Monday, November 10, 2008

How Bad Is The Economic Situation Really? Probably Worse Than You Fear


Bernie-- the real deal

I've gotten to be something of an expert on home prices in L.A. I'm helping my friend Roland buy a house and we've been looking, intensely, for months. I know when a house is going to get multiple bids and when a house is going to sit on the market for a year... or more. This morning a new one in my neighborhood came on the market. The owner's hopes and dreams led him to price it at $1.6 million, about double what it would sell for. In this market, hopes and dreams, despite the recent election returns, go only so far.

This morning the Clinton cabinet's one token leftist, former Secretary of Labor Robert Reich, terms the economic state we're in a Mini Drepression, not as bad as the Great Depression, not as "good" as a bad recession. "The employment report last Friday shows job losses accelerating, along with the number of Americans working part time who'd rather be and need to be working full time. Retail sales have fallen off a cliff. Stock prices continue to drop. General Motors is on the brink of bankruptcy. The rate of home foreclosures is mounting." So what should Obama do?

It's not about more bailouts for the bloodsuckers in corporate America. "The real problem," writes Reich, "is on the demand side of the economy." Consumers have cut back on everything but necessities and their spending makes up for 70% of the economy. It's a little sector Bush studiously ignored for 8 years-- or victimized.
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.

So the crucial questions become (1) how much will the government have to spend to get the economy back on track? and (2) what sort of spending will have the biggest impact on jobs and incomes?

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.

The political right-- Republicans and nominal Democrats from the Republican wing of the Democratic Party (Blue Dogs, Rahm Emanuel's New Democrats and assorted other corrupt corporate shills)-- will fight this tooth and claw. The arguments will be the same as the ones their ideological forebearers made against the New Deal. So can Obama reprise FDR? I'm a little nervous about that, looking at the names being floated for top jobs in the new Administration-- even beyond the worst (Rahm Emanuel).

On Friday, though, Senator Bernie Sanders, who's progressive voting score on key economic issues is about as far from Obama's as Obama's is from Maine Republicans Olympia Snowe and Susan Collins. Despite the absurd GOP claims that Obama is a socialist and "the most liberal senator in America," he's voted with the most conservative Democrats far more often than makes me comfortable-- very conservative Dems like Mark Pryor, Evan Bayh, Mary Landrieu, Ben Nelson, Blanche Lincoln, Tom Carper, Max Baucus... Like I said all through the primaries, Hillary Clinton he's not. Nor Dick Durbin, Frank Lautenberg, Sherrod Brown, Sheldon Whitehouse, Barbara Boxer, Ben Cardin or, back to the point, Bernie Sanders.

On Friday Bernie wrote a piece for HuffPo called The Road to Economic Recovery. I hope Obama reads it and takes heed. Like Reich, Bernie gets that the problem is NOT Wall Street banks and the self-entitled millionaires who run them. The problem is with the workers and consumers who have been thrashed by 8 years of punitive Republican policies. He points out that under the Bush Regime the median income for working age Americans has gone down by over $2,000 a year and that nearly 6 million Americans have slipped out of the middle class and into poverty.
When the Senate reconvenes of November 17th, I intend to fight for an economic recovery program that is significant enough in size and scope to respond to the major economic crisis this country now faces.

If we can commit more than $1 trillion to rescue bankers and insurance companies from their reckless and irresponsible behavior, we certainly should be investing in millions of good-paying jobs that rebuild our nation and improve its economy.

In my view, the size of this economic recovery plan should be, at a minimum, $300 billion.
This economic recovery package should first improve our crumbling infrastructure by improving our roads, bridges and public transportation. We need to bring our water and sewer systems into the 21st century. We need to make certain that high-quality Internet service is available in every community in America. Not only are these investments desperately needed, every billion dollars that we put into these initiatives will create up to 47,000 new jobs.

We also need to make a major financial commitment to energy efficiency and sustainable energy. With a major investment, we can stop importing foreign oil in 10 years, produce all of our electricity from sustainable energy within a decade, and substantially cut greenhouse gas emissions. We can also make the United States the world leader in the construction of solar, wind, bio-fuel and geothermal facilities for energy production, as well as create a significant number of jobs by making our homes, offices, schools and factories far more energy efficient.

In these harsh economic times, we should also make sure that, at the very least, all Americans have access to primary health care and dental care, which we can do by substantially increasing funding for the highly-effective community health center program. We should extend unemployment benefits, so that more than 1 million Americans do not run out of their benefits by the end of this year. We should assure that no one in America, in these hard times, goes hungry or homeless.

And we just elected a whole batch of new senators. Will they be lining up with Bernie? Kay Hagan (D-NC)? No. Jeanne Shaheen (D-NH)? No. Mark Udall (D-CO)? No. Mark Warner (D-VA)? rotflmao. I'm guessing Jeff Merkley (D-OR) and Tom Udall (D-NM) will. Obama has a 68% favorable rating from the American people. And Bush's... he's the most unpopular president since polling was invented, less popular now than Richard Nixon at his lowest point. We need to give Obama the benefit of the doubt and pray for him and be ready to nudge him along in the right direction when the wealthy and powerful interests get pounded into his head all day at the office.

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