Make no mistake: it’s politically necessary for Presdident Obama to produce some sort of substantial fiscal stimulus program under the present economic circumstances regardless of whether it will actually help the present circumstances or not. If he doesn’t he won’t be elected in 2012, indeed, it might threaten his presidency. That having been said, what should President Obama do about the economy.
The very first thing he should do is hew closely to the facts. It’s fine to speak of the “greatest financial crisis since the Great Depression” because that’s what it is. It’s not okay to speak of the “greatest economic crisis since the Great Depression” because a) it isn’t—the turndown in 1991-1992, in the early 1980’s, in the mid 1970’s, in the late 1950’s, and immediately following World War II were all worse; and b) fear-mongering by the president may actually produce what we’d like to avoid.
He should speak stirringly of the resilience and spirit of the American people and our ability to get through this if we all pull together, etc. He’s already starting to do this but the message is being diluted by the fear-mongering above.
He should get Congress to extend unemployment benefits and issue more food stamps. Those measures are the fiscal stimulus most likely to produce results now. He should get Congress to give money to the states for any “shovel-ready” infrastructure projects.
Unfortunately, I seriously doubt that there are enough of those projects to produce serious fiscal stimulus in the near term. This isn’t the 1930’s. These projects require years of planning, environmental impact statements, public hearings, litigations, etc. We also don’t build roads by getting a thousand guys out with shovels any more. It’s a skilled activity and won’t employ nearly as many people as it would have 70 years ago. Specifically, we aren’t going to employ 2 million clerks, salesmen, bankers, and financiers by building roads and bridges. We’ve turned a corner into being a services economy and unemployment in distressed industries is likely to be structural.
I wouldn’t object to extending broadband Internet access but the reality is that doing that doesn’t require the federal government and to get the most bang for our buck we should turn our attention to a new energy backbone for the country. This is something I’ve been pounding on for some time now here. A new energy backbone is the technology that makes solar power generated in the Southwest, wind power generated in the Great Plains, geothermal power generated in Arkansas and tidal power generated along the Texas Coast availalble to the great population centers.
Its scale makes it something that private businesses won’t tackle. The new backbone should be analogous to the Internet: resilient, redundant, adaptable, adaptivized.
It won’t employ 2 million people. The skills needed are more specialized than that. But it’s likely to create and preserve jobs.
In the near term monetary policy is a lot more likely to pull the economy out of its slump than fiscal policy is. However, I sincerely hope that President Obama seizes the opportunity to turn the politically necessary fiscal stimulus package he’ll undoubtedly produce to something we actually need.
Update
I see that the idea of an energy backbone is starting to pick up some steam. Grist quotes from an interview with Ted Turner:
We’ve got to have a new digital [electrical] grid that goes from coast to coast and border to border to move this new energy around. The best place to build solar panels is in the Southwest — Arizona, New Mexico, Southern California, and southern Nevada — but we’ve got to move it all the way across the country to New York and Boston. And then the best place for wind power, and where it’s the least disruptive, is out on the Great Plains, and we’ve got to be able to move that electricity generated from wind power to the major population centers as well. And we need a new grid anyway; the grid we have now is over 100 years old, and it’s decrepit.
Tigerhawk concurs (video clip).
