Finally, Some Good Ideas for Saving the Economy!

James Galbraith is actually one of those economists who understands economics. Go figure! So really, it's a relief to see he's thinking up good ideas for real stimulus.

– make aid to states and localities flexible and open-ended. The goal should be to stop all cuts in public services and layoffs of staff. States and localities should be offered a simple deal: no service cuts and no changes in tax rates. In exchange, the federal government will cover the gap in their revenue for the duration. Alternatively, the federal government could simply offer general revenue sharing on a per capita basis.

– establish and fund a full-fledged National Infrastructure Fund with the capacity to finance and to coordinate public investment projects on an ongoing basis. Congress would therefore largely delegate decisions over the type of local capital investment, including school construction which was cut from the Senate bill for no defensible reason.

– increase Social Security benefits across the board. The purchasing power of the elderly as a group is now gravely eroded by the collapse of stock market values, and the policymaking community needs to realize that the grand experiment in funding retirements via the stock market is ending. For the future we will need more Social Security, not less. And that means that the historic political link between Social Security benefits and the revenues from the payroll tax should be suspended.

– declare a full payroll tax holiday for the duration of the crisis. A holiday has advantages over the credit scheme, as it can be implemented at once for all workers and employers. The holiday could be made subject to a trigger, so that when the economy does begin to recover rapidly, part of the tax can be restored.

– pursue the foreclosure moratorium just announced, establishing the equivalent of a Home Owners Loan Corporation to deal with troubled mortgages, via renegotiation or conversion to rentals. This can be done, largely, through Fannie Mae, Freddie Mac and the Federal Reserve Board, but it will require sufficient staff to inspect and supervise mortgages at the retail level. Apart from this, and the ongoing nationalization of commercial paper markets, there isn't much more to expect from the Federal Reserve at this point.

Why can't the media give folks like him who get it right more of the attention he deserves?

Reality Bites

Dammit. Paul Krugman has ruined my Valentine's Day!

[...] These aren't normal times, so normal political standards don't apply: Mr. Obama's victory feels more than a bit like defeat. The stimulus bill looks helpful but inadequate, especially when combined with a disappointing plan for rescuing the banks. And the politics of the stimulus fight have made nonsense of Mr. Obama's postpartisan dreams.
...

But it's now clear that the party's commitment to deep voodoo - enforced, in part, by pressure groups that stand ready to run primary challengers against heretics - is as strong as ever. In both the House and the Senate, the vast majority of Republicans rallied behind the idea that the appropriate response to the abject failure of the Bush administration's tax cuts is more Bush-style tax cuts.

And the rhetorical response of conservatives to the stimulus plan - which will, it's worth bearing in mind, cost substantially less than either the Bush administration's $2 trillion in tax cuts or the $1 trillion and counting spent in Iraq - has bordered on the deranged.

...

For while Mr. Obama got more or less what he asked for, he almost certainly didn't ask for enough. We're probably facing the worst slump since the Great Depression. The Congressional Budget Office, not usually given to hyperbole, predicts that over the next three years there will be a $2.9 trillion gap between what the economy could produce and what it will actually produce. And $800 billion, while it sounds like a lot of money, isn't nearly enough to bridge that chasm.

OK, no he hasn't. I still love him, and he's still 100% correct. The "post-partisan" illusion has been destroyed. We're starting to realize that $787 billion isn't nearly enough of a "stimulus" to bring our economy out of what may become another "great depression". Today's Valentine's Day, and all I can do is think about the massive hole we're in and what we can do to get out of it.

Dammit.

House Dems Do Their Own Stimulus

And so far, this is looking much better than Obama's first proposal.

House Democrats are circulating an $825 billion economic stimulus measure that emphasizes health care, education and highway construction as well as tax cuts for individuals and businesses.
A summary of the measure shows spending totaling roughly $550 billion and tax cuts of $275 billion, although the totals are expected to shift considerably as Congress works on the bill.

Let's hope the final package looks more like this. Keep up the good work, Congresscritters!

Don't Be Stingy on Our Stimulus

When President-Elect Obama first released his economic stimulus plan, I was underwhelmed. Corporate tax breaks? No undoing of the disastrous Bush tax cuts? Only $775 billion?

Fortunately, the response from Democratic Congressional leaders and progressive economists has been great. They've challenged Obama to agree to a better bill, and now we may have a better chance at seeing a better stimulus passed. Believe it or not, it often takes some pushback and a whole lot of standing our ground to get something good accomplished.

While I may not agree with him on everything, David Sirota made some great points today at Open Left on what progressives need to do to win a stimulus that actually works. We need to stand our ground in saying no to silly "entitlement reform" gimmicks that are only meant to finish what GW Bush started in privatizing Social Security & Medicare. Furthermore, we must also resist "tax relief" gimmicks that are only meant to continue redistributing wealth from the working class to the "American Oligarchs".

Of course, we can't just resist awful "ideas" from the radical right. We must also promote our own good ideas, as A Siegel has done. We shouldn't just settle for "infrastructure spending", but push for "green economy" infrastructure. We can create good jobs and reduce our carbon footprint by developing more renewable energy, building high-speed rail lines, supporting carbon neutral building, and much more. Building green will actually stimulate more green, if you know what I mean.

But is it really all that important to be so ideological when Obama wants to be pragmatic? This is a false dichotomy. The fact is , as Jane Hamsher points out so well, that progressive ideas for spending will be more effective in stimulating the economy than tax cut panders to the GOP. Now this doesn't mean that no tax cuts should be included in the final bill, but it's utterly ridiculous for a $775 billion bill to include $310 billion in tax cuts that only yield a return of about $1 for every dollar spent. This isn't about "ideology vs. pragmatism", but rather about pragmatically utilizing proven progressive Keynesian economics to provide real relief to the American people.

So what should we do to get a real stimulus passed? We need to continue pushing Obama to care less about whipping 80 Senate votes for the bill, and more about achieving more bang for our bucks. We need to keep pushing Congress to pass good legislation. Basically, we need to keep being loud & refuse to give up.

We've already succeeded in having Obama drop corporate tax breaks from his stimulus proposal. Let's keep up the good work! Now, we should push to include good spending in this bill.

Call your local Congresscritters. Write to the Obama Transition Office. Raise some hell until we get a stimulus that isn't stingy to us.

Now It Looks Like Recession

Damn. 533,000 jobs lost in just one month. 6.7% unemployment. Our economy is in a downward spiral.

And again, this is why we can't afford "fiscal conservatism" now. We don't need "belt tightening" now. We need to stimulate this economy!

President Obama must be ready to tackle this on January 20. He must be ready to get people back to work & put money in people's hands ASAP. This is recession now, and we can't afford to continue falling down much lower.