Robert Borosage: Free Fall

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from OurFuture.org:



Free Fall
By Robert Borosage

November 19th, 2008 - 12:41pm ET


Free fall. The U.S. has lost private sector jobs for 10 straight months. One quarter of all businesses in the U.S. plan to cut payroll over the next year. Retail sales fell in October by the largest monthly drop on record. Auto sales have collapsed, driving the auto companies towards the precipice. Unemployment is up to 6.1 percent, with most analysts predicting it will soar past 8 percent over the next year. (That translates into unemployment among young minority men at rates of 50 percent or more). States are now facing $100 billion in deficits in operating budgets for the next fiscal year. Twelve million homes are "under water," worth less than their mortgages. The U.S. has joined Germany and Japan in what is becoming a global recession.

"The era of big government is over" is over. In the crisis, we are, as Richard Nixon once said, "all Keynesians now." Former Clinton Treasury Secretaries Robert Rubin and Lawrence Summers, until recently notable deficit hawks, now call for substantial fiscal stimulus—deficit-funded federal spending—to get the economy going.

Summers whose alliterative guidelines for this year's earlier $150 billion stimulus—"timely, temporary and targeted"—helped to fix its mistaken focus on tax rebates, has changed his consonants. Now he says the stimulus should be "speedy, substantial and sustained," noting that some estimates on Wall Street have gone as high as "$500 to $700 billion." Rubin agreed, saying "we need a very substantial stimulus," while mumbling about needing to reduce the budget deficit over the longer run.

A major recovery program—featuring substantial public investment—will be inevitably the first initiative of the Obama administration. It should feature more spending than tax cuts—investing in renewable energy and conservation, in rebuilding everything from schools to bridges to a smart electric gird, in helping cities and states avoid crippling cuts of services, in keeping college affordable, providing health care to children, and aiding those most in need. .......(more)

The complete piece is at: http://www.ourfuture.org/blog-entry/2008114719/free-fall