"Green Investments" and Infrastructure: A large chunk of the stimulus package will be focused on making changes to U.S. energy and environmental policy and improving our crumbling infrastructure. From "retrofitting" projects, to highway construction, to modernizing the energy grid, the total package will cost around $200 billion. To finance the "green" investments, we should increase the gas tax. If the country is to truly commit to updating our energy policy, a gas tax is not just logical but an almost necessary component of a comprehensive policy. Increasing the gas tax by a mere 5 cents per gallon would raise $10 billion a year. Additional savings could come from cutting wasteful pork barrel projects, and by reforming government contracting, which President Obama has already derided as wasteful and bloated.
Two warnings: Shifting attention from spending to repaying too early would derail the recovery—the fiscal responsibility piece of the plan should not kick in until the economy is growing strongly again. Second, paying off some of these new debts will not replace the need to address existing fiscal problems, particularly those in Social Security and Medicare, and major structural changes to those programs will still have to be made.
But if Congress is serious about taking all steps necessary to fix the economy, controlling our burgeoning debt will have to be a critical piece of the plan.