Is the industrial policy debate back in the U.S.? A WSJ interview with Barack Obama would suggest so:
The heart of Sen. Obama's spending program is his plan to spend $15 billion a year for 10 years on energy technology. It would be funded by revenue collected from a separate Obama proposal to cap greenhouse emissions through a system of trading pollution permits. Sen. Obama would auction those permits to producers of carbon dioxide, such as electric utilities, and figures the sales would yield about $100 billion a year. Most of that would go to consumers as rebates on utility bills, he said.
He also would fund an "infrastructure reinvestment bank" that would finance $60 billion in high-speed railways, improved energy grids and other projects over a decade. He would double spending on basic research, subsidize investment in high-speed Internet hook-ups, and offer $4,000 a year in tuition credits for students who later perform public services.
To "capture some of the nation's economic growth," he said in the interview, "and reinvest it in things we know have to be done like science, technology, research and fixing our energy policy, then that is actually going to spur productivity."
Sen. Obama made the case in the interview for large-scale government intervention in the energy market, saying that although venture funds are investing heavily in energy technology, there was a gap in funding that should be filled by Washington. He called it supporting the "middle stage" between innovation and commercialization. "You have this point in time when things haven't quite taken off yet and still entail huge risks," he said.
Sen. Obama likened his proposal to a venture-capital fund, with the government seeking private investors to contribute. He lauded a Central Intelligence Agency project which helps fund technologies the CIA finds important, but which lack long-term capital.
And the predictable Republican response:
Douglas Holtz-Eakin, chief economic aide to Republican candidate Sen. John McCain, dismissed the Obama strategy as "classic industrial policy which shows a lack of faith in private markets."
Although it is difficult to be sure, Obama's comments in the interview suggest that he has thought these issues through more carefully than we are accustomed to with politicians and presidential aspirants. I sense the outlines of a coherent and economically sensible strategy here. And it is too bad that Doug Holtz-Eakin is playing the role of party hack.