An article in last week's New York Times delved into Japan's "Lost Decade," - the prolonged period of economic stagnation that hit the nation in the 1990s - and explores what lessons for U.S. stimulus efforts can be learned from Japan's efforts to restart their economy. The article's findings echo some of the arguments Breakthrough has been making regarding the stimulus debate. Japan's stimulus missteps reinforce the argument that our recovery program should be focused on modern infrastructure--not traditional public works--in addition to spending on other national priorities such as energy and education.

The Times story begins with a look at which types of public spending helped Japan grow out of its recession, and which types stifled recovery:

[I]t matters what gets built: Japan spent too much on increasingly wasteful roads and bridges, and not enough in areas like education and social services, which studies show deliver more bang for the buck than [traditional] infrastructure spending.

"It is not enough just to hire workers to dig holes and then fill them in again," said Toshihiro Ihori, an economics professor at the University of Tokyo. "One lesson from Japan is that public works get the best results when they create something useful for the future."

There is a wide consensus in Japan that while some of the public spending was helpful, too much was wasted on projects that did not increase economic productivity--on unnecessary roads and bridges to nowhere. And the extended period of high public spending crowded out private investment and may have made local economies too dependent on federal aid, some Japanese economists argue.

But this is only half the story. While Japan's example provides compelling evidence that public works spending can go wrong, learning from this cautionary tale can also point the way to effective public spending efforts.

President Obama's new Teasury Secretary, Timothy Geithner, was in Japan during the collapse and concludes that it's not that Japan spent too much; it's that they did not spend enough. Similar to President Roosevelt in the 1930s, as Japan's economy began to recover and reached a growth rate of 3 percent in 1996, the government reduced its spending level and raised taxes, prematurely suffocating further growth and prolonging the recovery period.

There are other lessons to learn from Japan's program of fiscal stimulus, which spent more than 2 trillion dollars over 5 years in an economy half the size of the United States'. While infrastructure spending is an effective way to spend money quickly, officials in developed nations should be wary of spending on old-school public works projects like roads and bridges.

In a nation like China - or the United States in the 1930s - investments in traditional infrastructure, including new roads, bridges, airports and rail lines make sense. But in a nation as developed as Japan in the 1990s or the United States of today, spending on more roads and bridges should take a back seat to other more productive investments on modern infrastructure projects that can effectively enhance economic productivity and competitiveness - a modernized electrical grid, expanding broadband access, building modern high-speed rail lines, etc. The Times article points out, "Having neglected its roads, bridges, water treatment plants and more over the years, the United States is bound to generate a greater payback for such spending than would Japan," but spending on traditional public works should be primarily focused on fixing our existing infrastructure, not building new highways.

In addition, Japan's experience highlights the importance of prioritizing temporary stimulus projects that create permanent jobs:

Among [the Japanese town of] Hamada's many public works projects, the biggest benefits had come from the prison, the university and the Aquas aquarium, with its popular whales, [residents] said. These had created hundreds of permanent jobs and attracted students and families with children to live in a city where nearly a third of residents were over 65.

Another lesson we can learn from Japan is the necessity of speed. Japan's spending program took place over the better part of a decade, and the longer time frame worked against them. Instead of going for one big all out push over 18 or 24 months, the longer time frame reduced the impact of the stimulus and exacerbated any "crowding-out" of private investment during the period.

Perhaps most importantly, Japan's experience with public spending reveals that some of the best stimulus opportunities don't come from infrastructure at all. From the Times:

"In hindsight, Japan should have built public works that address the problems it faces today, like aging, energy and food sources," said Takehiko Hobo, a professor emeritus of public finance at Shimane University in Matsue, the main city of Shimane. "This obsession with building roads is a holdover from an earlier era."

And not only can stimulus put our country on track to tackle urgent national priorities, but studies say that this type of spending has the greatest stimulating effect on the economy:

Japan's experience also seems to argue for spending heavily to promote social development. A 1998 report by the Japan Institute for Local Government, a nonprofit policy research group, found that every 1 trillion yen, or about $11.2 billion, spent on social services like care for the elderly and monthly pension payments added 1.64 trillion yen in growth. Financing for schools and education delivered an even bigger boost of 1.74 trillion yen, the report found.

But every 1 trillion yen spent on infrastructure projects in the 1990s increased Japan's gross domestic product, a measure of its overall economic size, by only 1.37 trillion yen, mainly by creating jobs and other improvements like reducing travel times.

So investment in social programs can be more effective than infrastructure stimulus. But not just social programs--the Information Technology and Innovation Foundation, a think tank that studies technology and innovation policy released a report which found that the 37 billion dollars of high tech investments in the American Recovery and Reinvestment Act would yield close to one million jobs. Opportunities to invest in technologies that increase productivity while creating thousands of jobs cannot be ignored.

This article points to larger point about our current recession and stimulus. No recession happens in a vacuum; economies are embedded in societies and political systems. Even as we work to grow out of our current economic downturn, there is so much to be done. We cannot ignore pressing national imperatives in a narrowly-focused attempt to restore the economy to the way it was in 2007. We must look to the future, to the century that lies ahead. And even as we recover the economy from recession, we can revitalize our nation in preparation for the challenges that lie ahead. Let's get started.