen Every Day
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