Recovery!?!

Paul Krugman wants policy makers to face reality:

The small sliver of truth in claims of continuing recovery is the fact that G.D.P. is still rising: we’re not in a classic recession, in which everything goes down. But so what?

The important question is whether growth is fast enough to bring down sky-high unemployment. We need about 2.5 percent growth just to keep unemployment from rising, and much faster growth to bring it significantly down. Yet growth is currently running somewhere between 1 and 2 percent, with a good chance that it will slow even further in the months ahead. Will the economy actually enter a double dip, with G.D.P. shrinking? Who cares? If unemployment rises for the rest of this year, which seems likely, it won’t matter whether the G.D.P. numbers are slightly positive or slightly negative.

All of this is obvious. Yet policy makers are in denial.

Not only is Krugman right, the consequences of this denial may be catastrophic politically for the Democrats. Working people and the white collar unemployed have lost patience with the happy-talk from the Obama administration. Talking about being disappointed with the slow pace of the recovery won't cut it. Only by laying out a bold plan for putting millions back to work can the President regain the confidence of American voters. It may be time to propose a huge W.P.A. style jobs program.

Kuttner argues that exaggerated fear of deficits blocks economic recovery

Robert Kuttner has an interesting piece in which he criticizes the timidity of President Obama and Erskine Bowles on the issue of government spending.

This fall, Congress will either follow the conventional wisdom and prematurely cut government outlay before an economic recovery arrives, or it will increase public spending, put jobless Americans back to work, and reduce the deficit in a less painful fashion thanks to increasing economic tailwinds. The road that Congress takes depends on presidential leadership.

Kuttner goes on to quote approvingly from Yale economist Robert Shiller who asks the Obama administration to consider direct government job creation, W.P.A. style. While most of what Kuttner says makes a lot of sense, I don't feel Democrats need to do what Republicans under Reagan and the Bushes did for so long, and ignore the deficit. Kuttner is right that recovery will require some government spending. Yet there is a better alternative than deficit spending.

Bite the bullet, and end huge subsidies to the oil industry and other corporate interests that contribute so much to Congressional campaign coffers. Admit the fact that the wealthiest Americans caught a huge break with the Bush tax cuts, and that these cuts for them should expire as scheduled in 2011. Make it less financially attractive to ship jobs overseas. Begin enforcing our nation's labor laws, so that working and middle class people might have a little money to spend and thus stimulate the economy.

President Clinton was also criticized for being too concerned with the deficit. Yet the economy was quite healthy after his tax increases were adopted, and the deficit reduced. We may not be able to match Clinton's feat of actually producing a surplus, yet we shouldn't abandon the goal of striving towards a balanced budget.

Voodoo Economics

George Bush the Elder was by no means a good President. Yet he at least seemed to be sometimes aware of reality. Before he served as Vice President in Ronald Reagan's administration he accurately labeled as "Voodoo Economics," the notion that massive tax cuts for the wealthy, coupled with huge increases in defense spending would lead to long-term prosperity for the United States. Ironically, a major factor in his loss to Bill Clinton was that the myth of Reagan's success, in performing just this kind of magic, made it politically impossible for a Republican President to do what Clinton accomplished-- balance the budget.

"No nation has ever taxed and spent its way to prosperity." George W.Bush 7/6/2007

Well, O.K., if you don't want to count France, Germany, Italy, Ireland, Great Britain, Denmark, Sweden, Japan and every other major postwar economic power.

What is undeniably true is that no nation has ever recklessly borrowed its way to prosperity.

When lil'Bush took office in 2001 our national debt stood at $5,728,195,796,181.57 As he tearfully announced Rove's resignation this Monday our national debt had risen to $8,969,936,197,090.19. So what did the U.S. get for the more than $3.2 trillion in new debt, taken on by our government, so far under lil'Bush's watch? Did over a thousand economically depressed areas in the U.S. each receive at least $320 million in development aid? Did every state in the union receive billions for necessary repairs to highway bridges, dams, and other infrastructure? Or, have real wages fallen for the vast majority of U.S. taxpayers? Has a first-class college education become prohibitively expensive for all but the wealthy and superstar athletes? Have we sunk billions into an Iraqi quagmire, gaining nothing but deeper enmity in the Arab world and the death of many thousands of people? What are we getting for our hard-earned money?

My friend Manny possesses a rare skill as a builder of high-quality yachts. The Rhode Island company he works for is one of the few in the nation who can, honestly, say that Bush's redistribution of wealth to the obscenely rich has helped its business. Yet, Manny tells me no one at the yard, including his boss, has anything good to say about lil'Bush. They, like over 70% of their fellow citizens, have recognized the Cheney/Bush administration as a national embarrassment and a fraud.

And so I ask Nancy Pelosi: "Off the table? Are you f#%*ing insane?"