Good morning, America. Hello, world.
Yes, the skies over Mordor are now brightening.*
There is an almost palpable, physical sense of relief with the confirmation that the end of the Bush era is at hand.
And the election of an African American to the highest office in the land is an act of racial redemption that was almost unimaginable two years ago.
But we have a long way to go to escape from the Dark Days.
Capped by eight years of unchecked corporate predation, three decades of maniacal gifting to the corporate sector — improperly characterized as “free market” policies — has left the United States, and the world, in a very dangerous place.
The most acute problem — and the test that may well determine the character of the Obama administration, and whether it succeeds or fails — is the deepening recession. The financial crisis has made the recession worse, and poses enormous hazards and challenges of its own. The underlying problem is not the financial crisis, however, but the recession induced by the popping of the housing bubble. Calming the financial markets will not solve the economic problem, and the financial markets will not truly regain their footing until the economy is set back on a sensible course.
Responding to the worsening recession will require a massive program of public expenditure. The scale of the economic crisis requires a commensurate public outlay. Economists Dean Baker and Mark Weisbrot of the Center for Economic and Policy Research suggest additional U.S. spending of more $300 billion to $400 billion, and even more may quite possibly be required.
Of course, these astronomical sums seem more digestible after Congress agreed to spend $700 billion on the Wall Street bailout, but they will require a break from misguided prevailing orthodoxy** about the importance of balanced budgets.
It’s not that hard to figure out where these funds should go. They should expand unemployment insurance, and support state and local governments experiencing major revenue shortfalls as tax collections decline because of reduced economic activity. And they should be invested to meet pressing infrastructure and especially transformative clean energy needs.
It is conventional wisdom that infrastructure investments take too long to organize to be responsive to an economic slowdown. But many projects can be quickly and easily jumpstarted; the depth of the recession means that government stimulus will be needed for some time; and, with sufficient political will, even major energy projects — first among them, a major retrofitting of old buildings to increase energy efficiency — can be initiated quickly.
To succeed, Obama will have to deliver more aggressive policies than those on which he campaigned. Obama campaigned on a platform of a $50 billion “jumpstart” to the economy; a $150 billion investment over 10 years in energy and green technology; and $60 billion over 10 years for a transportation infrastructure investment bank.
These amounts are not close to sufficient. But there was evidence in the last months of the campaign that the Obama team perceives the depth of the crisis, and the absence of alternatives to major public expenditures.
In his book Obama’s Challenge, economic journalist Robert Kuttner rightfully argues that the choice for Obama is to be bold or to fail.
“On the recovery front, a failure to mount a program of large-scale public outlay would leave the economy in a self-deepening recession. And a program that continued the Bush administration’s ad hoc bailouts of failing banks without radical regulatory reform would simply invite the next round of bubbles, crashes and bailouts. As financial conditions worsen and ordinary business profits dwindle, the economic goes into a classic, self-deepening downward spiral.” This particular recession is more serious than most because of the collapse of housing prices, the financial crisis and the massive indebtedness of families and many businesses.
The choice, he argues, is transformation or stagnation.
Kuttner emphasizes the importance of leadership. He reads into Obama great potential for shifting ideological frameworks, and preparing the country for transformative economic initiatives.
Leadership will undoubtedly be important, especially in the early days of the administration.
But equally significant in the short-term — and more important over time — will be public demands. The Obama campaign generated an outpouring of civic energy not witnessed in the United States for two generations. The millions of people who invested their time and hope in Barack Obama now owe it to themselves and to Obama to invest more — this time to demand that he be all they hoped, and all the country and the world desperately need.
* For those not familiar with the reference, Mordor is the realm of the evil Sauron in J.R. Tolkien’s Lord of the Rings.
** Even as I prepare to post this column, NPR’s Steve Inskeep is asking Nevada Senator Harry Reid which of Obama’s stated priorities he’ll have to abandon, given fiscal pressures, or whether he’ll just trim all of them.