The stimulus absolutely worked; we now need targeted fiscal jobs stimulus

[bpwallace49]

The stimulus absolutely worked; we now need targeted fiscal jobs stimulus

By J. Morton Davis - 09/29/10 05:47 PM ET

 

 

The economic stimulus enacted in 2009 accomplished what one would have expected.

 

 

The economic stimulus enacted in 2009 accomplished what one would have expected. It saved all the too-big-to-fail banks, which are now achieving near-record earnings and paying near-record bonuses. It’s hard to prove a negative, but the evidence is also that the stimulus helped avoid a second Great Depression, even if it hasn’t fulfilled all our hopes.

 

But it has failed dismally to generate new jobs and curb unemployment. This threatens continued economic deterioration and misery for almost 30 million people who can’t find jobs. Even Alan Greenspan, generally an optimist, believes that unemployment will continue around 10 percent for some time. If our enviable capitalist system can’t solve this essential issue, we are doomed to decline as a leading world power, like so many great nations of the past.

 

 

We can and should launch an aggressive program to produce millions of jobs quickly. Americans are vehemently angry and 82 percent of them believe we are still in a recession. The Federal Reserve printed vast amounts of new money, driving down interest rates to almost unprecedented levels, but it has clearly failed to create a meaningful number of new jobs.

 

The 10-year malaise still gripping the Japanese economy provides tangible evidence that monetary policy and interest rates at almost zero will not reinvigorate an economy or job growth. One-year Japanese government notes yield a fraction 0.12 percent, and their 30-year bonds yield 1.7 percent. Einstein defined insanity as doing the same thing over and over again and expecting different results. Let’s hope we are not insane. We must not just stand by as the Fed duplicates the failed Japanese strategy and expect a different result — one that will magically generate job growth and a revitalized economy.

 

By lowering the discount rate to near zero and by buying Treasury paper to keep rates low and increase the money supply, the Federal Reserve has shot all the bullets in its arsenal. We now need to realize that the answer lies in creating jobs. We need a fiscal, not a monetary stimulus.

 

Fed Chairman Ben Bernanke proclaimed precisely this when he told Congress that “central bankers alone cannot solve the world’s economic problems.” In an environment where small businesses and individuals still can’t get loans, interest rates at zero will do little to improve the economy.

 

So many Republicans, and even some Democrats, are fighting tooth and nail to extend the Bush tax cuts for those families with incomes over $250,000 (a large number of whom enjoy incomes of several millions of dollars), arguing that at this critical time, reducing the net income of the rich by allowing tax cuts to expire would stall the recovery because the wealthy would have less money to spend or invest. This argument is presented even though every economist, even those who have only taken Economics 101, knows that those in high income brackets generally do not spend those incremental dollars, and are therefore unlikely to affect consumer demand. In contrast, jobs for the 30 million unemployed people in this country, who cost billions of dollars in unemployment insurance and other social safety-net payments, would boost their incomes, which, because of their propensity to spend quickly whatever they earn, will promptly amplify consumer demand and spark capital investment and revitalized economic growth.

 

Jobs, not low interest rates, give people money to spend, which in turn motivates companies to expand, reduces social safety-net expenditures, and reduces deficits and debt by increasing tax revenues. This is the one sure bet to create the jobs needed and to revitalize the economy quickly.

 

We can achieve this with a government-financed, private-sector program to restore crumbling national infrastructure. It should be even more extensive than the vast public works projects of the Great Depression. In its 2009 report card the American Society of Civil Engineers gave the nation’s infrastructure a D grade. The report pointed out that the average age of the country’s dams was 51 years and that more than one in every four bridges is either structurally deficient or functionally obsolete. The civil engineers estimate that $2.2 trillion needs to be spent over the next five years to update infrastructure.

 

Only the federal government can do this. With so much necessary and invaluable work to be done, no one should be unemployed. We should create our own demand and employ every willing and able worker. It’s a major investment in America’s national infrastructure that would generate an enormous number of domestic jobs, none of which could be outsourced.

 

President Obama seems to realize this. On Labor Day, he outlined his plan for “a quick infusion of $50 billion in government spending to approve major infrastructure upgrades to the nation’s roads, rail lines and runways so as to spur job growth.”

 

But $50 billion is too little, too late. Incredibly, we have spent more than that on infrastructure in Iraq and Afghanistan. The president can accelerate such an ambitious infrastructure program by directing the approximately $275 billion from unspent 2009 stimulus funds. What an enormous positive difference this could make reviving the economy and creating many new jobs. If even avowed deficit hawks can advocate extending tax cuts for the wealthiest 2 percent and lower revenue and a bigger deficit, surely we can tolerate spending to create jobs; the benefits to the economy will be clear, immediate and dramatic.

 

The president would dramatically expedite building work and job creation by insisting that bureaucratic delay be minimized. China has demonstrated that a new highway can be built in six months; here it can take seven years before construction even begins. In the 1930s, the Empire State Building was built in less than 14 months without the giant cranes or advanced construction technologies we have today. If we are to stay remain the world’s leading economic power, we must urgently remedy this crucial problem.

 

Timely and targeted government spending, rather than dependence on lethargic market forces, can be the most effective strategy. We have the finest political and economic system in history, but it would be useful to replicate part of what has fueled China’s much faster national growth — a $588 billion stimulus package for new highways, railroads and other major infrastructure projects that have produced millions of jobs and astoundingly improved quality of life.

 

Chinese state banks have provided low-interest loans for privately built infrastructure projects. The Fed or Treasury could do the same, with loans at 1 or zero percent interest to approved vital projects.

 

We must also find a way to overcome Washington’s paralysis. As China’s prime minister, Wen Jiabao, said recently, the Chinese system “enables us to make decisions efficiently, organize effectively and concentrate resources to accomplish large strategic desirable undertakings.” I’m not suggesting we adopt China’s political system, but our leaders owe it to this country’s citizens to undertake big strategic undertakings more effectively.

 

J. Morton Davis is a Wall Street investment banker and author of “Making America Work Again” and “From Hard Knocks to Hot Stocks”.

[redrumjuice]

Do you know how to create a job?

[gbpfan1231]

Do you know how to create a job?

If he answers your question you are not allowed to read it because it would be considered an opinion and accouding to BP you are not allowed to read opinions.

[SEC=UGA]

All these construction projects could employ hundreds of thousands of Mexicans... What are the unemployed white folk gonna do?

[driveby]

Timely and targeted government spending, rather than dependence on lethargic market forces, can be the most effective strategy.

 

Most of the people who actually pay the bills disagree with this.

[Yukon Cornelius]

up here the carpenters/ concrete / steel guys are all exited at there are 5 bridges ready to go this spring.

[Azazello1313]

The economic stimulus enacted in 2009 accomplished what one would have expected.

...

But it has failed dismally to generate new jobs and curb unemployment.

 

huh. you know, I could have sworn I remembered people telling us that we should expect it to generate new jobs and curb unemployment. I wonder how such a silly notion fell into my head.

[Deathpig]

The first few lines of the piece confuse the stimulus bill with TARP (the stimulus had little or nothing to do with saving the 'to big to fail' banks). He then goes on to promote government funded infrastructure improvements (I agree with this), even though the left had been saying the original stimulus bill WAS that (read: a lie), which the author points out was a dismal failure. Anyone remember Biden's famous 'we can't help your small business, but we can build a bridge to it' nonsense? Those projects were not the focus of the stimulus (barely a third of the money) and have been woefully underfunded and very poorly targeted.

 

I just wish people here would acknowledge what the stimulus was... the majority of it was the result of 12 years of Democrat legislative blue balls accrued from either Republican controlled White House or Congress. The first two months of Democrat majority they busted that nut and sprayed their liberal love all over the place. It wasn't designed for job creation or recovery or anything like that; it was a special-interest payoffapalooza that, at the time,was justified from the far left as 'fair' because of the government money that went to OMGHALIBURTON~!!~!!!!~!!! over the previous eight years. To rewrite history and pretend that bill was some sort of targeted recovery legislation is asinine.

[driveby]

The first few lines of the piece confuse the stimulus bill with TARP (the stimulus had little or nothing to do with saving the 'to big to fail' banks). He then goes on to promote government funded infrastructure improvements (I agree with this), even though the left had been saying the original stimulus bill WAS that (read: a lie), which the author points out was a dismal failure. Anyone remember Biden's famous 'we can't help your small business, but we can build a bridge to it' nonsense? Those projects were not the focus of the stimulus (barely a third of the money) and have been woefully underfunded and very poorly targeted.

 

I just wish people here would acknowledge what the stimulus was... the majority of it was the result of 12 years of Democrat legislative blue balls accrued from either Republican controlled White House or Congress. The first two months of Democrat majority they busted that nut and sprayed their liberal love all over the place. It wasn't designed for job creation or recovery or anything like that; it was a special-interest payoffapalooza that, at the time,was justified from the far left as 'fair' because of the government money that went to OMGHALIBURTON~!!~!!!!~!!! over the previous eight years. To rewrite history and pretend that bill was some sort of targeted recovery legislation is asinine.

 

Hey bp, at least my "opinion" pieces don't get torn apart factually.

[westvirginia]

The first few lines of the piece confuse the stimulus bill with TARP (the stimulus had little or nothing to do with saving the 'to big to fail' banks). He then goes on to promote government funded infrastructure improvements (I agree with this), even though the left had been saying the original stimulus bill WAS that (read: a lie), which the author points out was a dismal failure. Anyone remember Biden's famous 'we can't help your small business, but we can build a bridge to it' nonsense? Those projects were not the focus of the stimulus (barely a third of the money) and have been woefully underfunded and very poorly targeted.

 

I just wish people here would acknowledge what the stimulus was... the majority of it was the result of 12 years of Democrat legislative blue balls accrued from either Republican controlled White House or Congress. The first two months of Democrat majority they busted that nut and sprayed their liberal love all over the place. It wasn't designed for job creation or recovery or anything like that; it was a special-interest payoffapalooza that, at the time,was justified from the far left as 'fair' because of the government money that went to OMGHALIBURTON~!!~!!!!~!!! over the previous eight years. To rewrite history and pretend that bill was some sort of targeted recovery legislation is asinine.

 

Ding ding ding! Dude, where you been hiding?

[evil_gop_liars]

Hey bp, at least my "opinion" pieces don't get torn apart factually.