As the U.S. government was scurrying to find ways to bail out some of the nation’s largest companies, Google CEO Eric Schmidt criticized economic freedom and said the rescue plans should be used to support new telecommunications infrastructure and solve longstanding innovation issues.

“Let’s not just have bailout programs,” Schmidt said in a post-election speech to a large audience that included academics and government employees and was broadcast on the Web.

“Why don’t we use the stimulus money to get infrastructure built?” Schmidt asked. “We have to find the right balance of incentives. We’ve had the most extreme version of the free-market approach, and we’ve seen some of its consequences.”

Specifically, Schmidt suggested bailout money go toward measures such as creation of smart electric grids and encouraging competition among broadband providers.

Others Welcome Bailout

Some experts say using bailout money to invest in infrastructure, including broadband, could help the economy by creating jobs.

“If we are going to use federal money for a stimulus package, it is critical that at least a portion of it be devoted to investment, rather than consumption, and in particular to investments in new digital network infrastructure, such as health IT, green grid systems, and broadband,” said Robert Atkinson, president of the Washington, DC-based Information Technology and Innovation Foundation.

“These investments can create significant jobs in the short term, but also longer-term economic growth,” Atkinson said.

Broadband Briar Patch

Daniel Ballon, a senior technology fellow for the San Francisco-based Pacific Research Institute, says federal intervention could lead to problems for broadband providers in the long run.

“From Schmidt’s perspective, the most important short-term goal is boosting the quantity of broadband subscribers,” said Ballon. “Government investment in broadband infrastructure is the best way to accomplish this goal. Once the government helps build this infrastructure, however, it will subject broadband providers to increased regulation.”

This has happened before and is bad for the economy, Ballon notes.

“Historically, utility providers opt to consolidate and accept regulations in exchange for monopoly profits,” Ballon said. “These regulated utilities have little incentive to innovate and incorporate new technologies. As a result, Google’s proposal will benefit broadband in the short term but seriously diminish America’s competitiveness in the long term.”

Aricka Flowers (atflowers@hotmail.com) writes from Chicago.