IBM approves Obama's IT stimulus package

$30bn will create 900,000 jobs, healthy IBM


If you were the incoming president of the United States, and you wanted to gauge the effect of an economic stimulus package geared to information technology as a means to create jobs, who would you ask for advice? The economists at the Labor Department? The hot shots at IDC and Gartner? Or maybe the economists at MIT, the University of Chicago, or Stanford University? Nah. Forget that. President-elect Obama's transition team went right to the source: Sam Palmisano, chairman and chief executive officer at IBM.

In December, according to a report in the Wall Street Journal, Palmisano made a presentation to Carol Browner, the incoming White House coordinator of energy and climate policy, and Julius Genachowski, a tech adviser to President-elect Obama (and presumably in the running for the chief technology officer of the U.S. position that Obama has said he will create) detailing how a $30bn stimulus package geared to IT would create jobs.

IBM recommended boosting broadband Internet access in the country, further computerizing healthcare record-keeping, and installing so-called "smart grid" technology in the electric distribution system in America to allow consumers to better regulate their electric use (and cut their bills by avoiding peak usage times).

Asking IBM if $30bn in IT investments could stimulate jobs is a bit like asking a four-year-old not only if they want a lollipop, but if they want to eat a whole bag of pops. What kind of answer do you expect from IBM? "Not many jobs, Mr. President-elect?" Not in this reality.

As many of us know full well, IT helps companies get rid of jobs, and a lot of IT jobs have taken flight overseas where labor costs are lower than in the Western economies. And IBM is one of the biggest outsourcers and offshorers in the world.</p.

So not only is IBM's contention that a $30bn investment in these three areas (and presumably others) create 900,000 jobs in America suspect, it is laughable. What such a stimulus package might do is cushion the blow of a bad economy to server, storage, and networking equipment makers looking for some big projects to bid on. But that is a short-term phenomenon, and once the gear is bought and the implementation is done, the jobs are over.

As El Reg reported in the wake of the US presidential election back in November, Palmisano gave a speech outlining many of the same themes for infrastructure investment at the Council on Foreign Relations in New York. In a question and answer session following the speech, hosted by Robert Rubin, the former Treasury Secretary and co-chairman of Citigroup, Palmisano went into more detail about why he thought governments and companies should be making such IT investments instead of the traditional roads and bridges infrastructure that governments borrow to build when times get tough as a means of goosing the economy.

The report in the WSJ did not say how IBM came up with the 900,000 jobs figure, but it did quote Chris Caine, vice president for governmental programs at IBM, saying that the Obama transition team came to Big Blue looking for some numbers on how IT infrastructure investments could create jobs. Caine told The Journal that "there are lots of econometrics on the number of jobs from traditional infrastructure investments" but that there were no metrics for such calculations as they relate to IT investments.

To that end, IBM hired a think tank located in Washington, D.C., called the Information Technology and Innovation Foundation, headed up by Robert Atkinson, who was a vice president at another think tank, the Progressive Policy Institute. Then it did some studies of its own. IBM and the ITIF cooked up the 900,000 jobs figure, and tomorrow, the ITIF is expected to release a report based on its analysis, called The Digital Road to Recovery: A Stimulus Plan to Create Jobs, Boost Productivity and Revitalize America.

Step one: Start a think tank. Step two: Get funding from an IT giant. Step three: Get the ear of the incoming president. Step four: billions!

According to a preview of the report that the WSJ must have been given for its story, the ITIF reckons that spending $10bn to get broadband Internet in areas where there is no coverage today (rural areas and inner cities) would create 498,000 jobs per year, and spending another $10bn in modernizing healthcare records (above and beyond an estimated $30bn in public and private investment for this effort already in 2009) would create 212,000 additional jobs. The smart grids effort, which is something IBM has really taken a shining to, would yield 239,000 jobs with a $10bn investment. ®

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