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2.8 million jobs lost last year. Millions of families facing foreclosure and the loss of their homes. Food kitchens swamped. And it is going to get worse.
We need fast and bold action to staunch the bleeding, and limit the damage. We need a large recovery plan that creates jobs now. Economist Dean Baker estimates that the collapse of the housing industry will cut $450 billion from in the pace of annual residential construction; the loss of $8 trillion in housing wealth will reduce annual consumption by around $450 billion; the loss of $8 trillion in stock wealth will cut another $250 billion. In addition, the collapse of the non-residential real estate bubble will likely reduce annual demand by another $200 billion. This gives us a total decline in annual demand of around $1350 billion or $2,700 billion over two years.
Only the federal government can fill this hole. Consumers are paying off debts; business is cutting workers; exports have plummeted; state and local governments are facing brutal deficits. Only the federal government has the capacity to borrow money and spend it to create the demand needed to get the economy going.
President Obama has put forward an $825 billion recovery package. If anything it is too small and contains too many tax cuts. Tax cuts, as we discovered last spring, are relatively ineffective at creating jobs - for the simple reason that worried consumers are more likely to use them to pay down debts than to add to spending.
Business tax cuts are the least effective of all, for the simple reason that no sane business executive will add jobs when he or she can't see a market for the goods produced. With inventories piling up, businesses will use tax cuts simply to make their balance sheets look better.
We also need fast action. The months of delay while Bush refused to act have already been costly, as the decline accelerates and goes global. It is vital Congress act quickly to get this done, so the money can start pumping through the veins of the economy.
So what does the Republican opposition say? They want the stimulus to be smaller, nearly half the size of Obama's plan, and larded up with more tax cuts for business, and threaten to obstruct passage to get their way. They don't have the numbers to do that in the House. But in the Senate, they still can threaten a filibuster to delay action.
The administration's economists estimated that the Republican alternative would create 2.5 million fewer jobs than Obama's plan. Indeed the total jobs created would be fewer than those lost over the last three months.
The public just voted for change. They want Obama to be given a chance to lead. The crisis demands action. But Republicans chose party loyalty over cooperation in the House: not one Republican voted for the plan. And in the Senate, minority leader Mitch McConnell is threatening to hold things up unless there are more tax cuts for business stuffed in the bill.
The Republican minority is aided by Democratic "blue dogs," who join Republicans in worrying that some of the spending in the Obama program is a downpayment of investments in areas vital to our future - in cost-saving health care technology, in renewable energy, in education.
They demand that the spending be "temporary, targeted, and timely." They'd prefer apparently wasting the money on one-off ventures rather than investing in vital areas that might have a call on further spending when the economy recovers.
Republicans seem particularly perturbed about the money directed to poor working people. They object to giving the workers with the lowest pay a full child credit. They opposing subsidizing health care for the newly laid off workers. They don't like raising the tax credits for the poorest workers, and for increasing food stamps. They are outraged that unemployment insurance might be applied to those laid off from part-time work.
The Obama plan isn't perfect. It should be larger; it should have fewer tax cuts. It should contain more money for rebuilding public housing, building affordable mass transit, and aiding seniors, many of whom have lost a good portion of what savings they had.
But it is a good first step. It makes vital downpayments in energy, health care and education. It provides significant support to the "least of these," the measure of any program. It should be passed rapidly - without partisan posturing or wrong-headed ideological distortion.