Hey, "my friends," about the economy? "How about a little straight talk?" All that palaver about cutting spending, balancing the budget? Ruinous. Can't happen. We're going to have to spend a boatload of money - borrow it, deficit spending - to get this economy going. And tax cuts won't do it; we have to rebuild America. Getting this done is the next big fight that the next president will face.
You won't hear that from John McCain Nor is it conventional wisdom. Tom Brokaw and other commentators demand that the candidates choose "priorities," or pledge to curb entitlements to get deficits under control. The Wall Street funded billion dollar Peter Peterson Institute does full page ads on the need to balance the federal budget immediately. John McCain vows to make the federal government "live within its budget just like you have to." He'll "impose a one-year spending freeze on every agency of the federal government "(except the Pentagon and veterans). "To make our economy strong again, we must reduce the burden of federal spending." His new stimulus plan for the economy is virtually all tax cuts -- the vast bulk of them to affluent folks I capital gains cuts or increased write offs for losses in the stock market. (And his old economic plan busts the budget with massive top end and corporate tax cuts).
Barack Obama pledges an investment agenda -- in new energy, in education, in rebuilding our infrastructure. Yet, he too pays tribute to the convention, promising to scrub the federal budget, pledging that each of his spending proposals is "paid for," and vowing to bring deficits down.
Eliminating waste in government spending is a Good Thing (although if the candidates were serious they'd start with the Pentagon budget, the largest source of waste, fraud and abuse, not the domestic side). But we can't duck the reality: we're headed into a deep recession and we're going to need a healthy dose of deficit spending to get out of it.
The $700 billion bailout of Wall Street isn't enough. Belatedly, Treasury Secretary Paulson has stumbled toward a sensible position on the bailout -- giving taxpayers a stake in the upside while providing banks with new capital. (But NB: he didn't demand the deal that Warren Buffett got from Goldman Sachs. That's not because he isn't a good businessman; it's because he's still conflicted about whether his client is the American taxpayer or the Wall Street club). But if it works, the bailout of Wall Street simply strengthens the arteries and the capillaries of the economy. Given the downturn, to get the blood pumping through the system will require a hefty stimulus.
Most economists now accept we are looking at a deep and potentially extended recession. We've lost nearly a million private sector jobs since the beginning of the year. Home values are declining at record rates. Exports which have been on the rise will sink as the downturn spreads across the globe. State and local employment which has been rising is about to decline, as layoffs begin to meet rising deficits. Manufacturing never recovered from the last recession. Construction collapsed with the housing bubble. Consumers -- 70% of the economy -- are tightening belts. Restaurants are already feeling it; retail stores are likely to be decimated in the coming holidays.
Interest rates are already low. Monetary policy won't help. So many economists - even Larry Summers, an devotee of Bob Rubin's emphasis on balanced budgets -- are calling for a fiscal stimulus of 2-3% of GDP -- $300 billion or so. House Speaker Nancy Pelosi is developing a program that might be raised in the special session of Congress scheduled after the elections in November.
The most effective stimulus would focus on people who need help and investments that would help. Extend unemployment benefits and food stamps, bolster Medicaid. Then, help cities and states avoid cuts and layoffs that will just make things worse. Finally, begin projects on the shelf in areas vital to making our economy more competitive in the long term, starting with a concerted drive for energy independence, investing in green building and renewable energy. We need to modernize an infrastructure -- everything from bridges to sewers -- that is literally collapsing around us. This will put people to work and help get our economy back on track.
Anything like this, however, will face deep resistance in both parties. Last week, Republicans in the Senate used the filibuster to stop a vote on a token $60 billion stimulus for Main Street, even as they were panicked into forking over $700 billion to the Treasury Secretary for Wall Street.
The modern day right believes only in tax cuts, not spending. In a recession, this is perverse. Tax breaks won't make corporations expand when the market for their products is tanking. We tried personal tax rebates in the last stimulus, and didn't get much bang for the buck. People sensibly paid down debts. And to the extent they spent the rebates Jesse Jackson called "Wall Mart gift certificates," much of the money helped sustain employment in China, not here.
More traditional conservatives in both parties -- blue dog Democrats and fiscal hawk Republicans -- oppose increased spending at all. With the deficit headed above $750 billion, they argue we can't afford it. It's time to tighten our belts. Blue dogs demand we pay as we go. That sounds good, but in a recession, it only adds to the woes. And a declining economy will only add to the deficits.
We've got a debate that focuses on what cannot happen -- cutting domestic spending and balancing the budget, and slights what must happen -- a large, bold plan to rebuild America, put people to work, and get the economy going.
Obama clearly gets this, but doesn't want to buck the austerity consensus. He's put forth various programs -- including aid to cities, extended unemployment, investment in energy and infrastructure, and a blister of tax cuts -- that add up to about $150 billion. That is not likely to be enough.
So in the debate tomorrow night, rather than hector candidates about what they'd cut to reduce the deficit, ask how the candidates plan to get us out of the swoon we are in, and what it will take to get the blood moving through this economy once more.
The Peterson Institute, where I work, has no such endowment of money, and has scholars with a variety of views on fiscal policy issues. For example, I was a leading advocate of fiscal stimulus to get Japan out of its recession in the 1990s, and I support such stimulus today. Just so people keep the two organizations separate - their missions and financial positions definitely are different, even though both try to contribute to the public debate in their own way.
When you are going to see Paulson and Bernanke thrown in jail and replaced by the guys that predicted long time ago what is happening now, you should go again in business as usual.
Somebody should disconnect the derivates from real economy, or other way the economy will be killed. It is a 600 trillion problem which can not be fixed with 700 billion bailing. The real economy should and must be separated by the Grand Casino set up by a bunch of thieves.
Tax the "rich", eliminate loopholes that corporations have depended on for years, raise taxes on investment and dividends, and give that money out as government handouts to those who don't pay taxes...
I guess that's what you should expect from someone who thinks he's a modern day Robin Hood. The employers and investors in this country are the ones keeping us from going over the edge. Obama thinks he can slaughter the goose that lays the golden egg, and somehow end up better off.
Low taxes CAUSED the bubbles then the crash.
We thrived with 74-92% top income tax rate from 1934 to 1962.
Government Public Works deficit spending is what ended the Depression.
I would not raise Capitol Gains or corporate tax very much. Nor should we impose large tariffs.
Your idea of high taxes make great economies is silly.
Essentially, we have borrowed money - at least in part - to provide tax breaks to large corporations and wealthy individuals. Even the GOP isn't shameless enough to use the "tax and spend" line this year given that the obvious retort is "borrow and spend - even more."
“So what might the feds buy instead if ROI is the real metric? How about 600 wind farms or 400 solar power plants — about ten times the capacity of nuclear plants that Senator McCain has suggested we build…”
Read the rest here – http://blog.islandpress.org/196/terry-tamminen-how-would-you-spend-it
http://www.aero-news.net/index.cfm?ContentBlockID=ed668efa-03ac-4bc7-aa5d-54a9a2e9fc37
Obama's "logic" is badly lacking. The way to help is to encourage growth, lift the water for every boat not beat a few down to "help the many". This never works.
This is the most salient part of your story. If you look at a pie chart of our National Budget you would see an inordinately large wedge devoted to the Pentagon. It dwarfs domestic spending. Not counting Entitlements, it is bleeding our budget dry. I read that we spend more on defense than all the other countries in the world COMBINED!
And as Mr. Borosage points out, the Pentagon is the worst manager of taxpayer money -- there is constant fraud, waste and abuse. AND -- the Pentagon just had the audacity to ask for $450 BILLION in more spending. Until we confront this insane excess in spending than we are doomed.
I would rather see our taxpayer money spent on things that benefit normal Americans -- like roads, power infrastructure, port & border security, education, health care, product & food safety, etc. These are tangible things that benefit AMERICA -- not wasting BILLIONS of dollars on weapon systems that don't work, contractors that steal the money, no-bid contracts, fraud, waste, abuse, theft, etc.
You can be for cutting defense spending and still be Patriotic... that is a notion we have to defend.
As far as the military budget goes why hasn't there been a public outrage over the article that came out the day before 911 stating the Pentagon couldn't account for over $2.3 TRILLION in materials (wasn't it 'convenient' we were attacked the very next day...or was it?). Was this money spent on materials, paid for, then never delivered? Why isn't Rumsfeld (+ cohorts) incarcerated since this was on his watch? I smell a BIG rat here, don't you?
Since that time the Pentagon STILL hasn't shown us a set of balanced books, and even admitted their books are so screwed up they don't know if they can.
Isn't it time for oversight & accountability from these people with a constantly outstretched hand?
1. Who in their right mind would want to be president in the present economy and following Bush?
2. If you are a democrat, who would want a democratic Congress? They have an approval rating of about 10% which is lower than Bush.
3. No matter what, you will need to keep the troops in Iraq even if you plan to withdraw. By the time they are out your first term will be over.
4. And, even more frightening, the last time there was a democratic President with a democratic Congress was Clinton. After two years of liberal skipping through the tulips the american voters had had enough and the Congress went republican. Then,after Clinton, the presidency went republican.
5. We've seen Clinton and you are no Clinton, Obama. A one termer for sure.
It worked.
Then, like most fiscally responsible democrats, he became concerned with the ballooning deficit, and cut back some.
Instant recession.
So he increased the spending on DOMESTIC PROGRAM again, and the economy recovered.
The economy crashes after years of low top marginal taxes and thrives during 90% top margin income taxes.
http://www.hyperhistory.com/online_n2/connections_n2/great_depression.html
As we raised the top marginal tax to 92% from the depression causing 1925 lowering of the top tax rate to 25%, the economy stabilized, prosperity increased.
The Time line is a really good way to understand what happened.
Also this Wiki article:
http://en.wikipedia.org/wiki/Causes_of_the_Great_Depression
We know veto threats will be a thing of the past for solid programs!
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But even more important is restoration of AMERICAS SELF RESPECT by Investigating and Clearly Identifying what went WRONG in America.
We must define the causes, identify the origins, and prosecute the criminals. This will re-establish Americans confidence in American Government, Industry, and Wall Street and prevent us from making similar mistakes!
After World War II we highlighted the criminal actions of the Powerful to set the stage for a Brighter Future. This is one of those moments after this Historical 7.5 Year Crisis.
http://www.youtube.com/watch?v=Oz_rdCMXVOg