Mythbusting the Obama Recovery Package
http://www.truthout.org:80/011109E
The self-serving myths about President-elect Barack Obama's economic
recovery plan are starting to fly so thick and fast that we have been
working full-time to keep ahead of them. Here's what you need to know
to fire back.
Here it is: our moment of economic truth. We're standing at that
historic fork in the road where the nation decides, now and for the
foreseeable future, whether it's going to hang on to the catastrophic
assumptions of the free-market fundamentalists and rely once more on
the nostrums that have so far failed to fix the mess, or take a bold
step down a new, more progressive path that will finally re-empower
the American people to build an economy that works for us all.
As usual, the conservatives have absolutely no conscience about
what they did to create this mess. If they did, they'd all be holed
up
in their gated communities or on their private islands, embarrassed
into silence at best and terrified of peasant uprisings at worst.
Instead, they're jetting into D.C. en masse in a last-ditch attempt
to
head the country off - or at least make sure that any money that does
get spent ends up, as it always has, in their pockets.
To that end, the self-serving myths are starting to fly so thick
and fast that the staff here at CAF has been working full-time to
keep
ahead of them. Here's some of what they're flinging in this latest
B.S. storm - and what you need to know to fire back.
1. The proposed recovery package is too big.
False. Most progressive economists agree (and Paul Krugman is
downright emphatic) that it's going to take a minimum of a trillion
dollars of well-placed investment to pull our economy out of this
ditch. This is no time for half-measures, blue-ribbon committees,
pilot projects, or trial balloons: this is a life-or-death crisis
that
requires immediate and massive intervention.
CAF Senior Fellow Bernie Horn puts it this way: "The American
economy is huge and it's at a standstill. It's like a motionless 100-
car freight train - or one going backwards slowly. A small locomotive
simply can't pull it forward. We need an engine large enough to work,
one that can create millions of jobs. If anything, a $775 billion 2-
year plan may be too small rather than too big."
Dean Baker of the Center for Economic and Policy Research echoed
this same thing on Rachel Maddow's show last Tuesday night. It's got
to be big. And it's got to be now. Anything too small - or too late -
and the American economy will be at serious risk of stagnating the
same way Japan's did in the 1990s.
2. If we can't afford (insert pet project here), we certainly
can't afford this.
Yes, we can. What we really can't afford is a huge recession that
undercuts the tax base. That's a vicious cycle that will make it
increasingly harder to dig out the longer this goes on. The
Congressional Budget Office projects that the current slowdown will
cost the federal government $166 billion in lost tax revenues in 2009
- a number that could easily get even larger in coming years if we
fall into a real depression. If we get on that trendline, we could
lose a trillion dollars in government revenues by the end of Obama's
first term. We need to invest what we have while we still have it if
we hope to have a strong economy going forward.
This argument is based on the limited view that wealth is mainly
generated by loaning or borrowing at interest - a common enough
assumption among financial people over the past 30 years. A more
progressive view is that real wealth is generated by labor, combined
with access to resources required for production. Putting people to
work creates wealth. So does ensuring that our current failing energy
regime is replaced as rapidly as possible with one that's infinitely
renewable and that we will finally be in full control of. And so do
other kinds of infrastructure investments, which form the footing on
which a new round of businesses can rise and thrive.
Businesses have always invested their capital to create more
capital. The best parts of Obama's proposal involve getting the
government to do the same thing. Conservatives are resisting this
because don't believe that there's such a thing as the common wealth
-
which is how they've rationalized their plundering of our common
assets. We need to make it absolutely clear that we do believe in the
common wealth - and that their assaults on everything that allows
America to generate national wealth are going stop, right here and
right now.
3. It's more important to balance the budget. Fix that, and the
rest will take care of itself.
Read history much? Herbert Hoover is history's poster boy for the
idea that balancing the budget during a recession is the best way
known to turn it into a full-on depression. And that wasn't a one-
off:
FDR repeated the lesson in 1937, when he succumbed to the pleas of
budget-hawk conservatives and tried to balance the budget - a move
that put the brakes on what had, until then, been a solid recovery.
Looking forward, this year's numbers also show the case clearly.
Economists are already estimating that spending by individuals and
businesses will be off by $300 to $500 billion in 2009. The upshot of
this will be millions of lost jobs, which in turn will mean even
lower
spending and more job losses next year as the country accelerates
toward depression.
The only way to halt this slide is for the government to step in
and fill the hole with an additional $300 billion-$500 billion of its
own spending - and to spend that money on investments that will
create
as many jobs as possible. The longer we wait, the more government
spending it will ultimately take to pull us out of this - and the
less
able we'll be to muster that much cash.
Balanced budgets are important, but not as important right now as
making sure every American has a paycheck they can count on. We can't
afford to sacrifice the fate of the entire country to this one
economic ideal.
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