The Next Fight

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.

Comments

[AdamPosen]

Just a factual point: those ads and campaigns about fiscal restraint are by the Peterson FOUNDATION which indeed has over a billion dollars endowment, and which has a mission to advocate for sustainable solutions to long-term challenges, including their view of budgetary sustainability.

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.

[pirea]

As long as the creators of this mess are looking for the solutions to fix the problem, you are not going to see light at the end of the tunnel.
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.

[MourningDude]

You never mentioned how Obama's basket of tax hikes will benefit the economy...

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.

[research]

Please read up on the Great Depression: links below.

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.

[Stephen308]

We "thrived" when the worlds factories were bombed out of existence and the definition of globalization was: "America is the worlds factory". Now the worlds factories are rebuilt and globalization means we have to compete.

Your idea of high taxes make great economies is silly.

[eyecon]

"Taxes" are somewhat irrelevant. Total cost of living is the issue. Some tax increases have the potential to decrease COL. For example, we all pay higher insurance rates because of a lack of universal health care. Preventative medicine is much cheaper than emergency medicine. Hospitals pass the costs off to insurance companies who pass the costs off to us. WE pay for all those uninsured ER visits. Some neonatal intensive care is the result of low birth weight which can be prevented. A few $200 doctor visits could save a half-million dollars in NICU costs.

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."

[Stephen308]

The OBVIOUS retort to that being it's now the Democratic Party Congress that is doing all the borrowing and spending.

[IslandPress]

Former Secretary of the California Environmental Protection Agency Terry Tamminen says ROI for energy/power " solar and wind generators " would have been a better ROI for the $700 billion federal bailout monies:

"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

[MatoSka]

Richard Danzig, a top Obama advisor on national security, was recently quoted by the Wall Street Journal as saying he, "...doesn't see defense spending declining in the first years of an Obama administration."
http://www.aero-news.net/index.cfm?ContentBlockID=ed668efa-03ac-4bc7-aa5d-54a9a2e9fc37

[MourningDude]

How could they? 80,000 "residual troops" staying in Iraq indefinitely costs a lot of money. And escalation in "unwinnable" Afghanistan doesn't come cheap, either.

[robotsoul]

Obama's approach to the economy is more logically sound. We need consumer-based economic growth, which means making sure the middle class and low income people have at least some disposable income that they can spend on goods and services. Concentrating capital in the top tier of income earners squeezes the middle class, especially when those top earners and companies don't have to give any of it back because of tax loopholes, and incentives.

[Stephen308]

Obama's approach is to punish the employer with higher taxes and give it to people who don't even work in some cases. That's insane. He will destroy jobs, destroy wealth, increase unemployment....all to be a slave to left wing socialism.

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.

[RayPacNW]

If we need money to invest at home, absolutely cut some from the military. We have roughly 5% of the world's population, and we account for 50% of the world's military expenditures. Think about it - we spend as much on our military as the rest of the world COMBINED. That's just ridiculous, and really doesn't reflect modern day realities. I honor and support our troops, and I think we do need to be strong. But security also includes economic well being, and security includes diplomacy and planning and strategy - all of which are a lot cheaper and more morally responsible than engaging in conflict.

[tolate2pray4me]

I agree with RayPacNW, I am a veteran and my son is serving in the Army but cutting military spending has nothing to do with the troops and everything with the Pentagon curtailing wasteful spending. I also work for a defense contractor so I know how much is wasted and the truth is if I got laid off because of the cuts I would not be upset with the administration that has the integrity to tell the truth. We need to change our focus and image in the world and not by force but by example of what we can create here at home. We should work hard to solve the energy crisis and implement these solutions immediately, start an overhaul of our infrastructure to include building public transportation systems that are safe and work, there are many domestic projects we could start on with the savings from the pentagon budget that would create jobs, stimulate the economy, and repair our broken cities. I work on a program where the government bureaucrats greatly outnumber the productive engineers and collect hefty paychecks for their mostly incompetent contributions. Bring our troops home from around the world, close military bases abroad that pump our tax dollars into foreign economies, enough with the foreign aid until we take care of Americans first! Yes, I could lose my job but with other opportunities creating by a robust domestic agenda I am sure I can find another.

[priorato]

"... if the candidates were serious they'd start with the Pentagon budget, the largest source of waste, fraud and abuse, not the domestic side..."

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.

[MourningDude]

McCain is the only one that has talked about reducing defense spending. He talked about it explicitly in the debate, where he said that the entire process of purchasing and contracting need to be overhaled and updated.

[PaulMagillSmith]

Who can trust McSame, since he agrees with Bush over 90% of the time?

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?

[twofish]

I'm sure Dennis Kucinich has talked about this, and it wouldn't surprise me to find out Ron Paul has. The problem is that any Democrat who proposed this would get called commie-symp peacenick whackydoodle by the right wing propaganda machine. So only someone with solid (if phony) "defense" credentials on the right can even make such a statement. Rest assured, McCain wouldn't be allowed to make any big changes. The military-industrial complex was once called military-industrial-congressional complex. This money is glorious pork to congress critters of all orientations.

[bethel1974]

Also from my comment early. The $70-$80 billion that is in surplus in Iraq we should present to the world court we should procure some if not all of that money which by Jan 1. should over $100 billion dollars. That will be to pay back America some of the money we have wasted on this country. We will never get any oil out of them anyway. Second,eliminating outsourcing tax and bring jobs back to American soil will give the economy a big boost as well. More corporate taxes and Americans with jobs. I worked in the credit card industry and most credit card call centers are in India or Puerto Rico (sorry Puerto Rico but times are hard). Even at the call center in NC we had to use interpreters to talk with our customers and internally. Most computer call centers are in India we need those jobs here. China is not the manufacturing cost saver it use to be because the price of fuel to get the containers to the USA is to the moon. (container cost have quintupled since last year anywhere from 15,000 to 25000 per container)

[FirstShirt]

Look, conservatives should just accept the fact they will lose and look on the bright side:

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.

[RayPacNW]

I don't understand why there needs to be a "bright side" for conservatives. I know this sounds extreme, but haven't they destroyed enough? Wars of choice, massive wealth distribution to the rich, destruction of public confidence, the list goes on. Since the richest 400 people now control as much wealth as the lower 100 million, hasn't enough pickpocketing occured?

[Stephen308]

Have you considered that Obama might party ways with the far left socialists in order to become a two term president? It doesn't seem likely but it might happen.

[research]

FDR used deficit spending AND tax increases on the top incomes.

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.

[JohnShank]

Actually, I always understood that FDR's economic policies did very little to help things in the U.S. It was World War II that really boosted things. However, he at least was trying SOMETHING. I don't care for Bush even a little, but at least he didn't just sit there and do nothing. Perhaps he was tardy to the party, but he and the congress are trying to do SOMETHING to help. Hopefully it will.

[research]

The Economy had already recovered, with 14% GNP growth some years and declining unemployment. in 1934 onward all but one year, where FDR tried to reign in the growing debt by reducing spending.

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

[research]

Read up on FDR, his policies worked in just 4 years, unless you talk to some GOP economists who gave us this mess.

[twofish]

My Dad and at least one uncle were in the CCC (Civilian Conservation Corps) clearing firebreaks and building roads and bridges in the 30's. It made a difference in their households, and they could feel proud of sending some money home instead of feeling like nothing for being out of work.

The something Bush has tried is a $700 billion heist at the end of his term. So long, suckers, he says, heading out the door.

[JoeBlough]

Can we stop wasting money on Iraq? No return on investment there. Let's build our infrastructure first.

[PT6]

The Next Fight is to prevent Filibusters! Democrats must win at least 60 seats in the Senate to prevent filibusters!

We know veto threats will be a thing of the past for solid programs!
___________________________________________________________________________

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.

[jayelo]

This is a good one.
http://www.youtube.com/watch?v=Oz_rdCMXVOg