Obama Stimulus Plan Aims to Boost Digital Economy

In pledging to "renew our information superhighway," President-elect Barack Obama has offered the 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 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 investment 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. More immediate economic boosts are possible, as well. One step the ITIF recommended to spur corporate technology purchases is to allow firms to write-off all such investments for tax purposes in 2009.

Broadband expansion is likely to get a big boost from the incoming administration. Although the U.S. has some 75 million broadband users, it has consistently ranked low on the list of industrialized countries for its broadband adoption, both in terms of penetration and data transfer speeds. Obama called the U.S. performance in broadband access "unacceptable."

The U.S. is ranked 15th out of 30 industrialized countries in terms of broadband adoption, according to the European-based Economic Cooperation and Development (OCED). And even though Internet access is considered essential today, only about two-thirds of Americans have a computer at home, according to the ITIF.

Atkinson said the U.S. could increase PC ownership through a program that subsidizes the cost of computer purchases and Internet access. For the less than $1 billion, the U.S. could help about 1.5 million households get on the Internet, he said.

More PCs in U.S. households would boost broadband demand, as would programs to extend networks to rural areas and tax incentives to encourage investments by providers to boost the capability of their networks.

In terms of medicine, Obama wants to ensure that every doctor and hospital "is using cutting-edge technology and electronic medical records so that we can cut red tape, prevent medical mistakes and help save billions of dollars each year."

The Arizona Telemedicine Program in Tucson, Ariz., is using technology to do just that. For instance, it created a Teletrauma Service that allows trauma specialists to deliver assistance to remote areas and medical facilities. Using technology and cameras, these remote medical specialists can see a patient's wounds and x-rays or a pediatric cardiologist could look at an infant and decide whether it should be moved to a more specialized hospital and whether a nurse is needed for transport, according to Dr. Ronald Weinstein, who heads the program.

The telemedicine program has already saved lives and reduced costs by, in some cases, eliminating the need to fly a patient to a hospital for specialized care. "I think the impact, certainly in the cases where they saved lives, are dramatic," Weinstein said.

He noted that the Veterans Administration has been working on a telemonitoring program for veterans, an area he said he would encourage the Obama administration to continue to focus on. Cell phones can be used to prompt patients to take medications, or deliver messages that meet a patient's specific needs. Cell phones, in fact, are becoming "central to the delivery" of medicine, Weinstein said.

John Gantz, a research analyst at IDC, said it's too early yet to know what Obama's plans will mean in terms of new products and services, who's targeted and how any benefits might be delivered. Incentives are likely to be broad-based, he said, suggesting possibilities like tax breaks that could be used to encourage homeowners to upgrade to intelligent thermostats to help reduce energy use.

Gantz doesn't expect stimulus spending to target vendors. "The vendors have cash -- it's not like they need money like banks and auto companies."

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