Although classic Keynesian theory has been exposed as flawed, most economists agree the guiding principles of Keynesian economics are useful tools during times of economic recession. Deficit spending is one of the cornerstones of economic recovery. So integral was this infusion of new spending that John Keynes famously said "government should pay people to dig holes in the ground and then fill them up." This precept has literally come full circle. One of the elements of the $850 billion economic stimulus plan is specifically to pay people to dig holes and then fill them up. The catch: this time we're going to lay fiber-optic cables and geothermal piping.
The Multiplier Effect: How One Project Leads to Five
One of the central tenets of Keynesian is the multiplier effect, which claims that government spending sends positive ripples throughout the economy, creating new consumer spending and, in turn, increased employment. This may sound complicated and vague but can be easily understood through specific elements of the Obama Plan. Digging a subterranean path for fiber optic cables might cost anywhere from $44 billion to $100 billion, depending on the scope of the project. This initial outlay will create a significant portionpossibly allof the 2.5 million jobs Obama hopes to create/save. By helping to pay for the digging and fiber-optic installation, huge numbers of tech jobs will be created to bring the full value of 100Mbps broadband to American homes and businesses.
Better yet, the cost of broadband serviceincluding Internet access and cable servicewill be dramatically reduced, creating a wider consumer base and more spending power for people who already have broadband service. Meanwhile, the initial cost of the project still acts as its own economic stimulus, as the money placed into the hands of blue and white collar workers will itself eventually be used for consumer spending and to prop up housing values.
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The Bigger the Hole, the Higher the Mountain
Common sense tells us that when we dig a hole, the discarded dirt forms a mound of the same size as the hole. In economics, the mound may become two, three, or four times as big. This is another way of illustrating the multiplier effect. In terms of digging holes, what exactly we lay in the ditches we dig will determine how much this investment might payoff in the end. A single fiber optic strand will also reduce competition. In Switzerland, the government required the leading telecom company to install several fiber optic strands and auction the additional lines to other companies.
Another suggestion might be to give homeowners the option, wherever possible, to install geothermal heating and cooling systems with the fiber optic cable. All but eliminating energy use associated with heating and cooling, the most expensive part of the installing these systems is digging the ditches for the underground piping. By giving homeowners the option of installing geothermal systems when fiber optic crews roll through their neighborhood, the government could dramatically reduce its cost, enticing many homeowners to install geothermal systems. This, in turn, would make for good economic sense and instantly reduce energy loads during the summer and winter, when energy is in the greatest demand.
Home Improvement and Broadband Statistics
ServiceMagic, a contractor referral service that tracks consumer demand in every area of home improvement, has seen demand for geothermal heating and cooling systems triple in the last year. This increase becomes even more dramatic when the numbers from the beginning of this year's heating season, where requests for geothermal systems (8,506) more than quadrupled the same quarter for last season. In all likelihood, the rising demand and nearly 100 percent consumer satisfaction rating indicates the large installation cost is the only thing holding back wide-scale geothermal implementation.
In terms of broadband capabilities and affordability, this year's Information Technology and Innovation Foundationusing prevalence, speed, and price of broadband serviceranked the United States 15th, and below the international average. More disturbing, the United States has dropped in the rankings every year since 2001. Between upgrading the information superhighway and modernizing the heating and cooling systems of our nation's housing stock, the U.S. economy is only the most immediate beneficiary of this program. The quality of our education, the degree of energy independence, and the health of our environment, the very salvation of our country and planet lies in the dirt beneath our feet.