Why Obama Must Spend More
Lost jobs and diminished investment can wreak havoc
If voters still feel the same way a year from now, the midterm consequences for the Democrats will be severe, and deservedly so. Yet that same poll, conducted for the Economic Policy Institute, showed that most Americans would support the only action that might relieve the lingering pain of recession: more and faster spending.
The conventional viewpoint—repeated incessantly on talk radio, cable television and newspaper columns, as well as by politicians of both parties—is that the country cannot afford to further increase the public deficit. According to those savants, the stimulus package passed last winter spent too much and achieved too little; the deficit and debt are just too high; and there is simply nothing more that can be done except to wait for jobs to return sometime next year—or the year after that, or maybe someday in the distant future.
Among the respondents to the Hart poll, however, 53% named unemployment as the nation's most serious economic problem, with only 27% saying that the most serious problem is the federal budget deficit. The poll found that support for a continuing policy of public investment in job creation, energy independence and improved education is even more emphatic. Fully 73% believes that investment should be the first priority, and only 24% said that cutting government spending should take precedence.
Spend Money During Bad Times
In short, public spending in bad times is good politics. But is it good policy?
The same think tank that sponsored the Hart poll insists that the answer is yes. The economists at Economic Policy Institute say that spending now will not only provide relief in the near term but improve America's economic prospects long into the future, as well. Armed with copious data, they argue that the negative impact of substantial, prolonged unemployment is broad, deep and enduring—and that the issue of the deficit recedes when measured on that scale.
The institute's study, released last week, shows how lost jobs and income are simply ruinous to families struggling to find their way into the middle class, because of the effect on children's educational progress.
Meanwhile, diminished economic demand cuts investment, leading to reduced productive capacity that can hinder growth for years—and delay the introduction of new technology even as competitors abroad surpass us.
Although the Obama stimulus package stopped the worst recession from turning into a global depression, the nation's working families and small businesses have gotten too little help so far. Even if Congress is not yet ready to pass a second stimulus, which will ultimately prove necessary, the president should propose other actions.
Extending current unemployment, food stamp and health insurance benefits past the year's end is the first and most obvious step. The second is to extend federal assistance to first-time home-buyers and to families facing mortgage foreclosures and evictions.
Beyond that, the president should employ conservative means to meet progressive ends. He should increase the Small Business Administration's lending programs by billions of dollars, redirect stimulus and bailout funds toward public services and demand a "payroll tax holiday" on the first $20,000 of income, as suggested by Robert Reich, the former labor secretary.
All of those objectives could be achieved without passing a second stimulus bill. All of them would advance the public interest as well as the political interests of the president and his party. And none of them would be so easy for the Republicans to reject with their usual petulant "no."