There were no theatrics. No single women came in to protest life’s travails, no displaced workers told of the factory shut down. Speaker of the House Nancy Pelosi’s Democratic Steering and Policy Committee Forum was government as it should be. Serious people hard at work.
They didn’t sugar coat the problem. Former Secretary of Labor Robert Reich called it the “most serious economic downturn in more than sixty years.” Mark Zandi, chief economist at Moody’s Economy.com, expected this to be “the worst year for the U.S. economy since the end of the 1930s.”
But the solution is taking shape as well. Speaker Pelosi called for “bold action,” stressing both the urgency of quick action and the need for long term solutions. The broad outlines from multiple speakers and the Q&A look roughly like this.
1. Act Fast. We are heading downhill and picking up speed. Action is needed quickly to put money and energy into the economy. The fastest way to do it is to put money into hands of people who will spend it. Food stamps. Unemployment insurance. Child tax credits. It’s good for people and good for the economy, and it should be done by February.
2. Put People to Work. Repairing schools, strengthening levees, laying rail lines. These are good jobs now and smart investments in the economy for the long run. Some infrastructure needs to be “shovel-ready” so work can start and money can flow immediately, but the queue can begin now for next year’s work.
Monetary policy like lowering interest rates is good – but it’s not enough. We need not only to increase the supply of money, but to increase the demand for it. That means we should spend.
3. Build People, not just Things. Behind the drive to invest in physical infrastructure is the investment in human capital. From early childhood and pre-kindergarten education, to post-college graduate degrees in engineering, we need to invest in our people. That’s the innovation infrastructure that will power the economy when the two year stimulus package is a distant memory.
4. Think Big. The U.S. economy is huge, and actions to affect it need to be big as well. One percent of GDP is roughly $150 billion, and recommendations range from roughly 3 percent of GDP to 7-8 percent of GDP. You can do the math yourself (or just read this parenthesis: no less than $450 billion and up to $1.2 trillion is needed to affect an economy this big).
a. This is not the time to worry about deficits. This is the time to spend. We need to add money to the economy – so spending with offsets doesn’t do the trick. It just breaks even.
b. With interest rates low, this is a good time to borrow.
c. Deficits in the trillions seem big, but again it’s a big economy.Our current and expected deficits as a percent of GDP are not so alarming. (And the way to reduce the deficit as a percent of GDP is to grow the economy, not shrink the spending).
5. Problems are Inter-related, and so are Solutions. Energy affects foreign policy and our dependence on foreign oil, but also our domestic economy. New energy solutions can put people to work – improving insulation on old building, revamping the power grid, or inventing the plug-in hybrids.
Health care was also a cross-cutting theme. Starbucks spends more on health care than on coffee, and General Motors spends more on health care than on steel. It’s hard on business and harder to compete in the global economy. The problems occur at every level. A worker loses her job and with it her health care; she goes on Medicaid. Now the state has to pay for her Medicaid, but the state just lost the revenue of her payroll contribution. Health care problems amplify each other and cry out for systemic solution.
6. Act Fast, and Keep it Up. We need to stimulate now — but even if it works, everything won’t be fixed two years from now. We need to use this crisis to lay the groundwork for longterm solutions, not just postpone the next crisis.
That’s the substantive overview, but the atmospherics were important as well. I sat there in the audience, listening to the speakers and reviewing the data, and felt better about America than I have in a long time. These were serious people doing serious business. The people’s business.
They were smart and they were trying. They weren’t flailing around and blaming others. The ideas might not work – Rob Reich spoke of “experimentation” – but at least they were trying. With that in the background, maybe we can get something done.