All we really know about the financial industry bailouts and the economic stimulus plan are their enormous potential costs: at least $2 trillion combined, which is likely to balloon to $3 trillion or even $4 trillion, plus additional trillions of costly credit from the Federal Reserve, with very uncertain payback.
However, what is most immediately alarming about the bailouts and the $787 billion stimulus package are the daily indications that they still fall woefully short–in dollars and particularly in focus–of what is needed to confront the emergency economic conditions we face. And emergency conditions they are, with the US economy having contracted at an almost unbelievable annualized rate of 6.3 percent in the last three months of 2008, a terrible quarterly performance rivaled only four times since the Great Depression.
The nation is fairly resigned to the costly bailouts, but the stimulus plan is still not close to right: too small by at least half, not nearly timely enough in some of its spend-out rates and too underperforming against the only measure that really counts.
The plan’s composition drastically overemphasizes small one-time individual tax cuts ($233 billion) and non-jobs-related spending ($261 billion). But causing most concern is that the 3.6 million jobs the plan is supposed to create or, mostly, just save over the next two years are not nearly as many as they seem to be. This number is less than the 4 million or so additional jobs expected to be lost in the next year (which will only go up if GM and Chrysler are forced into bankruptcy), and it doesn’t even equal the number of jobs America needs to create just to stay even with population growth.
America’s Human Capital
The right way to earn our way back to long-term prosperity is through stimulus efforts that will help develop, broadly deploy, fairly compensate and, especially, fully employ our human capital, which will always be our greatest source of national wealth. Only then will we have refired the commercial engines needed to recover from this dismal recession. And only then will we have addressed Americans’ belief that unemployment is by far, with no close second, the most important economic issue facing the country.
We need an all-encompassing strategy on the massive scale we used at Normandy to win the war in Europe and that we later had behind the sweeping Marshall Plan to help rebuild Europe’s broken economies. This time, however, our big-thinking strategy must be about creating the 24 million jobs that are missing so that American workers will be nearly fully employed.
We cannot accomplish this simply by pouring unlimited borrowed money into our economy on the flawed and unfair premise that it will “trickle down” to where it is needed. This is true whether the money is given to high-income individuals, as Presidents Reagan and George W. Bush did, or distributed in the form of massive bailouts to the big banks and Wall Street firms, as is happening now, with the hope (but not at all the promise) that these bailouts will lead to economy-enriching loans.