Stimulus Packages


After this ridiculous debate in the Senate on stimulus packages, we should learn from the past that it only works if there is a clear understanding of what we are doing as a nation. Franklin Delano Roosevelt opened up the federal government to a whole host of innovations and federal spending which in turn cut down the baneful effects of the Great Depression and led to his enormous reelection. But highly sensitive to conservative criticism, he began to move in 1937 to a balanced budget; the result was by 1938-39 he retriggered a new depression. It was only the preparation for the war that finally ended ten years of unemployment and turmoil. Roosevelt did not spend too much but too little considering the magnitude of the crisis the nation was in. He was, though, smart enough to use public works projects to buttress his image and that of the Democratic Party—leading to their hegemony for almost forty years. One of the reasons we do not have a depression today of that magnitude is because of his legacy: especially Social Security which has protected the elderly. Where we repealed the New Deal as in controls of the banks, we have paid the price.

We can also learn from the terrible recession in Japan, where the Liberal government flooded the nation with public works projects to create Keynesian inflation. In fact the Liberals cut back also too quickly so as to balance the budget, and the house of cards toppled. What restored Japan somewhat was increased in fluidity in the lending institutions and a massive increase in exports. The export option is really not that available to the United States now; in part, we have distorted the market abroad so much that we cannot not use those lands as dumping grounds as have the Japanese.

There is also constant GOP chatter that what we need are tax cuts, especially for the rich and business. The problem is that many of us are taking those tax cuts and rebates and banking them—an entirely rational response when you are uncertain about your job. Perhaps we should give every American $500 worth of script which must be spent in 60 days. You cannot bank it or invest it, but must buy things with it, from food to televisions, appliances, health care, baseball bats, cars, storm windows. Whatever. That would certainly jump start the economy. The script would be tax free. Coupled with increased food stamps, unemployed benefits and better Social Security COLA it would make a big difference.

Also public works can be important contributions to the nation’s infrastructure. But more and more white collar workers are being unemployed in the nation. We need to find a way to use their skills and create a more livable environment. In the 1930s we were a nation of farmer workers and manual laborers. Now we have a different set of skills as a people and we need to somehow have better matches than the bridges to nowhere that we and the Japanese invested so heavily in during past depressions. We have put together a reeducation plan using our community colleges to retrain the American people for real jobs through apprenticeships that make sense.

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