Can Technology Save the US Economy ?  

Technology Review has a (long) look at the US economic stimulus bill and its spending on technology - particularly energy technology - Can Technology Save the Economy?.

By any measure, $100 billion is a staggering amount of money. That's how much the federal stimulus bill devotes to the discovery, development, and implementation of various technologies. Some $20 billion will fund the increased use of electronic medical records; another $7.2 billion will support the extension of broadband Internet access to areas currently without such services. Most impressive, roughly $60 billion will be spent on energy, funding everything from energy-efficiency programs to loan guarantees for the construction of large facilities that use new biofuel and solar technologies.

The spending is unprecedented, not only in scale, but also in the breadth of technologies it covers. For initiatives such as broadband deployment and incentives to adopt electronic medical records, the billions of dollars represent entirely new investments. And for energy technologies, the spending levels dwarf existing public and private investments. One big winner: the U.S. Department of Energy, which received $39 billion (in addition to its $25 billion annual budget). The DOE's Office of Energy Efficiency and Renewable Energy, whose budget in 2008 was $1.7 billion, alone was given $16.8 billion. By comparison, venture capitalists, who often claim clean tech as their favorite growth area, invested just $4.1 billion in that sector in 2008.

The influx of money is particularly dramatic because it comes after years of lackluster federal spending on technology and research, especially in the area of energy. The stimulus bill unabashedly singles out energy projects for huge doses of funding: $11 billion to modernize the electricity transmission system and create a smart grid, and millions to develop such new energy sources as geothermal power ($400 million) and biomass fuels ($800 million). Established renewable-energy sectors, such as wind and solar, also receive tens of billions in tax credits and grants.

Most audacious, the spending bill does all this with the intention of both stimulating the economy in the immediate future and creating growth in the long term. President Obama and others in his administration have repeatedly connected the stimulus spending with the need to begin creating "green jobs" and building a "clean-energy economy."

The decision to make large energy investments in hopes of realizing both immediate economic benefits and longer-term environmental dividends represents a "massive shift" in government policy, says Robert Pollin, a professor of economics at the University of Massachusetts, Amherst. Pollin published a report last fall arguing that substantial spending on energy technologies would create two million jobs over the next two years. The idea that spending on energy technologies to address global warming could have an immediate economic benefit, he says, "would have been considered preposterous less than two years ago." Yet his study now reads like a blueprint for much of the stimulus bill's energy funding.

But just how realistic are the expectations behind the stimulus package? Can huge jumps in technology funding boost the economy? And will this sudden windfall of funding really be a positive force in encouraging new technologies?

Almost all economists agree that technological progress drives long-term economic growth. Many proponents of the technology provisions in the stimulus bill go further, however, arguing that the funding will alsocreate jobs immediately. Daniel ­Kammen, founding director of the Renewable and Appropriate Energy Laboratory at the University of California, Berkeley, estimates that investments in renewable energy create three to five times as many jobs as the equivalent investments in fossil-fuel energies. "Energy efficiency and solar, in particular, have been shown to be two of the highest job-creating industries that we know," he says. And he believes there is clear evidence that spending on energy research will improve the performance and reduce the cost of renewable technologies already on the market. ...