One of the few blogs I read regularly is Robert Reich's blog. Reich used to be President Clinton's Labor Secretary, and he now teaches at U.C Berkeley's Goldman School of Public Policy. He believes that our nation's economy is now in such severe difficulty that it qualifies as being in a "mini-depression," and that what we need is a "maximum strength remedy" of substantial deficit spending on our crumbling infrastructure.
Reich argues that just bailing out the financial sector isn't good enough because "the real problem is on the demand side of the economy" with consumers who are afraid to spend or borrow (even if extremely cautious banks would lend to them) because they're already deeply in debt, their real incomes are falling, and they're afraid of losing their jobs. Cutting taxes won't work either because this mostly benefits the wealthy who'll tend to save the money they obtain from tax cuts more than they'll spend it, and the rest of us will tend to use our modest tax rebates to pay off debts or buy products made mostly overseas.
So, what we need to do, argues Reich, is spend $700 billion or more next year on "repairing roads and bridges, levees and ports; investing in light rail, electrical grids, new sources of energy, more energy conservation" to cause a "double whammy" effect of creating many new jobs and improving the workings of the future economy. However, we need to draw up a "capital budget" that lists spending priorities to make sure that we "avoid pork." To objections that we can't afford to increase our already monstrous budget deficit, Reich replies:
Government spending that puts people back to work and invests in the future productivity of the nation is exactly what the economy needs right now. Deficit numbers themselves have no significance. The pertinent issue is how much underutilized capacity exists in the economy. When there's lots of idle capacity, deficit spending is entirely appropriate, as John Maynard Keynes taught us. Moving the economy to fuller capacity will of itself shrink future deficits.I'm not an economist. Hell, I couldn't even stay awake when I tried to read my economic textbooks in college. But what I'm gathering from reading the "experts" now is that an increasing number of them agree with Reich about what we need to do to rescue our economy from its downward spiral. And I suspect that Barack Obama is going to do or try to do what Reich recommends.
