We need more government spending
Is another stimulus package what the U.S. needs right now? Commentator Robert Reich says yes -- and about $600 billion will be just enough to put Americans back to work and invest in future productivity.
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TEXT OF COMMENTARY
Steve Chiotakis: This week, President-elect Obama introduced a new economic team and revealed a plan for economic recovery. We're hearing about another stimulus package, but is that what the country needs right now? More government spending? Commentator Robert Reich says without a doubt, yes.
Robert Reich: The economy has just about come to a standstill -- not because credit markets are clogged, but because there's not enough demand in the economy to keep it going. Consumer spending is down. Investment is drying up. And exports are dropping.
Government is the spender of last resort. Which means we need a stimulus package of about $600 billion, this time focused on repairing the nation's crumbling infrastructure, helping states maintain services, and investing in new green technologies to wean the nation off oil. It's a whopping sum, but spending that puts Americans back to work and invests in future productivity. That's exactly what the economy needs right now.
Fiscal hawks will claim the government is already spending way too much. Even without the stimulus package, next year's budget deficit will run over a trillion dollars, given what's being spent bailing out Wall Street. The hawks also worry about aging post-war baby boomers causing Social Security and Medicare costs to skyrocket.
What the hawks don't understand is that when the economy has so much underutilized capacity -- unemployment soaring, factories idled, office space empty -- government spending that pushes the economy to fuller capacity will of itself shrink future deficits.
Meanwhile, Conservative supply-siders are calling for income-tax cuts, claiming that people with more money in their pockets will get the economy moving again more readily than can government. They are wrong, too. Tax cuts go mainly to upper-income people who tend to save rather than spend.
Even if a rebate could be fashioned for the middle class, it wouldn't do much good because, as we saw the last time, people tend to use extra cash to pay off debts rather than buy goods and services.
Besides, individual purchases won't guarantee and generate as many American jobs as spending on infrastructure and social services. because much of what we as individuals buy comes from abroad.
The real challenge is for government to avoid having this money go to pork projects like bridges to nowhere. That requires a true capital budget that lays out the nation's priorities rather than the priorities of powerful Washington interest groups.
Chiotakis: Robert Reich is a professor of public policy at the University of California, Berkeley. His most recent book is called "Supercapitalism."
Comments
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From Chicago, IL, 11/26/2008
Finally Robert, I am glad to agree with you again! What you said about the GDP is completely correct. Like what you said about consumer spending!! American's consumer spending at Walmart benefits China in a larger way than it does the USA. And that is because we are no longer innovating in the USA, we are just cutting costs in our corporations and and in our government. The consumer is treated to cheap chinese merchandise which benefits very few people, including the slave labor that are used to assemble the stuff. That is why we are in this downward spiral - its all cheap, without any purpose. meanwhile, all the innovation is being exported to the lowest cost bidder. We need to invest more in our American technological innovations, like green initiatives, than we do on our American financial innovations. In the long run we are all dead, so what does social security matter to us today??!!
From Virginia Beach, VA, 11/26/2008
The fact that these opinions are being put forward by someone named "Reich" is ironic to say the least. Why do we even pretend to have a constitution any more? Over half of current Federal Spending is illegal. The Federal Government is inventing money to purchase (read Nationalize) banks. People wake up every day and hold their hands out expecting the government to give them gifts. The United States of America was such a good idea. Too bad it did not work.
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