One day after the government reported the worst hemorrhaging of jobs in a month since 1974 — with 533,000 jobs lost in November — President-elect Barack Obama revealed aspects of his (hopefully sufficiently) ambitious plan for a stimulus package that would save or create a minimum of 2.5 million jobs while investing in our long-term infrastructure.
Obama’s plan includes investments in bridges and roads, schools, sewer systems, mass transit and other public utilities. The New York Times reportsthat investments in green jobs might be to the tune of $100 billion over two years, “including jobs dedicated to creating alternative fuels, windmills and solar panels; building energy efficient appliances, or installing fuel-efficient heating or cooling systems.”
There is speculation that the entire package will run anywhere from $400 billion to $1 trillion, and Democratic leadership wants the legislation ready for Obama’s signature on Inauguration Day.
But the Washington Post writes that quick passage might not be in the cards. (Remember, during the Wall Street bailout, Senate Democrats couldn’t even get the 60 votes needed to overcome a Republican filibuster and pass $56 billion in spending on infrastructure, unemployment, and aid to states struggling to meet Medicaid obligations. Our Bill Greider will lay out how to take on the vise of the filibuster in our next issue.)
“Under the timelines being discussed, the only way we can get something done is with the cooperation of Republicans,” a senior Senate Democrat told the Post. “The dynamic hasn’t changed.”
While most Americans recognize the urgency of public spending to create jobs, rebuild our crumbling infrastructure, and repair our shredded social compact, too many Republicans are still spouting talking points that reflect the disastrous policies of the last eight years.
“Anyone who has talked to the American people knows that while they are hurting, they don’t believe that more Washington spending is the answer,” a spokesman for Minority Leader John Boehner told the Post.
And both Ben Stein (appearing on Larry King Live with me) and columnist George Will are spinning the fiction that the New Deal didn’t lift us out of the Depression, the war did. (Columnist Bob Herbert observed earlier this year, “We appear to have forgotten the lessons of history. Time and again an economic boom has followed periods of sustained infrastructure improvement.)
Expect to hear more of this line of attack on public spending as conservatives fight tooth and nail to prevent a new New Deal. Here’s a version of the argument in a recent Will op-ed: “The assumption is that the New Deal vanquished the Depression. Intelligent, informed people differ about why the Depression lasted so long. But people whose recipe for recovery today is another New Deal should remember that America’s biggest industrial collapse occurred in 1937, eight years after the 1929 stock market crash and nearly five years into the New Deal. In 1939, after a decade of frantic federal spending — President Herbert Hoover increased it more than 50 percent between 1929 and the inauguration of Franklin Roosevelt — unemployment was 17.2 percent…. Unemployment declined when America began selling materials to nations engaged in a war America would soon join.”
I asked economist and Nation contributor Dean Baker what he thought of Will’s anti-New Deal assertion? “First, according to the Commerce Department’s data, GDP fell by 26.6 percent from 1929 to 1933. It fell by 4.4 percent from 1937 to 1938,” Baker said. “If we’re just interested in one year drops, GDP fell by 8.6 percent in 1930, 6.5 percent in 1931, and 13.0 percent in 1932. So I’m not sure how 1937 gets to be the ‘biggest industrial collapse.’ The unemployment rate did fall from a peak of more than 25 percent to just over 10 percent in 1936 because of New Deal policies. It rose again in 1937 and 1938 for the simple reason that Roosevelt tried to balance the budget. He raised taxes by more than 30 percent in 1937 and cut spending by more than 15 percent. This threw the economy back into a severe recession. The problem was not that Keynesianism failed, it was that it was not pursued with enough vigor. Also, the economy cannot tell the difference between orders generated by government programs of whatever stripe and foreign orders for military goods. The point is that both create demand.”
Another key element to building a 21st century infrastructure might be a proposed National Infrastructure Bank. As Herbert recently wrote, “The smartest step when it comes to infrastructure would be for the new administration to follow through on the president-elect’s campaign promise to create a national infrastructure bank that would not just raise money and invest in the nation’s infrastructure, but would also bring a measure of coherence to the myriad projects that need to go forward.”
Senator Obama was a cosponsor of the National Infrastructure Bank Act introduced by Senators Christopher Dodd and Chuck Hagel. Herbert explained that the bill “would create an infrastructure bank with a bipartisan board of directors and a chief executive to be appointed by the president and confirmed by the Senate. The board would streamline the process of reviewing and signing off on major infrastructure proposals. It would determine the value to the public of each project — and its environmental impact. It would provide federal investment capital for approved projects and use that money to leverage private investment.”
The bill was originally introduced the morning before the I-35W bridge in Minneapolis collapsed in August, 2007. Senator Dodd said of the bill, “The American Society of Engineers estimates that an investment of $1.6 trillion over five years is required just to bring our current infrastructure to an acceptable level. That translates into $320 billion a year – just to upgrade existing structures to serve the needs of our nation. This burden cannot be borne by the federal government alone…. Witnesses at the Banking Committee’s hearings testified that the National Infrastructure Bank will allow the federal government to leverage up to $250 billion from the private sector.”
Still, there will be continued arguments from Republicans that infrastructure spending isn’t “a reliable catalyst for short-term growth.” But the nation’s governors, on the other hand, say that there are $136 billion worth of infrastructure projects that are ready to go when financing is secured. They estimate that for every $1 billion spent 40,000 jobs would be created. So conservatives can desperately cling to their failed philosophies, and maybe even hold the country hostage with a filibuster, but the people know better. As a Des Moines Register editorial put it: “The federal government has been pouring billions into rescuing banks, hoping the jolt trickles down. Creating jobs is a way of getting money to trickle up. Want Americans to spend? They need confidence they will have a paycheck to cover the bills.”
As New Jersey Governor John Corzine said at a Center for American Progress panel on labor recently, “Much needs to be done, certainly at the macro level stimulating our economy. And I’m certainly in the camp that whatever big is, make it bigger.”