Here is my general assessment of where we are from an economic point of view, putting the political dynamics mostly aside for the moment.
I believe that we should do much better on fiscal policy than we are doing as a nation.
(1) There is no room, nor case, for broad-based personal or corporate income tax cuts or credits or rebates. (Much smaller temporary subsidies of house and auto purchases, especially on fuel-efficient cars, make a little bit more sense, though I don't love those either). The deficit is hemorrhaging and will do so for years to come. Despite some ideological claims to the contrary, there will be no scope for sizeable cuts in spending as a percent of GDP, since five core areas (defense and homeland security, veterans affairs, social security, health care, and interest on the debt) take up all federal revenues, meaning that everything else in the budget (education, energy, science, transport, housing, income support, diplomacy, courts, public administration) is effectively on borrowed funds. And with aging, health care cost increases, etc., the underlying chronic deficits will tend to rise, not fall. We will therefore need increased not decreased taxes. Finally, note that temporary tax cuts are likely to have little stimulus effect, even if they could be afforded;
(2) Immediate and sizeable spending increases in the stimulus package should be directed to a few areas: significant support for our crisis-ridden state and local governments, especially for health (Medicaid), education, and other urgent public services; income support (unemployment, anti-poverty including food stamps and child nutrition); health care coverage for the uninsured (as well as adequate Medicaid funding mentioned earlier); and a significant multi-year rollout of infrastructure of all sorts (roads, rail, other mass transit, ports, water, energy, broadband, etc.)
(3) Future taxes (and revenues as a share of GDP) will have to increase, partly by rolling back the Bush tax cuts on the wealthy (certainly), and partly by introducing new revenues on carbon (e.g. by auctioning carbon permits or taxing carbon) and eventually I believe by introducing a VAT or something similar.
(4) The claim that we should reject infrastructure spending because it rolls out over several years is disastrously wrongheaded. We need a buildup of serious high-return public investments, and we can and should start now. The added stimulus will be useful in future years, but even more useful will be the infrastructure! The most rapid spending will come from sizeable immediate transfers to state and local governments, to the poor, to those without health insurance, and the start-up of some infrastructure spending, and this initial boost will be enough to "buy time" for a sustained and meaningful growth in infrastructure in later years.
(5) We need a medium-term expenditure framework in which budget and tax policies are presented with a five-year time horizon. In such a medium-term framework, we would have significant deficit spending this year -- yes, perhaps $1 trillion in total not counting TARP -- but then falling over time by a programmed step-by-step increase in government revenues (rollback of tax cuts, new carbon levies, closing corporate loopholes, and probably introducing a modest VAT). The spending side will eventually taper off in certain categories (e.g. the emergency transfers to the state and local governments), but overall medium-term levels of public spending are likely to increase from 21 percent of GDP to perhaps 24 percent of GDP. Revenues should increase from around 18 percent of GDP to around 24 percent of GDP over a period of 5-7 years.
Such a package would require several weeks to put into motion, and some parts might require several months, but that would be time well spent if we would thereby restore a sensible fiscal framework. It would be better to set the medium-term direction of fiscal policy, and to get it right (significant short term stimulus through spending not tax cuts, rising public investments in infrastructure over several years, and a rising trajectory of taxes relative to GDP) over the course of a few more weeks and even months, rather than to do things haphazardly and unconvincingly within a deadline of a few days.
Of course, to give the administration its real due, it might be impossible to achieve anything if the opposition proves unmovable to this kind of package, so taking something highly flawed now rather than a better framework that is never enacted (!) would make sense. I regret and worry, however, that we haven't yet had the kind of public discussion about what's really needed for the medium term, and how we can get there. I don't really know if it's "now or never." If that's true, let's have the legislation now. It just doesn't feel right to me, however. And I do worry that the tax cuts and coming mega-deficits might well frustrate a subsequent convergence on a more meaningful and sustainable trajectory in the coming months and years.
Finally, this is not meant to be a comprehensive agenda, only a sketch of broad macro policy. We need major systemic reforms in health, energy systems, foreign policy, science and technology, and much more, which will have significant budgetary implications, but which requires ample public debate and policy formulation.
Finally, finally, there is a massively important global context which is not even discussed in our current debates. The role of Asia in helping to get the U.S. and Europe out of this mess should not be underestimated. Attacking China is completely wrongheaded in that perspective. We need policy coordination, not bickering. There are important exchange rate, monetary, and financial policy considerations at a global cooperative level which can and should speed recovery.
For more commentary come to the State of the Planet blog.
Follow Jeffrey Sachs on Twitter: www.twitter.com/earthinstitute
Mass transit reduces the cars and trucks on the road. If it's mandated, or forced, or taxed into peoples lives so that they can't aford to drive anylonger those same citizens will fail to pay their mortgage and move away from the state who imoses this on them.
Those communities that are supported ENTIRELY by mass transit, and the transit system is luxurious and comfortable and desired, those same citizens STOP driving ENTIRELY !! Look at St. Louis.
Automakers have yet to come up with an alternative that is both affordable, energy green, and wont get you killed on the average American highway. Thanks in large part to G.W. and the last 8 years.
And now we're trying to turn the ship (the Titanic) around to avoid an iceberg that is bigger than Utah. We saw the iceberg 20 years ago and each captain refused to make course changes because the elite passengers were goading and paying them to stay the course.
It's too late. Brace for inpact. Sound the collision alarm. All I can say is that if you saw the movie Titanic you know what happens to the poor bastards below decks.
Let the companies who invested in failure, FAIL !!
Spend money on upcoming NEW companies that can help us rebuild our financial structure.
Everything you're saying about how the problem has been ignored for years is true. But I don't understand why you want to now ignore a critical part of the solution.
If you start telling the Titanic (errr I mean the U.S. Economy) they should stop using Petroleum to fuel their energy needs your not just saying buy an electric car your telling the entire staff of engineers who built the Titanic, the Owners, the Investors, the Crew, the Captain, all of the Officers aboard, and "some" of the passengers..............while the ship is underway........(not docked)..............we need to stop using fuel to continue this journey.
How do you think their going to react ? Going green is not as simple as day time television makes it sound. Those are just sound bites to help sell beer. Stop watching television news, that's just an ongoing advertisement machine, it's not " information ".
You can't legislate against an entire financial structure built in and around greed and self interest and controlled by Godless evil men and women. If the owners of these institutions had a fraction of moral or ethical fiber coursing through their veins we would have the ability to recover. They don't and we're doomed.
We'll be throwing money into a slave market expecting the slaves to be happier because of the slave owners making more money while they hold their ROI in offshore bank accounts.
The French had the best idea. Le Guillotine ! Viva La Liberte' !
The slave owners are paying the legislators to ensure they keep their slaves. And even some are paying to ditch their slaves for slaves overseas now !! And it's working !! We can all go from Slaves to beggars without masters, which is worse ?
But I do have question: Are they "godless evil men and women" or are they wicked? There is a big difference! I tend to believe the latter.
Peace
Love
Revolution
We have to CUT SPENDING first. Let's start with ending our militaristic adventures overseas. And how about shutting down the Federal Reserve and adhering to the Constitution that says only Gold and Silver should be used to back currency. Do you know why it says that? Because there is a limited supply of each commodity. The Founders knew Government would always want to spend spend spend and take take take from the lower class. They said only Gold and Silver to prevent our Government from spending money wherever and whenever they want rather than having the Fed print money out of thin air.
There is only one solution to our mess and that is cutting Government Spending!
How do you create demand if people that are working don't have disposable income and are supporting everyone else with their taxes?
(2) Immediate and sizeable spending increases in the stimulus package should be directed to a few areas: significant support for our crisis-ridden state and local governments, especially for health (Medicaid)
I think you need to investigate Medicare and Medicaid because we are $53 trillion in the hole, I would suggest the movie IOUSA from Bill Clinton's head bookkeeper.
BTW, mass transit is a joke in many places in America, Minnesota 2.8% of people use it and people don't want to.
Second, spending is the best choice to improve the economy, provided that it's the right kind of spending.
Third, mass transit is a joke not because people don't want it, but because it's been made to be a joke! Right now I spend around one gallon of gasoline each way to work. I also spend around half an hour. If I were taking public transit it would cost me close to 8 dollars each way and take more than two hours. If they would make it more reasonable, I would utilize it!
Tax cuts have the lower multiplier effect of any stimulus measure proposed, the point of any stimulus is SPENDING which creates DEMAND, tax cuts do not create demand, consumption does, and to suggest that your tax break would be spent on new consumption rather than saving is "wishful thinking" and "disingenuous"
I agree with your second and third points State and local government should be assisted and Medicare/care should be investigated and refined.
Mass Transit however has other implications, besides lowering our consumption of foriegn oil, mass transit construction would employee thousands of people and offer thousands of other more diversity in employment options by increasing the range of their commutes, fuel cost for transit systems are significantly lower than all other forms. If Minneasota only has 2.8 people using mass transit, then I agree they should be funded, but that's just Minnesota, the East and West coast could benefit from them.
The United States is a lot like those towns: our roads are shot, our bridges are failing, our military is used up. We are outclassed in medical care by countries with a tenth of our GDP, our internet services and phone plans are laughing stocks in Europe (where you have dozens of providers at speeds that are doublethat available in the US for a fraction of the cost). Rumania makes our phone infrastructure look quaint.
We have spent the last 40 years living on borrowed time. At some point everything will come to a halt. When our bridges, ports and roads are useless, it will be past the time to replace them.
You can't keep eating your seed corn. You can't keep spending your capital. To even try is foolish and the insistence on doing so is pathological.
The Republicans need rehab as much as the country does. It's time to wake up and smell the crazy.
You cannot simply keep raising taxes and expect businesses to continue to hire workers and expand! They reach a point where they go out of business since they cannot produce at a profit.
Deficit spending only makes sense if the debt being taken on can pay off the debt being added. Food stamps and airport security equipment are sunk costs and provide no real ROI.
Eliminating payroll taxes puts money in people's pockets and eases suffering. Also, why no mention of foreign policy cuts, foreign aid cuts or NASA cuts? Those are all wasteful...
http://inthon.wordpress.com/2009/02/09/why-the-stimulus-package-will-not-work/
How long have you spent standing in lines at airports that have insufficient security equipment?
Defense spending cuts? Now, that actually makes sense. We could cut our military spending 50% and still spend five times what the next biggest spender spends. It seems much too easy for us to go to war when we have the idea that our soldiers are nearly invulnerable. Perhaps knowing our troops would actually be in harms way would cause us to limit military actions to only those that actually defend us.
Not all tax cuts are good.
Not all taxes are bad.
Why would you want to tax articles that are actually produced by industry and thereby deter production? I guess someone has to pay taxes, why not make it stock market speculators?
Check it out at: www.nader.org
The Republicans deny the concepts of "social forces," and "public goods and investment." Thus, they deny that infrastructure can increase economic growth and employment. To many of them, a recession is a time when a lot of people decide to become lazy.
If government were free, then I would be for a lot more government, but like just about everything else, government is never free. Eventually, government spending has to be paid back.
If it were free to help the poor, (For example, if it were costless to give food stamps for the poor), they would still be against helping the poor because they think its immoral to do so. Thus, in this case, Republicans are against government even though its free.