Robert Reich's Most Excellent "Maximum-Strength Remedy" for the Economy
by Texas Nate, Mon Nov 10, 2008 at 06:48:35 AM EST
TPM Cafe has a post up from former Labor Secretary Robert Reich that diagnoses our biggest economic ailment, lack of demand:
I is investment. Absent consumer spending, businesses are not going to invest.
Exports won't help much because the rest of the world is sliding into deep recession, too. ...
That leaves G, which, of course, is government. Government is the spender of last resort. Government spending lifted America out of the Great Depression. It may be the only instrument we have for lifting America out of the Mini Depression. Even Fed Chair Ben Bernanke is now calling for a sizable government stimulus. He knows that monetary policy won't work if there's inadequate demand.
Then he goes on to prescribe how the Government can best use its spending power to get the economy back on track:
The answer to the first question is "a lot." Given the magnitude of the mess and the amount of underutilized capacity in the economy-- people who are or will soon be unemployed, those who are underemployed, factories shuttered, offices empty, trucks and containers idled -- government may have to spend $600 or $700 billion next year to reverse the downward cycle we're in.
The answer to the second question is mostly "infrastructure" -- repairing roads and bridges, levees and ports; investing in light rail, electrical grids, new sources of energy, more energy conservation. Even conservative economists like Harvard's Martin Feldstein are calling for government to stimulate the economy through infrastructure spending. Infrastructure projects like these pack a double-whammy: they create lots of jobs, and they make the economy work better in the future. (Important qualification: To do this correctly and avoid pork, the federal government will need to have a capital budget that lists infrastructure projects in order of priority of public need.)
Government should also spend on health care and child care. These expenditures are also double whammies: they, too, create lots of jobs, and they fulfill vital public needs.
I've been calling for these kinds of economic stimulus for months. Glad to have someone joining in who's got the ear of the incoming administration.