At his Brookings speech today the president outlined his economic plan. It has all the right pieces and it points in the right direction. But something is missing.
Start with the good news. The President understands how bad the situation is. The greatest crisis since the Great Depression, one in four homes underwater, losing 700,000 jobs a month before the Recovery Act passed, etc., etc. The President tries to call attention to good news (job loss down to 11,000 last month) but he isn’t fooling himself. This isn’t George Bush telling us “the fundamentals are strong.” It’s bad, and he knows it.
The Recovery Act was a step in the right direction. The plans announced today keep it going. The basics are relief to states and localities to so they don’t have to layoff police and school teachers, and emergency assistance for individuals like COBRA and unemployment benefits. Moving beyond the basics, Obama proposes an important new round of infrastructure spending on roads, bridges and water systems. He outlined incentives to homeowners to improve home energy efficiency (bizarrely nicknamed “Cash for Caulkers,” to recall a program widely (if wrongly) considered a failure). Other elements like the elimination of some capital gains taxes are more puzzling, but at least he’s trying. Some of the money will even come from the TARP fund, so it looks like money moving from Wall Street to Main Street.
It’s all good. But here’s the problem. It’s not enough. Paul Krugman calls it “too little of a good thing.” Robert Reich says it “doesn’t measure up.” “We need a federal government that moves boldly and swiftly to counter-balance the huge recessionary forces still at large.”
That’s where we come in. Worries about the deficit tend to shrink the plans. The hundreds of billions of dollars needed to solve our problems — putting people to work fixing schools and laying high speed rail — would add to our already intimidating deficit.
It’s fair to be concerned about deficits in the long run, but the long range worries shouldn’t constrain short range thinking. The best way to reduce the deficit is to grow the economy. That might cost money at the outset. In the words of our commander in chief:
“There are those who claim we have to choose between paying down our deficits on the one hand, and investing in job creation and economic growth on the other. But this is a false choice. Ensuring that economic growth and job creation are strong and sustained is critical to ensuring that we are increasing revenues and decreasing spending on things like unemployment so that our deficits will start coming down.”
He said the same at last week’s Jobs Summit. Spending money to put people to work is not a deficit problem. It’s a necessary step for economic growth.
“Now, if we can't grow our economy, then it is going to be that much harder for us to reduce the deficit. The single most important thing we could do right now for deficit reduction is to spark strong economic growth, which means that people who've got jobs are paying taxes and businesses that are making profits have taxes -- are paying taxes. That's the most important thing we can do."
I’ve written in the past that some people are hysterical about deficits. People who matter like Krugman and Reich say it louder and more effectively. Obama asked for everyone’s help:
“That's not always the dialogue that's going on out there in public and we're going to have to do a better job of educating the public on that."
Educating the public is partly our job. We need to talk about budgeting responsibly in the long run AND kick starting the economy right away. We need to move past the “false choice” between jobs now and growth later. We can do both. Put people to work building the bridges that we need. We get good jobs now …and we get to keep the bridge.
Our problems are big. The solution needs to measure up.
