December 22, 2008


The most important thing mentioned by Galbraith is revenue sharing. This is something anti-local liberals don't like but it would be one of the fastest ways to get the money to the right place. The grad school mentality running the bailout has so far totally ignored the importance of programs that the public can see and feel, which are not only more equitable but which would help create a recovery rather than a depression spirit in America as a whole. James Galbraith, Mother Jones - Nearly everyone in Obama's circle agrees that more public spending and tax cuts are needed: a "stimulus package." The cautious say $150 billion (about 1 percent of GDP), while the bold and the worried say $500 billion (or just more than 3 percent of GDP). Both focus attention on what is needed in 2009 -- as if the economic problem can be solved in a year. That is almost certainly wrong. . . The historical role of a stimulus is to kick things off, to grease the wheels of credit, to get things "moving again." But the effect ends when the stimulus does, when the sugar shock wears off. Compulsive budget balancers who prescribe a "targeted and temporary" policy followed by long-term cuts to entitlements don't understand the patient. This is a chronic illness. Swift action is definitely needed. But we also need recovery policies that will continue for years. First, we must fix housing. We need, as in the 1930s, a Home Owners' Loan Corporation to restructure failed mortgages on sustainable terms. The basic objective should be to keep people in their homes by all necessary means, except where borrowers committed willful fraud, so as to stop the spread of blight and decay. . . . Second, we must backstop state and local governments with federal funds. Otherwise falling property (and other) tax revenues will implode their budgets, forcing destructive cuts in public services and layoffs for teachers, firefighters, and police. And when these public servants are laid off, guess what? They have trouble paying their mortgages. General revenue sharing -- unrestricted federal grants to states and towns, a program invented by Richard Nixon and killed by Ronald Reagan -- is required. Luckily it can be reintroduced quickly on a large scale. . . Third, we should support the incomes of the elderly, whose nest eggs have been hit hard by the stock market collapse. We can't erase those losses case by case (nor should we), but we can sustain the purchasing power of the group. The best way is to increase Social Security benefits. Useful steps would include boosting the formula for widowed spouses, ensuring a minimum benefit for retirees who worked their whole lives in low-wage jobs, and allowing college students to receive survivors' benefits up until the age of 22. . . Fourth, we should cut taxes on working Americans. Obama proposes to effectively offset the first $500 of Social Security taxes with a refundable credit. It's a good idea, but can be expanded. If the economy continues to spiral downward and a really large fiscal boost is needed, let's declare a payroll tax holiday, funding Social Security and Medicare directly from the treasury, until the economy gets back on track. . . Finally, we must change how we produce energy, how we consume it, and above all how much greenhouse gas we emit. That's a long-term proposition that will require research and reconstruction on a grand scale: support for universities, for national labs, for federal and state planning agencies, a new Department of Energy and Climate. It's the project around which the economy of the next generation must be designed. It's the key to future employment and future growth -- and to our physical survival.


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