Recovery Realism

Today there are new signs that President-elect Obama's economic team and the Democratic leadership in Congress are prepared to commit to an economic recovery plan that is suited to the scale of the problem. But the progressive movement will still have to push the envelope.

One positive signal is in the story in The Washington Post today [1] that reported that "President-elect Barack Obama and other Democrats are rapidly ratcheting up plans for a massive fiscal stimulus program that could total as much as $700 billion over the next two years."

That is beyond the $300 billion a year [2] that many progressive leaders were saying just a few weeks ago was the minimum amount needed to get the economy back on track.

Yet it is a measure of just how badly the economy is collapsing that what was considered to be a left-wing argument in the early fall is now becoming a centrist argument as we head into winter. How centrist? Consider that on CNBC this morning [3], Hank Greenberg, a former chairman of AIG and a John McCain supporter during the presidential election, said that the government will have to spend up to about $1 trillion on economic recovery. "I think it's deeper than what most people want to believe," he said.

If numbers as high as $1 trillion are beginning to enter the mainstream discourse, we shouldn't shy away from arguing that that a stimulus package just for Main Street needs—infrastructure building, aid to state and local governments, unemployment insurance and other safety-net needs—may need to be at minimum $1 trillion over two years.

What Austan Goolsbee, a senior Obama economic adviser, has been saying publicly [4] is that their thrust right now "is not a numbers-based economic program" but is "to do whatever we need" to meet Obama's stated goal of creating or retaining 2.5 million jobs.

When Obama formally introduced his economic team Monday, he said, “I think the most important thing to recognize is that we have a consensus, which is pretty rare, between conservative economists and liberal economists, that we need a big stimulus package that will jolt the economy back into shape and that is focused on the 2.5 million jobs that I intend to create during the first part of my administration. We have to put people back to work.”

Congressional Quarterly noted [5] that "Obama left key details unfilled, including the size of the package and precisely what tax and spending elements it will contain." That leaves room for Congress to fill in some of the blanks. But Obama did promise that his final proposal "is going to be of a size and scope that is necessary to get this economy back on track.”

Making sure that the focus stays on ensuring that Obama's economic team and Congress deliver whatever is "necessarily to get this economy back on track" is the key reason why Robert Borosage, co-director of the Campaign for America's Future, issued a media statement today that said, "The crisis we face makes Rubinomics irrelevant." Yes, there is widespread concern among progressives that ex-Citicorp chairman Robert Rubin and many of his proteges are in positions to call the economic shots despite Rubin's role in creating the conditions that placed Citicorp and other financial institutions in crisis. But that was then.

Now, to quote Borosage, "it's not the personnel; it's the policy. And on this, Obama has been clear. He's announced a massive recovery plan based on putting people to work with public investment vital to our future." Rather than the focus on reducing the deficit and financial market deregulation that was the hallmark of Rubin's tenure as Treasury secretary under President Clinton, "deficit spending must go up, finance must be reregulated, trade imbalances must be reduced and manufacturing can no longer be outsourced."

On those scores, Obama is setting the right direction, and the consensus around the scale of the solution is blowing in our direction. There are still political leaders who are arguing for the opposite, and mainstream media outlets that parrot their control-the-deficit line without proper context and fact-checking [6]. What Obama will need, and what our economy must have, is a mobilized community prepared with the facts and the political framing that will make it possible for Obama and Congress to move quickly and boldly.