Want Jobs? Rescue Homeowners - and Spend, Baby, Spend
It's time to start thinking about real solutions to this problem. There are two:
Spend Spend Spend
The stimulus worked, but it wasn't big enough. Far too much of the package was devoted to nonproductive tax cuts for the wealthy, and far too little on direct spending that creates jobs. So we need more direct spending on infrastructure - and, as Dave notes, we also need it if we don't want our country to keep falling apart at the seams.
The President recently observed that restoring jobs in construction and in state and local government at the same rate they experienced during previous recessions would reduce the overall unemployment rate to 6 percent, and some economists think that figure is low.
The CBO estimates that the last round of direct stimulus spending of $300 billion created 1.4 million jobs. We need to spend at least that much again, and we need to restore Federal support for state and local budgets.
Another way to get the economy moving is to get financial relief to people who have been financially struggling and have put off needed spending - on vehicles, home improvements, and the like - as well as reasonable amenities.
Homeowners owe $800 billion in "negative equity" to banks for non-existent real estate value. That's an "invisible bailout" funded by the struggling middle class, and delivered by borrowers who were frequently hoodwinked into taking out a mortgage at inflated prices.
Principal relief of $300 billion or thereabouts would be just, fair -- and would create a lot of jobs.
There you have it. So can we stop talking about government deficits until this problem is fixed? Some of us think Simon Johnson's emphasis on government debt is premature - let's get the economy moving and pivot to deficits afterwards - but he's certainly right when he says, "Our modern debt surge is much more about declining federal government revenue than it is about runaway spending."
So let's tax the wealthy, help homeowners, and spend some money to put more people back to work. When that's done we can pivot to deficit reduction - with millions of additional workers able to contribute to that effort with their taxes.
If reports are true that the President's game plan is to make his re-election campaign "all about Republicans," I would respectfully suggest a change of direction. It should be "all about jobs."
So what's keeping you, Washington? Stop the silly talk about "Simpson/Bowles" and "Grand Bargains" and get to work. The nation's unemployed, underemployed, and underpaid have waited long enough.