Here's a thought: If we are going to spend two trillion dollars (and most likely more) trying to deal with the economic crisis, shouldn't we do it right?
The price of getting it wrong is, after all, extremely high. Think of a patient suffering from a grave viral infection who is treated with antibiotics. Not only will the treatment be unsuccessful, it will delay the proper care dangerously long.
So the ways the Obama administration handles the next phase of the bank bailout and the debate over the stimulus package are crucial.
So far, the debate over the stimulus package is, for starters, getting tied up in -- and dragged down by -- the public's widespread disgust at almost every aspect of the bank bailout, from the lack of transparency to the ongoing cluelessness of the Wall Street Marie Antoinettes to the lack of any recovery bang for our billions of bailout bucks.
Even worse than all that is wrong with the original bailout, is the prospect of the new administration repeating the mistakes of the old when Timothy Geithner announces his plans for the remaining $350 billion.
Early indications are that the next bailout tranche will be handed out from an equally Wall Street-centric perspective -- animated by the belief that all that ails us can be cured by pumping a few trillion into our financial institutions. This despite the mounting evidence that the best interests of the banks and the best interests of America are no longer aligned.
As Niall Ferguson told me in Davos, "It is time to start new banks; the old banks need to be completely restructured." And this includes an end to paying dividends to shareholders -- not to mention an end to bonuses, redecorating, new jets, Super Bowl parties, and stadium naming deals.
President Obama needs to make it clear that the next phase of the bailout is going to be handled radically differently than the first go round. As Bloomberg has reported, Henry Paulson invested twice as much taxpayer money in Goldman Sachs as Warren Buffett, yet gained warrants that were worth one-fourth as much. And the Goldman terms were repeated in most of the other bank bailouts. "If Paulson were still an employee of Goldman Sachs and he'd done this deal," said Joseph Stiglitz, "he would have been fired."
This is a mad-as-hell moment (see Sen. Claire McCaskill), and Obama needs to make it clear to the bankers that the American people are not going to take it anymore. And this requires more than finger-wagging -- it requires disgorging.
The administration also needs to use the debate over the stimulus package to rethink its too-timid approach -- otherwise we are going to miss a huge opportunity to both arrest our economic free-fall and create a 21st century economy.
"I support the stimulus package," Van Jones, author of The Green Economy, told me. "But when I look at it in its entirety, I fear that we may soon look back and say that we missed a huge chance to go bigger and bolder. After all, there were three flaws with the old economy that has crashed: it favored consumption over production; debt over smart savings; and environmental damage over environmental renewal. Some parts of the stimulus package seem to be more of the same -- trying to prop up the old, failed economy. That strategy simply won't work -- but we could waste a lot of money and time trying. Instead, we need a new direction for our economy. You can't jump halfway across a chasm -- you just end up falling into the abyss."
Rick Levin, president of Yale and an economics professor, echoed Van Jones' call for "bigger and bolder": "First of all, there's a question of magnitude. The overall stimulus is about 6 percent of GDP. We did not exit the Great Depression without a stimulus that amounted to about 25 percent of GDP -- we called that World War II... The second problem is with the mix... Only $335 billion worth goes to job creation -- that's about 3.5 million jobs, about $100,000 a job. Three-and-a-half million jobs is only two percentage points on the unemployment rate. That's not enough. I would get rid of the tax cuts and use the entire package for job creation... There are lots of great public works projects that would be well worth supporting. And, in the near term, what about CCC-type activities that put people to work right away, cleaning up public parks, weather-stripping homes, offices, schools, government buildings?"
Many experts in the key areas the stimulus package involves -- including healthcare and education -- are equally critical but reluctant to go on the record since, after all, there is something rather than nothing for them in the current bill. One high-ranking expert on education told me off-the-record: "We are really wasting an enormous opportunity. They are going to spend something like $100 billion on education and not get much reform. At this point, they would have so much leverage to get the unions to really think differently. Unions are worried about teacher layoffs. So Obama could say we'll give you money in exchange for tenure reform and teacher accountability. The president has a lot more leverage than he's using to rebuild a system that's not working."
As Michael Lynton, Chairman and CEO of Sony Pictures, told me: "I'm often asked, given Hollywood's struggles, if I were building a movie studio system from scratch, is the current model what I would build?"
The answer was, of course, no. Likewise, given the chance to rebuild America's economy, is the current system, with a few hundred billion dollars worth of patches, the one we want to build?
Obama has added or talked about adding several new cabinet-level positions, such as chief technology officer, climate czar, and car czar. How about an advisory cabinet of economic thinkers who can offer the president big ideas for a 21st century economy?
A good place to start would be among those who sounded the alarm about our current financial crisis -- all of whom are critical of the short-sighted, ad-hoc nature of the stimulus bill. People like Nouriel Roubini, the New York University economist who was so prescient about the collapse. Lawmakers, he says, are "injecting populist politics into economics decisions. Companies and sectors that should be left to drown are being floated lifeboats."
Jeffrey Sachs, the Columbia University economist who was instrumental in transitioning the economic system of the former Soviet Union, is also no fan of the stimulus bill, calling it a "a fiscal piñata," an "astounding mish-mash of tax cuts, public investments, transfer payments and special treats for insiders," and "a grab bag of hasty short-run spending." He warns that "without a sound medium-term fiscal framework, the stimulus package can easily do more harm than good." This is especially true, he says, "if we allow further tax cuts during a time of fiscal hemorrhage, or give into 'bipartisan' demands to make the Bush tax cuts permanent."
Joseph Stiglitz is equally leery of the tax cuts that have been included in the stimulus package. "We are in uncharted territory in this crisis," he says. "But household tax cuts, except for possibly the poorest, should have no place in the stimulus. Nor should business tax breaks, except when closely linked with additional investment... Increased investments in infrastructure, education and technology, relief to states, and help to the unemployed need pride of place."
In October, Alan Greenspan, one of the poster children of the old system, conceded that there was a "flaw in the model." I'd say that events since then have exuberantly proven that to be an understatement. There's not a flaw in the model -- the model itself is flawed.
And instead of bailing water out of the sinking ship, we should construct a replacement appropriate for navigating the economic seas of the 21st century -- and steer it in the right direction.
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Senate Stimulus Bill (Full Text)
Updated on February 8 The pdf is now available. * * * * * Updated on February 8 The compromise Senate stimulus bill has been...
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Obama says differences shouldn't delay stimulus
WASHINGTON — President Barack Obama said Monday that "very modest differences" over a massive package to revive the economy should not delay its swift passage,...
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Obama White House Losing Patience On Stimulus
Underscoring the reality that GOP opposition to the stimulus seems firmly entrenched, the Obama administration mounted a more aggressive stance in favor of the recovery...
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STD Money, Recovery.gov, The Patriot Act: HuffPost Readers Dig Through The Stimulus
More money to battle STDs. Recovery.gov stripped out. A nod to the Patriot Act. Huffington Post readers have taken a preliminary look at the Senate...
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Top Dem Senator: "Hundreds Of Billions More" Needed For Bank Bailouts
Sen. Kent Conrad, chairman of the Budget Committee, warned Monday that the financial sector would need "hundreds of billions more" in federal dollars before the...
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Senate Looks To Boost Mass Transit, Highway In Stimulus
WASHINGTON — The Senate voted Tuesday to give a tax break to new car buyers, setting aside bipartisan concerns over the size of an economic...
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Where Is The Stimulus Shock And Awe?
During a November 25 press conference, then President-elect Obama promised "a new spirit of ingenuity," declaring that the "old ways of Washington simply can't meet...
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Stimulus, Yes; Bank Bailout II, No
If Obama does his job he will mobilize public opinion and isolate Republicans who would rather sink the economy than give a Democratic president legislative success.
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Economic Stimulus: Investing in Vets Delivers a Huge Bang for the Buck
As the Senate begins to debate the stimulus package this week, our elected leaders must ensure that any plan fully supports the newest generation of veterans and their families.
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Bipartisanship Fetishism vs. What's Best for America: Obama Needs to Choose
At tonight's press conference, CBS's Chip Reid asked President Obama about whether, given the lack of bipartisanship on the stimulus bill, the White House was "moving away" from its "emphasis on bipartisanship?" Obama replied that his "bottom line when it comes to the recovery package" is: does it create or save jobs? That's good to hear because the president's actions over the last couple of weeks have left many wondering whether bipartisanship, rather than what's best for America, has been his priority. Perhaps there will come a day when the Venn diagrams of the Republican Party and the national interest actually intersect. But, at the moment, we find ourselves with a GOP whose leaders believe, among other things, that government jobs are not real jobs, and that Obama's stimulus plan is "the socialist way." Hard for bipartisanship to flourish in this kind of atmosphere.
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Billionaire For A Day: A More Entertaining Economic Stimulus Package
Let's do something to capture all Americans attention and by doing so make the economic stimulus package real to all of us: 800 Americans will each win a billion dollars.
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Palin's Facebook Page: Opposes Obama's Stimulus Plan
We learn on Facebook that Palin has "serious concerns" with Obama's stimulus package. Say what?
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Just imagine: What if McCain Had Won the Election and Obama had Shafted him During the Stimulus Debate?
Um, are McCain's feelings after losing an election the big question on people's minds in the nation? I think the stimulus package is the focus of the country right now, don't you?
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Stimulate Me!
Experts seem relatively unified, if such a thing is possible, on the issue of direct economic stimulus to every taxpayer. They're against it.
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Where's Ross Perot When You Need Him?
I'm ready for a little old fashioned Ross Perot specification of the expected outcomes of the stimulus package. This is what we call in education a "teachable moment."
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Rahm Throws Pelosi Under The Bus To Save Stimulus Bill
The story of the morning seems to be that the Obama team is unhappy with Nancy Pelosi and the House committee chairs for delivering up such a liberal, pork-laden bill that they themselves really had nothing to do with.
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Our Twin Crises
That we are unable to manage a functioning economy or deal with climate change because rapacious Wall Street traders have disproportionate political clout is a measure of our political dysfunction.
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Creating Jobs Is Not "Wasteful"
America voted for a change of direction last November, not more of the same. Republicans should listen to the American people and work in a bi-partisan fashion to help get our country on the road to recovery.
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Oh, About That "End" of the Obama Honeymoon ...
Where Obama may have made a mistake is in being too substantively accommodating with people who are basically not going to support him except in the event of an extraterrestrial invasion.
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Patriotic Extortion
Imagine if the Democrats had not pre-capitulated to the Republicans on the stimulus bill. Imagine if they had forced the Republicans to actually mount a filibuster.
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Steele Crazy After All This Year
We are witnessing, not so much the collapse of the Republican Party, as its slide into insanity. What was the GOP's great accomplishment last week? A show of "unity" enough to block the first stimulus package.
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Command and Control?
At a time when the country is virtually pleading with him to exert command and control, he has yielded that role to congressional partisans that the public doesn't quite know and almost certainly doesn't trust.
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Why the Stimulus is Needed, Part II
Given the decreases in personal consumption expenditures and gross private domestic investment, what are the chances of the consumer spending again or business investing again?
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House vs. Senate Stimulus Bills
Some highlights: The House version would spend $60 billion more on education -- the Senate version adds more than $100 billion for tax cuts to individuals and families.
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A Better Stimulus for the Economy
The problem with our economy is not weak spending, which is just a symptom of our predicament. The root problem is lack of confidence in the future.
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The Truth About the Stimulus Package
Until other countries are willing to do their share to stimulate the global economy, the Obama administration is right to lift our boat first.
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Operation Zero Cred
The GOP with Joe the Plumber on the Hill this week to discuss the economy. They should be summarily shut out of this process -- whether or not the president wants them out.
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Change vs. Bipartisanship: What Happens When You Throw a Bipartisan Party and Half the Guest List Stays Home?
The problem with a message of bipartisanship is that it makes it very difficult to tell the story of why things are so bad that we need dramatic change.
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Delusional or Just Cynical?
A good example of the "frothing at the mouth" reaction to the stimulus plan is a blog penned by Jonathan Tobin, Executive Editor of Commentary.
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Obama Financial Team to Taxpayers: You'll Get Nothing, and Like It
There's nothing that prevents the public from getting their fair share of any future bank profits appropriate to the high risk investment they are being forced to make.
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No, Seriously: Republicans Don't Get It
Investment in bike paths will not only improve our economy, and take our country in the right direction for the future; it is exactly the kind of investment the American people want.
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Obama's Wake-Up Call
Even as unemployment hits 7.6 percent and shows no signs of slowing any time soon, the GOP is falling over itself to protect the ostentatious privileges and prerogatives of a few financial potentates.
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Selling Stimulus
What the administration needs, and what its senior advisers proved so adept at during the campaign, is a simpler, more compelling, campaign-style message for what this legislation is really about.
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A New Movement
There is a movement to strip billions of dollars from the stimulus bill led by Ben Nelson of Omaha (whose Democratic status is debatable) and Susan Collins (Republican) of Maine.
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Energy Self-Reliance and Our Future
You want my opinion on a stimulus plan? Follow Ohio's example and invest in American energy. All of it.
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Stimulating
As muddled as this economic stage may be -- and all major measures taken in crisis usually are -- it is born of the drive to reconstruct and not profiteer, and that alone is progress to applaud.
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Bipartisanship (is) for Dummies
The idea that we can turn this economy around by caving to the feckless demands of those who screwed it up in the first place is utterly bankrupt.
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Obama: Use This And the Jobs Bill Will Pass With a 100 Vote Margin
Our best salesman is Obama. There is no house or senate member who this president cannot roll over.
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Obama to Speak Monday Night on Stimulus While Rep. Pete Sessions Says Republicans Are the New Taliban
If the media hadn't acted so irresponsibly the past two weeks and President Obama hadn't tried to be so bipartisan, he might not have had to take to the airwaves, but that's not the case anymore.
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Pulling the Wool Over Our Eyes
The American people elected President Obama in record numbers to lead our country in a new direction, if the Republicans aren't willing to join him, the least they can do is get out of his way.
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Our Phone Calls Are Working, Don't Let Up!
If representatives know that's what their constituents want, they will be both more inclined to keep that critical public investment from the House bill, and act with the speed.
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Obama Undermines Jobs Mandate For the Sake of Bipartisanship
Roosevelt had the New Deal, Kennedy had the New Frontier, Johnson had the Great Society, and Obama has...the stimulus plan. An abstract goal with fungible components that valued process above all else.
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Lions Coach Up Steelers on Stimulus Package
How can anyone take the GOP seriously on economic policy? Agree or disagree on their philosophy; their record is demonstrably terrible. They are the Detroit Lions of Congress.
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Republicans Say They'd Support the "Right" Stimulus Bill, But Stimulus for Them Is Only More Tax Cuts
If you look closely at what the Republicans are saying, this isn't a debate on the merits of this stimulus legislation, but rather another round of policy battles fought during last year's campaign.
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Democrats in Congress Need to Learn How to Lead
I am losing patience with congressional Democrats' innate instinct to capitulate, something that has been evident since the November 2006 mid-term elections.
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But if you want to spend $1 trillion wisely, in a way that actually builds a newer, stronger foundation under our currently inflated economic situation, why not use it to target the best global companies in all fields and endeavors, from green technologies to computer programming to heavy equipment manufacturing (I'm thinking Germany, Japan, India, wherever), and use that money to entice them to come to America and set up shop (even if it's a subsidiary). Let's use our strength (that most people want to live here) to get the best, brightest, and most successful companies who aren't all ready here to come here. One of the problems with our economy is that we haven't mastered globalization yet. This would be a huge step in the right direction.
I live in a class II city, 300,000 people and I can go to the ER and be through triage in 15 minutes.
I'm not even going to spend time asking how you concluded this one: "That quickly pumps a stack of cash into the construction, auto and medical tech industries" Universal health care going to buy us new cars?
Spend some time on monetary policies and what is created when u print money at the speed our government is printing money.
After going through the HR-1 today I would urge your readers to contact their public servants to go back to the drawing board and encourage the President to ask for a better bill: better yet he should ask for three bills.
One for pure infrastructure no spending, no pork.
One for tax cuts: new home purchases etc. no pork.
One for special prodjects (pork) that has wind broadband, wind, solar as well etc.
Jack Welsch of (G.E. fame) said almost as much last week on Charlie Rose.
This bill as it, a mish-mash of old stuff. It looks like left-over night at my dinner table or worse.. it's like having Tandoori Chicken and blueberry pancakes from IHOP with a lime snow cone topping. YUK! President gave the House and Senate a free hand in crafting it. Madame their are too many cooks in here in HR-1 to be sure.
HR-1 is not a Ponzi scheme of spending, but it's too easy for the Republicans to make that arguement if the economy worsens this fall (it will under this bill). My specific suggestion:
1) Limit the tax cut 5k on new homes.
2) Make mortgage interest deduction to 75% of total interest not 100% as now,
3) Extend that 75% to second home purchases.
Thank you for your work and Huff Post!!!.
Respectfully.
DenverJJ
Jeff W. (J.J.) Jones
http://writerswheel.blogspot.com/
The catch is that while the majority of us can see that the economic system needs to change we live in a democratic political system and the majority can't agree on how to go about doing it. It is absolutely true that if you only jump halfway across the chasm you will find yourself in the abyss but it is also true that Congress has just barely managed to agree that we need to jump at all. ( to be continued)
tm
President Obama does not need to compromise like this because it is not enough and people are falling further behing and down than anyone in the Senate realizes or even cares.
It takes 12 people to build a wind generator 6 mos. for production and Assembly. 1600 are needed to replace a coal fire plant. The Rust belt can make the steel parts and assembly factories in every county in the nation can make solar and wind renewables. We could put to work 140,000 people here in NM. However, we have the Nuclear dirty-energy-contaminating-earth-killing -wolves at the doors of congress raping the coffers and the souls of the people in this country by getting $32.5 Billion-- this is unacceptable and beyond shameful, especially when children are going hungry. How dare they do this to the American People. Accountability and transparency.
Fat little kids, who have cell phone carrying parents, that aren't willing to go feed their own kids doesn't pull at my heart. America has a very skewed point of view about starvation. Instead America has a child obesity problem.
My State did a study on the school lunch program. They found a higher percentage than they considered, were getting school lunches born out of convenience. Lazy parents that didn't want to make breakfast or a lunch for their kids.
Sometimes I visit our local schools for early business meetings. I see the kids getting school breakfast and I can stand up and say.....they sure as hell aren't skinny.
The amount of money spent on the Obama and Bush inauguration ceremonies would have fed the kids you are worried about. Have you voiced your concern for how the elite waste our money on their Wagu steak dinners. Doubt it! Open your eyes and see who put us in this situation. It isn't your neighbor. It is thirty years of Dem's and Rep malpractice and economic manipulation. And you want more of it?
Doing good for the poor is driving them out of it...not making it easy for them to stay poor.
A national teacher reform measure will take longer to create than we have to get funding passed so that schools don't close early this year because governments run out of money.
This is how far we've fallen in America. We are actually debating not whether, but how much, money to steal from those that are productive. Makes me wonder why I keep paying my bills. After all, I'm as deserving as anyone for a bailout, aren't I?
Another report released Friday, this one from the Congressional Oversight Panel, revealed that the government overpaid anywhere between 60-100% for assets they acquired in AIG and Citigroup; assets they acquired on taxpayer's behalf, no less.
The treasury might have dolled out tens of billions of your tax dollars to their buddies on Wall Street for toxic assets, but it's really your long-term interest they have at heart. Are we feeling the warm and fuzzies of Washington's love yet?
If you're still feeling glib, you needn't despair; another stimulus package is on its way. Friday's markets even cheered it in for us.
Problem is Arianna that making "money fall off trees" is not the answer. The only way out is to let it all fall down now so we can rebuild tommorrow using real weath, not more worthless printed 'tender' that will make inflation go through the roof like an certain African country i could mention.
People in your position need to start telling the truth about our economy, particularly on what a giant "ponzi" scheme it is that makes Mandoff's look like a drop in the ocean.
Problem is Arianna that making "money fall of trees" is not the answer. The only way out it to let it all fall down now so we can rebuild tommorrow using real weath not more worthless printed tender that will make inflation go through the roof like an certain African country i could mention.
People in your position need to start telling the truth about our economy, particularly on what a gaint "ponzi" scheme it is that makes Mandoff's look like a drop in the ocean.
that is like the old saying " besides that Mrs Lincoln, did you enjoy the play?