Not only are the French smarter, so are the Norwegians

(The blog below was written for an American readership and appeared on February 11th on my blog at www.PlaceEconomics.com. Because it deals with international comparisons, however, I've repeated it here.)

Earlier this week I wrote about the incorporation of $132 million a year for the next four years for the restoration of historic buildings in France. That was a specific part of President Sarkozy's economic stimulus plan for France. Like the US, France is suffering its most severe recession since the end of World War II.

This morning I get an email from my friend Terje Nypan who is in the Culture Ministry of Norway. Much of the national budget in Norway is dependent on oil. So when the oil price drops from $140 per barrel to $40, it obviously has a big impact.So the Norwegian government has adopted what they call their "Crisis Package" in the amount of about $685 million dollars. (If that number seems low compared to the $780 Billion stimulus package here, remember that the population of Norway is around 4.6 million versus 304 million for the US. )

But unlike the United States where the only criteria to make the bill seems to be having a friend on the House Appropriations Committee, in Norway they actually had a set of principles upon which their decisions were based. And here they are:

• The measures must have a speedy effect on the labor market
• The measures must have specific target objectives
• The measures must be limited in time
• The measures shall strengthen the Government in its policies for the environment and income distribution.

I happen to think this is an excellent set of principles. But others could have a different list. The trouble in the US is that there is no set of principles upon which we are encumbering 3 generations to repay.

And how did Norway commit their stimulus money to be consistent with these principles?

• Measures for increased energy efficiency $183,529,000
  
• Repair and development of railway system $198,976,000
  
• CO2 cleaning $147,129,000
  
• Footpaths/sidewalks and bicycle roads $ 76,471,000
  
• Nature management and Cultural Heritage $ 52,000,000
  
• Environment research on sea wind turbines $ 11,471,000
  
• Charging stations for electric cars $ 7,647,000
  
• Bio Energy $ 7,647,000
  

The Cultural Heritage portion of that was around $34,000,000 and was divided as follows:

• Rehabilitation and maintenance of privately owned, protected property $11.6 Million
  
• Technical and industrial heritage, vessels and centers $6.9 Million
  
• Rock art, archeology, and universal access $3.8 Million
  
• Fire safety for historic wood buildings, medieval and important churches $11.8 Million
  

Why did they do this? Because they learned in the last recession that: a) it worked putting people back to work and training workers for the future; and b) it met the principles they established.

Virtually all the line items in the Norwegian stimulus package are long term investments. Almost none in the US stimulus package are.

One more blog about the stimulus package then I'll let it go. What the hell, I'll never live long enough to have to repay any of it.

Why the French are Smarter than us Americans

(The blog below was written for an American audience and first appeared on February 9 on my blog at www.PlaceEconomics.com. But because it is international in nature, I've also posted it here)

Yeah, we have to have a stimulus plan. And one will pass this week. The latest iteration is the one crafted by a moderate Republican (Susan Collins of Maine) and a moderate Democrat (Ben Nelson of Nebraska). And as a militant moderate myself, I have to commend them for at least making some adjustments to the bottomless barrel of pork written by the Democrats in the House and the equally irresponsible "just say no" or "just say more tax cuts" approach by the Republicans.

In this morning's Washington Post Senator Arlen Specter, one of the three Republicans likely to vote for this latest version, said that the $780 Billion Dollar package would create or save 4 million jobs. (As an aside "create or save" used by both Specter and President Obama is bullshit...why? It means you have already defined success for yourself. If not a single new job is created you can still say, "Yeah, but I saved 4 million jobs" and it's impossible to disprove that.)

But bullshit aside, make the calculation. $780 Billion divided by 4 million jobs equals $195,000 per job.

Now France has as big a case of economic chaos as we do. Their economy shrunk last year the most since World War II and their unemployment is expected to reach nearly 11%.So, of course, President Sarkozy had to introduce his own economic stimulus plan. But here's a big piece of his approach - committing 100 million extra Euros per year ($130 million) for the restoration of historic monuments in France for the next 4 years. So about 1.5% of his stimulus package is going toward heritage conservation.

By the way Sarkozy isn't the only one. In March there is going to be a hearing in Brussels of the European Union on using heritage conservation as a counter-cyclical economic development strategy.

So what if we took this approach as part of our stimulus plan? Of course in the US we are much more likely to use tax incentives to attract private investment rather than direct public funding. And we've done this effectively with the Historic Rehabilitation Tax Credit.

So let's double the tax credit for the next 4 years (from 20% to 40%) and let's assume that costs the US taxpayers the annual equivalent of $130 million per year. What would that mean? Nearly 20,000 jobs per year for each of the next 4 years. (Also, by the way, when economists and politicians say "job" they mean one full time job for one year. So if a stimulus package creates one job in the highway building business, for example, that lasts for the next four years, that will be counted as 4 jobs).

The cost to the US taxpayer of historic preservation as stimulus? $6875 dollars per job...for the same amount of money that is required to create 1 job in the rest of the stimulus package, 28 jobs would be created. And this would represent less than 1/10 of 1% of the stimulus spending, not France's 1.5%.

Furthermore, this is Sustainable Economic Development! A tax credit to encourage Americans to buy even more cars isn't.

France might not produce the best armies, but they are better at wine, better at cheese, and sure as hell better at figuring out a stimulus plan than we are.