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Tuesday, October 25, 2016

Unemployment is still a major problem in the U.S., and the best solutions involve a more aggressive government response.

The Congressional Progressive Caucus budget, released last Wednesday, is forecast to create more than 8 million jobs by 2017 – a claim that is bound to stir up an argument about the government’s role in job creation. It’s not a new argument – progressives and conservatives have been having it explicitly since 2008 and more implicitly for years before that – but it is worth revisiting, because progressives are losing, and it’s a battle we cannot afford to surrender.

First, some might wonder if we even need to worry about jobs anymore. Unemployment is falling, GDP has expanded, and the stock market has rallied. The political debate has shifted away from a focus on growth and toward the consequences of our failure to stimulate growth: rising inequality and poverty. But in the face of federal paralysis, the labor participation rate remains down, wages remain stagnant, and productivity continues to decline. Now more than ever, the government must restore the dream of dignified work to all Americans.

Even if we agree that there is a problem, the skeptics will argue that the government is too inefficient and bureaucratic to effectively create middle-class jobs and support economic growth. But the 2009 stimulus package provides a prime example of effective government intervention. Economists of all stripes, including Alan Blinder, former vice chair of the Federal Reserve, and Mark Zandi, Chief Economist at Moody’s and former economic advisor to John McCain, agree that the ARRA succeeded in creating the 2-3 million jobs it was designed to create. In their analysis, Zandi and Blinder found that without the stimulus, the economy would have contracted 6 percent and unemployment would have hit 11.6 percent. Instead, at its worst, GDP declined 2 percent and unemployment hit 10 percent.

The problem was that the ARRA could not protect the U.S. from a shock that cost the economy 12 million jobs, because the $825 billion package was too small and tapered too soon to plug the $1.2 trillion drop in private demand.

Acknowledging the success of the stimulus, some conservative analysts argue the challenges we now must tackle are not remnants of the recession, which would be amenable to government intervention, but rather are the product of insurmountable structural trends – automation, globalization, financialization. But even if that is true, it’s not an excuse for the U.S. government to abdicate its role as a driver of economic growth. Indeed, a changing economic landscape requires an adaptive government to ease the transition. Increased automation requires reformed and renewed investment in human capital to allow American workers to dominate the information age. Globalized supply chains demand new labor laws to recognize the rise of sub-contracted work. A growing financial sector requires an enhanced regulatory regime to ensure capital is allocated toward productive uses.

Then we have the deficit scolds, who are likely to claim that the CPC’s proposals are fiscally unfeasible. While hysteria about the government debt has prevented lawmakers from passing an additional large-scale stimulus package, new U.S. debt projections, and the clear failure of Europe’s austerity measures, prove these threats to be overblown. The danger associated with deficits, rising interest rates, and runaway inflation are far from a reality in the current climate of below-target inflation and non-existent interest rates.

In fact, the U.S. budget deficit fell to 4 percent of GDP in 2013, according to the CBO, and was projected to decline to 3 percent, the average for the last 40 years, in 2014. At about 73 percent of GDP, the federal debt remains high; however, the most effective way to reduce the debt to GDP ratio is to grow GDP, not shrink debt. National debt topped 118 percent of GDP immediately following World War II, and then the debt doubled over the next 30 years. But because the economy grew rapidly, debt fell to a healthy 30 percent of GDP by 1981. Europe’s experience with austerity reveals the danger of valuing debt reduction above growth. As spending reductions slowed rising debt, they also cut GDP and increased the relative cost of debt payments.

The CPC’s budget will create new jobs, improve job quality, and invest in future job growth. The ideas are not new; many, like investment in infrastructure and workforce training, have been proposed in bills currently sitting in Congress. Nor are they necessarily bold; for example, funding R&D and using fiscal stimulus were considered common-sense government policies in previous generations. The problem up to this point has not been a lack of good ideas. It’s lack of political will. Let’s reopen this debate and use the vast number of policy tools we know to be effective.

Nell Abernathy is the Program Manager for the Roosevelt Institute’s Bernard L. Schwartz Rediscovering Government Initiative.

Cross-posted from Rediscovering Government.

The Roosevelt Institute is a non-profit organization devoted to carrying forward the legacy and values of Franklin and Eleanor Roosevelt.

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  • lemstoll

    GOP excuses to oppose…

  • paulyz

    The Federal Government under Obama has created insurmountable DEBT, not jobs. Everyone knows that the unemployment rate the last 5 1/2 years has been dismal and at a HUGE cost.

    • charleo1

      Come on! You’re smarter than that statement. Which of the two wars that were occurring, and had been occurring since 2001, and 2003, respectively, paid for themselves, or paid down the debt? What part of the Bush tax cuts, aimed almost entirely at the top end. Corporations, hedge fund managers, and people that receive their income from capital gains, like collateralized debt obligations. Start to make up for the lost revenues in taxes that would have been collected. And then, brought down the debt through all the added economic activity, the cuts were advertised to create? How many of the nearly 4 billion dollars in subsidies collected each year by the oil companies, went to mitigate the cost of gasoline at the pump in the summer of 2008? And finally, which part of a recession that costs 10 million American people their jobs, and hundreds of millions of jobs worldwide, since 2007. And reduced U.S. GNP to a minus 3%, while rattling economies from Saudi Arabia, to Beijing, ever made money for any economy? Or didn’t substantially raise the public debt for every government on the planet? Yet here is the only place I know of that has, if we can believe what is said, expects this President
      to lower the public debt in the face of the worse economy in 80
      years. And I’ll mention again, because of the tremendous outlays they have required, while prosecuting two land wars. Outlays,
      by the way, that did little to stimulate the general economy, or put
      a significant dent in a very troubled economy. And could not be,
      in a severely depressed economy, be funded by any other source
      than borrowed money. As they have been from the beginning.

      • ThomasBonsell

        We came out of World War II with a debt at 122 percent of GDP. Since then we have seen five years out of almost 70 in which the debt has actually been lowered. There was another year in which the debt was lowered by calendar-year calculation but not by fiscal year. By the way, in those years in which there was an actual decrease in the debt, the presidency was occupied by a Democrat – except for 1956-7 when GOP Eisenhower had a Democratic Congress.

        It seems paulyz, above, has no idea how debt is increased. An example is the Clinton administration in which the eight-year run saw an over-all SURPLUS of $62.9 billion. But the debt was increased by about $1.5 trillion. Explain that paulyz, and then I may listen to you about the debt.

        Incidentally, $4 billion subsidies to the oil industry annually seems a bit low. Many corporations get hundreds of billion annually all by themselves.

        • charleo1

          World war II debt, is an excellent example of why
          debt is sometimes the wrong conversation to be
          having. Or, like in a severe recession caused by the near collapse into insolvency of our financial sector, is a terrible time for the government to
          start taking money out of the economy. Especially if the goal is to reduce deficits. Which I don’t believe for a second all the yammering by the Right Wing on cutting spending is about debt. Their economic plan is fairly straight forward. It’s
          called, we hope you fail. But leaving politics for a
          moment. Not all debt is bad debt. Debt created to improve the civil infrastructure, has a great return. It provides jobs, to do the work, then it produces savings to business thru added efficiency, and reduced costs. Then there’s the kind of debt that produces little or no return. Like unnecessary tax cuts to individuals, and corporations, who are already floating in capital they have literally ran out of ways to spend. Of course they would like to expand business. But, that would require a lot of that capital they have stashed away, uninvested, ending up in the hands of consumers, to buy their product. So, they buy market share. But that’s not increasing the size of the pie. It just leaves consumers with fewer choices. Which also happens to be bad for innovation as well. And does next to nothing to add jobs. More often than not, consolidation winds up costing jobs. Unnecessary wars create bad debt. When they don’t make us safer, stabilize world order, or in some way benefit our interests. As it turns out, building up nations in places where we’ve blown down nations, and they hate us as a result, are not good investments. And if we borrowed the money to do all the knocking down, and the building up, well, that’s bad debt.
          And the oil companies? You’re no doubt right on
          that. That 4 billion was a number they were using a while back, in their laughable attempts to reduce it. And we borrow that money too. Have you seen your return on that investment yet? I’m still waiting for mine too!

          • ThomasBonsell

            So very right.

            The question is how many times do we have to go over the same failures before people begin to learn and how often do we have to have success before someone notices?

            The GOP cut taxes three times for the aristocracy in the 1920s, lowering the top rate from 70% to 28%. Corporations were allowed to run wild because “the business of America is business,” said Cal Coolidge. The result was the Great Depression.

            No body learned a thing because Ronald Reagan cut taxes for the aristocracy in the 1980s from 70% to 28%. Corporations were allowed to run wild because “government is not the solution, government is the problem,” said Reagan. The result was a severe recession that didn’t become a full-blown depression because many FDR safeguards were still in place.

            So George W. Bush decided to give it a third go. Same result.

            On the other hand, the New Deal of FDR did wonders in curing the GOP Great Depression. The GDP rose an average of over 15% between 1933 and the summer of 1941 before we became entangled in the war. If we discount the two years lost when FDR listened to the right and cut spending, only to fall back into recession,the GDP averaged more than 20% annual growth, and FDR did it with government spending and debt. Four percent is considered robust.

            And government debt has a positive function. It provides the CDs and money-market funds that people can invest in to safeguard their life savings. It funds securities mutual funds (2%of the total) and money market mutual funds (2.4%) It funds government retirement programs (2.2%) and private pension plans (3.5%). US commercial banks hold 2.1%. State and local governments own 3.5%. It is the safest place people can put their money for retirement without the fear of losing any of it.

            The only problem areas I can see are the amount of debt held by foreign entities (about 30% of the total) and that held by the aristocracy of America. That held by foreign entities drains money from our economy and puts it into foreign economies (about $125 billion in 2013). The debt held by the American aristocracy is the fourth largest (slightly behind that held by China) and it is a form of subsidy for the super wealthy paid for by working Americans.

            I have mentioned this before, many times, but after the Reagan tax cuts, the wealthy raced to the Treasury to buy debt instruments when interest rates were in double digits, rather than invest in new businesses, When Reagan’s tax cuts produced massive debt and runaway deficits, he got an increase in the payroll tax. That produced major surpluses and a 1938 law required all surpluses in the Social Security Trust Fund to buy bonds, bills and notes from the Treasury rather than sit idle. When that cash went to the Treasury it produced the interest payments to the aristocracy (almost $30 billion in 2013) and foreign debt holders, and we were on our way back to the system in Britain we revolted against. The Social Security Trust Fund is the largest owner of US debt (about 20%) with about $3 trillion drained out of it, most of that since Reagan’s payroll tax increases,

            About building up nations where we had blown them down: during WWII we destroyed the manufacturing bases of German, Japan and Italy and saw the industrial base of Great Britain and most of Western Europe blown up by Germany. We then spent billions of dollars in the Marshall Plan to rebuild the physical structure of those nations so that they all had modern, state-of-the-art facilities. At the same time, American manufacturers only retooled the old worn-out factories, allowing foreign nations to shoot past us in manufactuting. We lost the automobile industry to Japan, Germany and Itsly. We lost electronic manufacturing to Japan. Our textile industry went to Asia. Boeing is still strong but has lost most of its American competition and European aviation firms are giving Boeing all it can handle.

          • charleo1

            As I was reading your overview of our economic history since the great depression. I thought, if only we could transfer your knowledge, and ability
            to explain, and take some of the mystery out of the poorly understood subject of economics. And how if more people understood basic concepts, we would not be so divided on the fundamentals. You, along with a few others here like Dominick, and, “indy” do a great job. Better than most of the Democrats in fact. Elizabeth Warren is amazingly gifted in this respect. But for the most part, they get off in the weeds, and people’s eyes glaze over. It’s a big reason we have otherwise intelligent Americans, who support Republican politicians, running around claiming the government, cannot create real jobs, because it funds them with private sector taxes. That’s how the Reagans, and George Bushs, get away with such damaging policies. And, people are especially vulnerable in recessionary cycles. Why aren’t businesses hiring? Well, they tell them, it’s because they don’t have the money to hire. And why don’t they have any money? Because the government is taxing, and regulating them out of business! So we get exactly the kind of economy that kind of thinking creates. With huge sums of capital piled high in corporate accounts. And hard pressed consumers, walking around with empty pockets. Of course, the economy still stinks. But the Right’s diagnosis hasn’t changed a bit. Always the same. Lower the corporate tax, the capital gains tax, reduce regulations, and oh, keep the unions out of the mix. This is the formula, that funds their campaigns. But, it’s really only half of the total agenda. These policies will work to slow down the economy. But, next part of the plan is guaranteed to blow huge holes in the Federal budget, as Reagan, and both Bush Presidencies did. And then, go after New Deal, and other safety net programs designed to assist the poor, the working poor, and middle class on the premise we’re headed for financial disaster, if we don’t put them on the chop block, and go after them with a fire ax. In this, the Republican Party hasn’t wavered since FDR. If anything, they are more determined than ever, in achieving this goal today, than I can remember them ever being.

          • Dominick Vila

            Bear in mind that increases in the national debt only become relevant when a Democrat is in office. When the GOP controls the White House and Congress they are just “IOUs…pieces of paper” as a misunderestimated former President so eloquently stated.

          • charleo1

            It’s that the truth, in big red letters!
            Personally, I don’t see any way, other than being intellectually dishonest, the Right’s supporters could believe all the hyperbole about government spending. They are dumb like foxes. They never uttered a peep, as George W. put everything on the credit card. But they expect Obama to balance the budget in an economic whirlwind. It’s the most transparent, I believe I’ve ever seen the GOP.

          • Allan Richardson

            They are like the Dad in a “traditional” family who runs up the family debt to buy HIMSELF a fancy sports car, then complains that the family needs to be “frugal” when the water heater breaks, or the kids need new clothes, books or supplies for school, or someone needs a life saving operation (and he never “wasted” money on a health insurance policy): THEN we “can’t afford to go into debt.”

          • charleo1

            Exactly! The husband that staggers in after
            a two week gambling binge, in hock up to his eyeballs. And announces to his family, they’ve
            been living beyond their means. They can eat,
            or keep the lights on. But not both!

    • Sand_Cat

      You’re an idiot. Why don’t you just stick your head back into your anus; obviously that world is more congenial to you than external reality.

    • Kurt CPI

      Although the thinking you espouse is highly publicized, the facts do not support it. The debt under President Obama has grown, but not nearly at the rate that it grew under G. W. Bush. I don’t agree with much of governmental economic policy – Republican or Democratic administrations – but Presidents Clinton and Obama both trimmed the deficit where Reagan, Bush 41 and Bush 43 all expanded it. Clinton even had a balanced budget and legislation that required federal mandates to be fully funded was put into place. Don’t take my word for it – research it for yourself…

    • Independent1

      Fact is that Reagan and the two Bushes are responsible for more than 90% of America’s current 17 trillion of debt. Bush Jr alone is responsible directly for 7.2 trillion and indirectly for about another 4 trillion which is the result of the economic disaster that he allowed to happen during his watch – Bush and the irresponsible GOP Congresses in office during his two terms are even responsible for deficits being incurred today –
      .to pay for the unfunded war in Afghanistan which may never have needed to happen if he and Cheney hadn’t kept refusing to let the CIA try and stop it
      .to pay for the unfund tax cut that Americans earning less than $400,000/yr are still enjoying
      .to pay for the unfunded Medicare drug benefit that was enacted as a giveawy to the Big Pharma lobby
      .to pay for other unfunded state mandates that are still active today
      And because the drastically reduced tax revenues that we’re experiencing today due to the 14 million lost jobs that resulted from the Great Recession – were Bush’s fault!!!
      In actual fact, Obama has reduced deficit spending faster than any president since Truman; cutting deficit spending in 1/2 over 4 years as he promised. The only increase in the deficit chargeable to Obama, is the Stimulus package he signed for in February of 2009 which was less than One Trillion dollars.

    • Independent1

      Would you care to educate us on just how Obama created insurmountable debt??
      Was it by being the smallest spending president since Eisenhower with 1.4%/yr budget increases compared to the 8% plus/yr increases of Reagan and Bush 2??
      Was it by reducing deficit spending faster over the past 5 years than any president since Truman – actually cutting deficit spending in 1/2 within his 1st 4 budget cylces as he promised?
      Was it by establishing a “War on Fraud in the Defense and Healthcare sectors” which have recovered billions of fraud related dollars – far more than any other president?
      Was it by ending the war in Iraq quickly as he promised saving us billions of dollars in war related costs and soldiers’ lives?
      Was it by allowing oil drilling and natural gas fracking on public lands which may make America the world’s largest energy producer within the next couple years surpassing Russia?
      Was it by implementing policies that have encouranged the economy to rebound over the past 4 years such that it’s raised our GDP by over 2 trillion dollars which has lowered America’s debt to GDP ratio?? (Which is at the lowest percent of any similar industrialized nation on the planet?)
      Was it by following through on the auto bailout and stimulus which not only saved the auto industry which included about 1.5 million jobs but has allowed the auto industry to rebound and for the government to collect 80-100 billion in taxes over the past few years that would have been lost??

      Just what has Obama done to “create insurmountable debt”????
      Let’s hear it!!!!

  • charleo1

    The author here, Neil Abernathy, in a very practical, common sense way,
    with historically accepted economic principle, and the numbers to boot.
    Makes a strong case for more government action to improve the economy. And by that, both absorb those coming into the job market, and put the remainder of the long term unemployed still seeking jobs, back to work. It’s a case that’s been reiterated by the President, the business community, and economist on both the Left, and Right, since the near collapse of the world economy in the fall of 2008. That term, “near collapse of the world economy,” still sounds to me like something out of
    a fictional novel about the end of civilization. Where all semblance of normality breaks down, and it’s left up to a few heroic characters to save humanity from the abyss. To listen to the Right Wing, one could be led to believe, it wasn’t real. Just a Liberal plot perhaps to increase the size of government, end liberty by redistributing the wealth, Commie style. and, enslaving the job creators with a devastating tax burden. In other words the Right has refused to have a serious, meaningful dialogue about the economy. And, it hasn’t been so much a lack of political will. As an abundance of political will not. Dialogue with an ideologue, if you will. If one talks with a person who says God is a little green frog, that lives in his backyard. And sticks by that, even as he’s never proclaimed this belief before, has no proof the little green frog even exists, But then, produces a bevy of theologians that testify as to the validity of the thing. And the little green frog says, government stimulus programs are a waste of money. He also says, they’ve never worked. But they have worked, we insist.
    Many of you sat right where you’re siting today, and passed stimulus
    legislation! And it worked! The frog thinks you’re trying to destroy the Country! Well, that’s preposterous! The frogs a liar! Now, the frog thinks you’re trying to destroy religious freedom!

  • Kurt CPI

    There’s a lot right with this article, but some things are not taken far enough. First of all, European austerity has not been a total failure, although it is short-sighted and something still needs to be done to increase European GDP in the long run. Secondly, increasing US GDP is only a part of the equation. The spoils must also be distributed more fairly. Working class people – the ones directly responsible for production – need enough income to create consumer demand. Our GDP has been on the rise since WWII and continues to grow. The problem is that when the proceeds are all condensed so that a few hundred people hold more than 50% of the proceeds, those proceeds exit the marketplace. Those people store their earnings wherever it will generate the most return and cost the least to do so. Emerging (foreign) markets, banks, etc. hold huge portions of US wealth while the middle class has less and less real money – most of which would remain in motion fueling the economy if it were available.
    We can’t go back to a blanket 70% capital gains rate. That unfairly impacts middle-class people who have saved all their working lives to have enough income to retire – largely dependent on selling off 401K investments over time. If they had to pay 70% of that as taxes they’d be broke. But surely a system could be designed to divert more of that capital to work (I’m not saying 70% is fair for anyone), more of it back into the economy. For this to happen, Citizens United has to go. We the people have to stop it.

    • BillP

      Kurt any money that is withdrawn from a 401k plan is tax day the person’s income tax rate not the 70% you use an example. Any money earned in a 401k plan whether earned from contributions, dividends or capital gains from securities sold in a 401k. Capital gains are du on sales of securities that are held in taxable accounts not tax deferred accounts. Other than that I agree with your comment.

      • Kurt CPI

        I researched this and you are correct. Money that has grown in a 401K is taxed at your federal income tax rate for the tax year at the time of a qualified withdrawal regardless if it is capital gains or not (at least for now). That 70% rate was reduced a long time ago, it is now 25% for short-term capital gains, 15% for long-term. Still I think some protection needs to be in place for people who sell a small business they’ve held for decades. Whether capital gains or income tax, the Warren Buffets of the world are the ones who can afford to pay those kinds of rates, not the guy who owned and ran the corner store for 45 years and sold it at $250,000 profit ($4000/yr average yield for all those 45 years). He took the risk, paid his taxes, made the repairs, worked untold hours. It’s a crime that the government can take 25 – 30% of that just because he realizes the fruits of his investment as a single transaction.

  • bikejedi

    I cant agree with Govt being a good or efficient job creator . It seems all they do is take money out of the private sector to give their friends and cronies jobs at tax payer expense

    • Independent1

      No private sector company has ever created jobs without customers to buy the product or service that they are offering. Even at the current time companies across America are sitting on trillions of dollars afraid to invest it into creating jobs because there isn’t sufficient demand.

      You’re voicing very much the same thing that one of the GOP’s worst presidents insisted on during his 4 years in office (Herbert Hoover), and because he refused to get the government involved in stimulating the economy, a recession akin to what Bush jr. had in 2001 turned into a full fledged world-wide depression.

      Companies will only add jobs when customer demand increases such that they need to add jobs to service more clients. The only way to do that is for THE GOVERNMENT to inject monies into the economy by creating work such as improving the nations’s infrastructure, school systems, alternative energy research, etc. etc. When the workers added to accomplish the objectives defined by the government stimulus start spending their wages in economy which will increase demands in companies across the nation – THEN AND ONLY THEN, will thousands of private companies start pulling money out of their investments to add jobs and expand.

      A small example of this was the green energy portion of Obama’s stimulus package that was passed in February of 2009. Of the 90 billion allocated for the stimulus, only 29 billion was ever approved by the government for green energy initiatives – but this 29 billion prompted more private sector companies to invest more than 100 billion of private money into green energy research which resulted in Micheal Grunwald writing a book on just how effective the green energy stimulus was. Here’s the link to an article about Grunwald’s book:

      Obama’s stimulus package was a ginormous clean energy bill, says Michael Grunwald


      • ThomasBonsell

        Actually, Hoover tried to stimulate the economy. He began one program that was a bailout for the financial system. It was a small “trickle-down” scheme and did not work.

        His other action was to cut government spending in 1931, according to, trying to balance the budget. That, also, did not work.

        • Independent1

          I didn’t say Hoover didn’t try things but he did not believe in a stimulus to create jobs; bailing out the financial sector is not a stimulus and neither is cutting spending.

          See this on Hoover and the Great Depression from a NY Times article:

          President Herbert Hoover, a Republican and former Commerce secretary, believed the government should monitor the economy and
          encourage counter-cyclical spending to ease downturns, but not directly intervene. As the jobless population grew, he resisted calls from Congress, governors, and mayors to combat unemployment by financing public service jobs.
          He encouraged the creation of such jobs, but said it was up to state and local governments to pay for them. He also believed that relieving the suffering of the unemployed was solely up to local governments and private charities.

          In fact, Hoover actually ended up raising with another potential job destroying tactic of significantly increasing taxes – raising them from 25% to 63%. See this from Wikipedia:

          The onset of the Great Depression in 1929 led to a sharp decline in tax revenues, as the economy contracted. President Herbert Hoover’s response was to push for a major tax increase. The Revenue Act of 1932 raised tax rates across
          the board, with the top rate rising from 25 percent to 63 percent. That increase was justified on the grounds that the budget needed to be balanced to
          restore business confidence. Yet the $462 million deficit of 1931 jumped to $2.7 billion by 1932 despite the tax increase. Interestingly, the major cause of the deficit’s rise was a sharp decline in income tax revenue, which fell from $1.15 billion in 1930 to $834 million in 1931, $427 million in 1932, and just $353 million in 1933. Moreover, as Table 6 demon- strates, the higher tax rates on the wealthy actually caused the tax burden to be shifted to thenonwealthy.

        • Allan Richardson

          He did start a “pilot program” to test whether the CCC and TVA would work: Hoover Dam. It was great for jobs in Nevada, but was not replicated elsewhere.

          Just kidding about the pilot program bit. That may not have been his intention, but that’s how it worked out. By the way, his re-election campaign slogan was “Prosperity is just around the corner.” Unfortunately, his party was unwilling to make that left turn and kept walking away from it, and unlike the Tea Party today, the VOTERS CAUGHT ON TO THAT.

      • Kurt CPI

        I agree with some of what you’re saying, but…
        Hoover did not understand economics at all. He surrounded himself with advisers that assured him the money belonged at the top. I mirrors our current situation. On that I think we would agree. However, that was the primary cause of the depression, not failure to pump government funds into projects. There were plenty of motives behind the economic policies of the time, and economic engineering at the hands of industrialists and financiers (Prescott Bush, J.P. Morgan, etc.), with the Hoover administration convinced to the core that this could continue indefinitely, led to economic collapse (the same things were happening in Europe). Roosevelt deserves credit for the stop-gap deficit spending that resulted in jobs and much needed infrastructure. WWII, from a purely economic standpoint, made the US, with its shiny new infrastructure, the indisputable king of production. But also credit Harry Truman and Dwight Eisenhower with following through. Truman knew when enough was enough, and Eisenhower (A Republican) replaced debt with revenue.

        The government injecting money into the economy is not the ONLY way to create enough wealth among the working class to generate consumer spending. It’s one way, and it’s not the best way. But, like the New Deal, it can only work short-term when financed by debt. Eventually, just like in the years following Roosevelt, it must be paid for, or at least the source replaced with revenue.

  • Dominick Vila

    Public sector investment, especially in areas such as infrastructure repair/modernization, transportation, R&D with a special focus on high tech and alternative energy sources, and education may not be the BEST solution, but it is an absolute necessity. With the exception of R&D and development of high tech products, the private sector has never been interested in investing in these areas, not because they are not concerned, but because they are not profitable and because they have learned to rely on the Federal and state governments to pick up the slack.
    In addition to creating well paying jobs, repairing and modernizing our deteriorating roads, bridges, tunnels, seaports, airports, and power grid would help us meet the challenges of the 21st century and would help us be competitive against countries where heavy investment in infrastructure and alternative energy sources has been going on for decades. Our transportation system, especially our rail system and inner city public transportation, are so far behind those in Western Europe and Asia that trying to make a comparison is ridiculous.
    The debate about whether or not public sector investment must shift from job creation to whether or not it is needed to remain competitive and grow as a nation.
    Sustainable growth and job creation depends more on what the private sector does than on government stimuli, but that does not mean government, at all levels, does not have a responsibility to provide the private sector, and the nation at large, with the tools we need to compete and maintain our privileged position in the world. What we need is cooperation and a focus on what is best for us as a country, not the old arguments, influenced by ideology, that were a factor in the economic mess we are finally overcoming. We need investment, low interest rates, realistic tax rates, and credit to grow and prosper. Angela Merkel style austerity is not going to do the trick for us or anyone else except, perhaps, for the bankers.