FEAR FOR A CAUSE

I was having a conversation with one of my colleagues in the banking industry a few days ago about the American Recovery and Reinvestment Act of 2009 (the 2009 Stimulus Package). We were discussing the past history (in the depressions of the 1930’s) and success of a government stimulus. History records the facts as follows; after assuming the presidency, Franklin Roosevelt, pursued a government stimulus that successfully revived a depressed economy. However, encouraged by deficit hawks to abandon continuing the stimulus, he deviated returning to government austerity to quickly, and sending the economy into another depression. But, a significant world event occurred. The president and members of congress, having lost their confidence for government deficit spending were involuntarily re-engaged in a massive deficit stimulus when the fear of the Nazi’s in Germany and an aggressive enemy in Japan forced them into the kind of deficit spending program that the economy not only needed to recover but, to issued in a long period of productivity and wealth that brought the United States to be the leader of the World (free and otherwise) that we are today.

What we lack today, for a similar recovery, is the “fear” which would launch us into a similar recovery. Today, deficit hawks are again cautioning about a federal deficit of $1.4 trillion…a fear to be sure…but, the wrong kind of fear. This is their (conservative deficit hawks) reason for saying no to everything…including the most recent debate about healthcare. This argument is based in denying history and ignorance. It’s a prescription for a continuation of a weak recovery and possibly a re-entry into another great recession or even a new depression. Their argument will result in a long slow recovery, possible negating any meaningful recovery, and continuing the suffering of the under-employed, and the unemployed.

Here’s the facts as recently described by The Nation Magazine. “The mobilization for World War II produced one of the most remarkable success stories in US economic history. War production not only overcame lingering weaknesses from the Great Depression but transformed the economic system into the modern powerhouse that became the platform for our long-running postwar prosperity. All this was achieved by the government, largely with borrowed money. By war’s end Washington had piled up federal debt totaling around 120 percent of annual GDP (nearly double today’s debt level).” DID YOU GET THAT…120% of the annual GDP!

The Nation goes on to say, “During the wartime emergency the government took charge of the economy and rapidly shifted the industrial system to armaments while suppressing domestic consumption. Deficit spending force-fed the rapid development of new technologies and new basic industries. In a few short years, economic output expanded by about 75 percent. Despite rationing and wage and price controls, Americans at large were replenished: per capita income rose by almost 70 percent (with industrial jobs opened to women and blacks).”

Another massive government stimulus plan, that I like, which lasted for years was the Interstate Highway System enacted during the Eisenhower Administration. I could argue that this government program created additional wealth and prosperity for all of us, rich and poor. The key to un-locking prolonged economic opportunity continues even unto today, although this system is crumbling and badly in need of repair (roads and bridges). This presents an opportunity for additional stimulus and growth in our current crisis.

We, as a country, need a new fear which would force us into making the commitment to our predicament of today. We need a public “Jobs Program.” A “Jobs Program” that would create jobs when the private sector seems unable or unwilling to do so. We should commit to creating “green jobs” that would supplement environmental construction, and re-tooling standing buildings with environmental efficiencies, not to mention high speed rail which would encourage green efficiencies and conservation. We need to encourage and create “green companies” and our government should support and purchase from those companies.