Who's responsible for the slow recovery?

FreeStateDem over at DailyKos posted this interesting item on the recovery act with some great links today that is worth a read.

In it the poster notes:

There are a large number of people on this site and elsewhere in Democratic circles who have internalized a completely misguided view about President Obama and what he has done as president.

This view is currently leading to significant voter discontent, suppressing enthusiasm, spreading misinformation, and will eventually lead to major Republican victories in November unless a significant educational campaign is waged to counter the misinformation and propaganda that is sapping enthusiasm and seeding discontent among Democratic voters.

Basically, we are victims of a propaganda campaign of which many of us are unknowing and knowing co-participants.

But here's the kicker:

Did anyone tell you that the American Recovery and Reinvestment Act of 2009, also known as the stimulus bill, was bigger than the entire New Deal program from 1933 to 1943?

According to CNBC, in today's dollars the New Deal from 1933 to 1943 cost $500 billion (the original cost was $32 billion). The stimulus bill cost $787 billion. Obama's stimulus was bigger than the New Deal.

The post goes on to document, with links, the quantities of money allocated for job-creating, job-saving programs in education, clean energy, infrastructure, modern technology, such as broadband and healthcare, and so on.

FreeStateDem offers two explanations for the slowness of this recovery act in producing more jobs, more quickly:

1. The economy of today is fundamentally different than the economy of the 1930s or even the 1980s. Technology has made millions of workers redundant in this economy. This new economy doesn't need you. Until we as a society figure out what to do about this problem, unemployment will remain high relative to historical levels.

2. The second reason unemployment remains high is because the business community in the United States is not cooperating with the Obama administration. The business community is not doing their part to invest in America and create jobs. This is a fact that even the financial press acknowledges. Businesses are sitting on record profits and record cash reserves and yet they are not hiring employees.

What do you think?

First, IMHO, there has been less waste in the current recovery act. Media scrutiny, instantaneous social media, and the administration's own efforts at transparency have resulted in little in the way of the "boondoggle" narrative the Republicans attached to the story about the New Deal. Efficiency has meant money moves faster today and has greater effect.

So what's the problem?

Here are some almost random thoughts:

In my view, one big consideration is time. The total value of the New Deal, estimated in today's dollars at $500 billion, covered 10 years. We're now working on 18 months of the recovery act.

Republicans in the national elections following the implementation of the New Deal were no less ferocious, divisive, demagogic than they are today.

Today, programs created in the New Deal have helped soften the worst effects of recession – unemployment insurance, poverty programs, childcare and education programs, health resources and so on. The fact that these programs didn't exist prior to the New Deal made it patently obvious to millions of working families that Roosevelt was on their side and that Republican opposition was harmful.

The New Deal was no more immediately successful in halting what was then a far worse jobs crisis. By 1940, unemployment fell to 15% from its high of 25% in 1933, even as GDP climbed fairly steadily after the 1933 trough and the glitch of 1937.

Roosevelt's early large congressional Democratic majorities and new Democratic governors meant that federal dollars were not held up by Republicans at the state level as has now been the case by GOP governors like Rick Perry (R-TX), Mark Sanford (R-SC), Tim Pawlenty (R-MN), Haley Barbour (R-MS), Bobby Jindal (R-LA), and others. No doubt that these roadblocks to moving federal recovery act dollars into the economy have slowed economic recovery in those parts of the country.

By the 1938 mid-term elections, however, a coalition of right-wing Democrats and Republicans blocked and even turned back some of the New Deal, forcing Roosevelt to give lip service to balancing the budget and the like, which many associate with the recession of 1937 (funny to talk of a recession within a depression) and led to Roosevelt's own efforts to cut the conservative, Southern Democrats loose. FDR created the basis for a new Democratic coalition that included broader sections of the working class (African Americans and Latinos notably) and was premised on increasing the number of pro-New Deal members of Congress – a move that prompted the party realignment we more or less live with now. (Similar conditions for such a move by President Obama don't yet exist on the today's political terrain.)

While I'm not buying FreeStateDem's first idea as stated (globalization and associated technological developments must play a role), the second one is intriguing. A recent Commerce Department study found that since 2007, the first year of the Great Recession, U.S.-based businesses have increased the workforce in their overseas operations by 2.1 percent and have reduced their domestic workforces by over 1 percent – while the economy was sliding into recession. On top of that, after getting a $700 billion infusion of government cash as part of the Bush administration-authored TARP program, banks still have yet to move that capital back into the economy, especially to small businesses who create and the largest proportion of new jobs.

Now I'm not saying they are doing that deliberately in order to harm the recovery as an anti-Obama political gesture, like the Republican Party did, but as former Defense Secretary Donald Rumsfeld used to go around saying, "lack of evidence isn't evidence of lack."

Maybe there's been too much carrot and not enough stick on banks and big business to make sure an economic recovery happens here.

Some in the liberal camp have taken to the "toldyaso" line of argument. Some, like Paul Krugman are reminding their readers that they had said all along a $787 billion stimulus package wasn't big enough to fill the $2.9 trillion hole in the economy, without a corresponding recognition of the political infeasibility of something bigger (despite high levels of involvement by hundreds of thousands of Obama supporters in support of the stimulus).

The difference between $2.9 billion and $787 billion, as Krugman has explained, seems dramatic. The point is not to try to fill a $2.9 trillion hole with $2.9 trillion stimulus, but to craft a stimulus package that creates the right kind of economic activity and circulation of money that swiftly fills that hole. Krugman's point is that the recovery act wasn't the right kind of balance, which, of course, again points to the kind of ideologically-motivated blockage put up by Republicans to slow recovery and hurt working families in order to create political harm for Obama and the Dems.

Though, as some in the White House will also admit, the recovery act was also premised on much more optimistic assessments about the health of the U.S. economy. (I mean, who really wants to listen to cranky liberals like Paul Krugman, who despite his Nobel Prize, rights for the New York Times afterall.)

Several unemployment extension packages, a second aid to the states bill, and the beginnings of a transformative health reform law (not going into full effect for 3 and 1/2 more years) are only a start in creating the right kind of balance to fill the rest of the hole.

A second infrastructure package in the works and a meaningful climate change law that provides serious investments in changing the energy foundations of the U.S. economy could help turn the corner more fully, but whether either is doable in the waning weeks before the election is still not yet apparent.

A little courage and a lot of street heat needed.

Post your comment

Comments are moderated. See guidelines here.


No one has commented on this page yet.

RSS feed for comments on this page | RSS feed for all comments