Let's Get Fiscal By MIKE WHITNEY

[Crewleader]

November 17, 2009

More Stimulus, More Government Jobs Programs, More Debt Relief


"Our greatest primary task is to put people to work. This is no unsolvable problem if we face it wisely and courageously. It can be accomplished in part by direct recruiting by the Government itself, treating the task as we would treat the emergency of a war, but at the same time, through this employment, accomplishing greatly needed projects to stimulate and reorganize the use of our natural resources."

Franklin D. Roosevelt, Inaugural Address, March 4, 1933

There's no reason why a sharp-witted politico like Barack Obama can't survey the wreckage around him and draw the same conclusions as FDR. The unemployment crisis should be the president's first order of business; Job 1. Instead, Obama is paralyzed by indecision, unable to settle on a policy that he's willing to stick with through Hell-or-high-water. His lack of resolve shows that he's got his priorities mixed up and that he's getting bad advice from his lieutenants. The economy needs more jobs to get back on track and make up for flagging demand. Those jobs are not going to come from the private sector which is struggling just to stay afloat. They'll have to be created by the government; major public works programs expressly designed to put millions of people back to work. These are precisely the kind of programs that conservatives and Libertarians despise, which is important, since it lays the groundwork for a national debate on the role of government. This is a debate that Obama can win, provided he stops waffling and shows some moxie.

Unemployment has reached a 26-year high of 10.2 percent, but the "real" rate of joblessness (underemployment) is now hovering at 17.5 percent. These are Depression-era numbers. The Fed's zero-rate policy and liquidity-injection programs have sparked a 62 percent rally in the stock market since early March, but had no material effect on unemployment which is headed higher. A growing number of economists, including Paul Krugman, Nouriel Roubini and Marshall Auerback, are calling for bold action to stop the bleeding and put the country back to work. But the poll-driven Obama administration is afraid to break with the "pro growth" small-government dogma which has guided state policy for the last 30 years. Obama knows the economy needs another round of stimulus, but he's afraid to move forward for fear of offending Wall Street and fatcat party donors who see any expansion of government as a threat private profit-making. As a result, the economy continues to be whipsawed by rising joblessness, soaring defaults, and tighter credit. Here's a quote by Obama's chief economic advisor, Lawrence Summers, which helps to clarify the point:



Indeed, in the current circumstances the case for fiscal stimulus -- policy actions that increase short-term deficits -- is stronger than ever before in my professional lifetime. Unemployment is almost certain to increase -- probably to the highest levels in a generation. Monetary policy has little scope to stimulate the economy given how low interest rates already are and the problems in the financial system. Global experience with economic downturns caused by financial distress suggests that while they are of uncertain depth, they are almost always of long duration.

The economic point here can be made straightforwardly: The more people who are unemployed, the more desirable it is that government takes steps to put them back to work by investing in infrastructure or energy or simply by providing tax cuts that allow families to avoid cutting back on their spending. ("A Bailout Is Just a Start", Lawrence Summers, Washington Post)

The article was written by Summers in September of 2008, which shows that he knew what needed to be done more than a year ago. That's impressive, but where are the infrastructure and green technology projects that were promised? Where are the new jobs?

http://www.counterpunch.org/whitney11172009.html