Counter Conservative Attacks on Obama’s Economic Recovery Plan

Myth #1—The proposed recovery package is too big.

Answer—The American economy is gargantuan; the Gross Domestic Product (GDP) totals about $14 trillion per year. Right now, the economy is like a train that has begun to roll backwards toward a cliff. A successful economic recovery plan must be a mighty engine that can pull the economy forward by creating millions of jobs. A locomotive that is too small simply can’t do the job. No other engine is available. Families are tightening their belts. Business is laying off workers. Banks aren’t making loans. Exports are down as the recession goes global. State and local governments are planning deep cuts. Interest rates are already at near zero. Only the federal government remains to provide the lift we need. Economists agree with Obama advisor Lawrence Summers that, “In this crisis, doing too little poses a greater threat than doing too much.” [Paul Krugman [1]]

Myth #2—We can’t afford it; it’s a budget-buster.

Answer—No one likes deficits near an unimaginable $2 trillion in one year. But the costs of doing nothing are far worse. We can’t afford an unchecked recession that would batter our economy for years to come. We can’t afford an unemployment rate that could soar over ten percent. We can’t afford the poverty, increased crime, escalating social-services costs, and decreased revenues that would result from a long recession. In short, an economic recovery plan that works will be far cheaper than the alternative. [Congressional Budget Office [2]] And in fact we can afford it. Across the world, investors are rushing to buy U.S. bonds, so we can finance this debt at remarkably low interest rates.

Myth #3—Budget deficits must be avoided at all costs.

Answer—Herbert Hoover proved that balancing the budget during a recession is a recipe for depression. Economic recovery and job creation require deficit spending. Individuals and businesses are cutting back. That will cause millions to lose their jobs and send the economy on a downward spiral lasting for years—unless the government fills that hole by spending hundreds of billions itself. [Center for American Progress [3]]

Myth #4—It’s irresponsible to borrow billions to pay for the economic recovery.

Answer—Right now, individuals, businesses and foreign countries are willing to lend billions to the U.S. at an interest rate very close to zero. They’d rather place their money where it’s safe than risk big losses investing elsewhere. If you could borrow money without paying interest, you would. America needs this money to jump-start the economy and create jobs, so it should. [Bloomberg [4]]

Myth #5—Tax cuts stimulate better than spending.

Answer—The types of tax cuts favored by conservatives are terribly inefficient for stimulating the economy. Mark Zandi of Moody’s Economy.com (a Republican) calculates that spending to rebuild America’s infrastructure is five times more effective for creating jobs than are cutting corporate taxes or making the Bush income tax cuts permanent. [Moody’s [5]] We tried tax rebates last Spring. They had little effect because less than 20 percent of the 2008 tax rebates were used in a way that stimulated the economy. [University of Michigan [6]]

Myth #6—Spending on infrastructure will turn into an orgy of waste, fraud and abuse.

Answer—We suffer a staggering public investment deficit. A recent report from the Institute for America’s Future shows that American roads, bridges, levees, canals, and schools are falling apart from neglect. We need to invest in rebuilding America, which will create hundreds of thousands of jobs. Barack Obama says he will not allow any earmarks in his program. If any “Bridges to Nowhere” are proposed, they will be cut out. And while there will inevitably be some waste, it will be insignificant in comparison to the trillions squandered by private banks on speculative follies. [Institute for America’s Future [7]]

Myth #7—Stimulus only works if the money is spent quickly and only tax cuts can be done quickly.

Answer—It’s true we need to act quickly; this legislation can’t be delayed. In fact, the Obama plan targets projects that can be implemented quickly, including: aid to states for health care, child care, and other underfunded services that employ a lot of people; increases in food stamps and unemployment insurance to protect the vulnerable; and “shovel ready” projects to rebuild roads, bridges, waterways, and schools. [Change.gov [8]]

Myth #8—It’s wrong to bail out spend-thrift states; Let them stimulate the economy themselves.

Answer—Almost every state, controlled by Democrats and Republicans, liberals and conservatives, is facing a budget crisis. These states are required by their constitutions to balance their budgets every single year, and a year ago they were in balance. But the recession has blasted a hole in their revenues and drastically increased their spending needs for health care. Without aid, states and cities will be forced to layoff teachers and police, raise college tuitions, cutback on medical services, and raise taxes—all of which would add to the downturn. [Center for Budget and Policy Priorities [9]]

Myth #9—Keynesian economics doesn’t work. It didn’t work during the Depression. It didn’t work for Japan in the 1980s.

Answer—LOL. This is an absurd attempt to rewrite history. Nobel prize-winner Paul Krugman debunked these claims in his book, “The Return of Depression Economics.” But more important, why would anyone believe the very conservative ideologues who are responsible for our current economic crisis? What’s been proven conclusively is that conservative economics doesn’t work. [Paul Krugman [10]]

Myth #10—This is a partisan, Democratic program.

Answer—Conservatives and Republicans, including Federal Reserve Chairman Ben Bernanke, the U.S. Chamber of Commerce, the National Association of Manufacturers, and economists such as Harvard’s Martin Feldstein, have come out for a large economic recovery package. Businesspeople especially know that this recession is killing us. [The Hill [11]]