In Michigan last week, President Obama took full ownership of the economy, Bush legacy assets and all. This couldn't be more welcome as we move into the second wave of recovery.
More than a year ago, candidate-Obama had stood on a General Motors shop floor in Janesville, Wisconsin and delivered a landmark campaign speech setting out his economic philosophy. He diagnosed our malaise as the result of almost thirty years of misdirected investments. Our beggar-thy-neighbor approach had favored the privatization of privilege over the common good.
Obama spoke of how decades of these failed government policies had undermined worker security and wages. The answer was a renewed investment strategy, a reforging of the basic public-private partnership underpinning our social compact. Obama's portfolio would be judged by its ability to promote the common good.
Seventeen months later, as Obama returned to the Rustbelt, much had changed. The Janesville GM plant closed before his inauguration. Supporters are growing anxious. Thankfully, his investment strategy is not the Bush Iraq War-style shock-and-awe that we have grown used to. Instead, Obama's road to reinvestment is planned and methodical-accountable. Still, urgency not delayed gratification is Obama's overriding aim and mandate.
The American Recovery and Reinvestment Act has moved its first tranche to market. Whatever its inefficiencies, it has still provided more bang for taxpayer buck than the TARP money to date. Despite thirty years of attack on our government institutions, cities and states remain better investment vehicles than our banks. Even setting the ethic of public service off to one side, governors and mayors hope for reelection rather than to extract spectacular bonuses from the public purse.
The second tranche of stimulus money will, however, be different from the first. The typical description of the Reinvestment Act as combining direct grants with tax breaks is a mischaracterization. In fact, the Act promises two types of public works money, the direct grants in the first half and then the generous tax bond incentives in the second. This second half is now on the way.
We have yet to feel the full force of the second half of the Recovery Act. Through these tax provisions, it aims to create overwhelming incentives to move TARP money into public works. These projects are called P3s. When combined with pension fund capital and sovereign wealth, by some estimates, we are talking about upwards 450 billion dollars. This is the second wave of our recovery. It promises jobs, bridges and clean energy.
However, the specter of Bush and thirty years of privatization still haunts this public money parked in Goldman, Citi, Morgan Stanley and elsewhere. The stubborn insistence on enormous bonuses, on bypassing environmental regulation and on sidelining public participation in basic planning decisions as a precondition to cutting these P3 deals pervades. The pull by beggar-thy-neighbor privatizers to re-direct this public money to create a massive company town, where tax haven planners formulate our public policy and equal opportunity into a ponzi scheme, is still strong.
Thus, President Obama's return to the Rustbelt to make clear that the economy is now his was a reassuring sign. If the TARP banks are to be a main investment vehicle for the next stage of recovery -- as they should be, it is after all our money not theirs -- it is heartening to have someone elected rather than board appointed as our commander-in-chief.