We are facing the worst economic crisis since the Great Depression, and Republicans have chosen political posturing over cooperation. Republicans gave Obama's recovery plan exactly zero votes in the House and three in the Senate. Their focus was to increase the tax cuts and reduce the spending – exactly the reverse of what economic models say are best to get people to work.
Now Republican Governors are posturing on taking the money. Governors Sanford of South Carolina, Jindel of Louisiana and Barbour of Mississippi all say that the stimulus is a big mistake, and advertise that they won't take "all" the money. Turns out they'll only take about 95 percent of it. What will they refuse? They won't take the money that would extend unemployment to part-time workers that have lost their jobs. Why not? Because when the recovery comes and the stimulus funds are exhausted, they'd have to raise taxes to continue the program.
Say again? These Governors don't want to extend unemployment insurance to part-time workers – often the most vulnerable of poor working people, piecing together two and three part-time jobs to make ends meet – even though unemployment is skyrocketing and the federal government is offering to pay the entire tab. And the reason is that once people go back to work, they won't want to shut the program down or raise taxes to continue it. Folks, if you can make sense of that, there's a party out there for you.
In reality, we need to expand the stimulus, not cut it back. The US economy shrank at a nearly 4 percent annual rate in the last three months of last year. Japan plummeted at a 13 percent rate; Europe at a 6 percent rate. And it is going to get much worse. States and localities are looking at an estimated $350 billion shortfall between now and 2011, according to the Center on Budget and Policy Priorities. The stimulus plan only covers about 40 percent of that.
Unemployment is particularly harsh on young men and women. That's why we've been arguing for giving students the same interest rate on student loans that the banks get (1 percent or so), or the same rate at which the federal government can borrow money.
That would enable more students to afford to stay in school or advanced training – and there is no better time to do so then when the economy is cratering. If we allowed graduates to renegotiate, we'd reduce the burdens on those just starting out. That would make them more able to buy a car or take an apartment. This would be a direct and efficient way to pump money into the economy, and reduce the number of unemployed. Far better for the nation's long term health to remove teenagers from the job market by keeping them in school than by putting them in jail.
At this point, the federal government is basically backing virtually all the student loans anyway, as the private sellers have abandoned the market. So why should the federal government turn a profit on kids in school, when our national imperative is to provide the young with the best education possible?
This measure should be the centerpiece of an expanded stimulus, one that also offers greater relief to states and localities. Combining the two would enable the federal government to insure that states don't slash their contribution to universities, and require that universities not hike tuitions just because the federal government is decreasing the cost of loans. We want the students and graduates to come out ahead.
Congress should be pushing to make the stimulus bigger, not smaller; and more effective, not less. Instead they did just the reverse. The conservative "blue dog Democrats" like Sen. Ben Nelson from Nebraska joined with Republicans to reduce the size of the Obama plan, reduce the money going to school construction and cut the help going to states and localities. Instead they built in $80 billion for the alternative minimum tax fix, which the Congress would have done anyway and which applies overwhelmingly to those who make over $100,000 a year. They made the recovery plan weaker, not stronger.
This country is in trouble. We need bold and creative action. It is time for the Congress to stop listening to lobbyists and donors in DC, and start looking at what is happening in states and localities across this country. The time for posturing is long over.