invest in america

No New Ideas

Lauren Kiefer — Wed, 10 Dec 2008 13:36:27 -0500

The American people voted for change. While Obama is talking about a huge public works project, conservatives are still stuck in the same old place. They cannot seem to stop talking about tax cuts, as if that will solve every problem

John Boehner, current Republican Leader of the House, offered his economic advice to the American people in a press release on November 21. But it’s all about tax cuts. He recommended we double “the child tax credit; temporarily eliminate the capital-gains tax…reduce the corporate tax rate…and give small businesses more tax relief…” Same old, same old. And even more recently, he shot down Obama's “spending spree” and announced once again that we should provide “tax relief to the middle-class.” Been there, done that.

Furthermore, the Heritage Foundation's plan is also all about tax cuts: “ … the federal government should top showering industries with loans… lower the corporate tax rate...make permanent many elements of the Bush tax cuts…delay the increase in the capital gains and dividends tax rate from 15 percent to 20 percent for some successful investors…”

To top it off, here are some ideas put forth by the Republican Party in their 2008 Economic Platform:
• “making the 2001 and 2003 tax cuts permanent”
• “a major reduction in the corporate tax rate”
• “permanently ban internet access taxes and stop all new cell phone taxes”
• “doubling the exemption for dependents”
• “current limits on tax-free savings accounts should be removed”
Read that list again. Everything is a tax cut. Don’t they have any other ideas? And who is going to pay for our roads, schools and bridges if we don’t collect any money for them?

What conservatives don’t understand is that this is not a battle between tax hikes and tax reductions. Progressives are not claiming that tax increases alone will get the country out of the recession; rather they are focused on using government spending to jump start the economy.

It has been said time and time again by leading economists. Tax breaks simply do not stimulate as well as direct investment. The Economic Policy Institute recently published an article on how to stimulate the economy, accompanied by a chart containing the following information about the “Economic benefits of various stimulus provisions”:
• Food stamps: $1.73
• Extending UI Benefits: $1.64
• Infrastructure Spending: $1.59
• Make Dividend and Capital Gains Tax Cuts Permanent: $0.37
• Corporate Tax Cut: $0.30
• Make Bush Income Tax Cuts Permanent: $0.29
• Accelerated Depreciation: $0.27

As we can see, investing in food stamps, unemployment benefits and infrastructure will create the greatest amount of return for each dollar spent. Poor people spend their money immediately on necessities, producing immediate economic activity. On the other hand, corporate tax cuts, making the Bush tax cuts permanent, and accelerated depreciated are not very useful or economically rational measures. In fact, infrastructure investment yields a return that is over 5 times greater than that of the Bush tax cuts. The tax breaks for wealthy citizens and corporations will actually “cost over twice as much as they return to the economy.”

The Center on Budget and Policy Priorities also separates the myths and realities of tax reductions, emphasizing that making tax cuts of the Bush administration permanent “would cost about $4.4 trillion over the next decade.” Moreover, “tax cuts have been the single largest contributor to the reemergence of substantial budget deficits in recent years.”

Numerous opinions from leading economists support the progressive call for fiscal expansion. In a recent op-ed from The New York Times, Paul Krugman points out that “Fiscal expansion will be even better for America’s future if a large part of the expansion takes the form of public investment — of building roads, repairing bridges and developing new technologies, all of which make the nation richer in the long run.”

In an article from The American Prospect, Dean Baker also stresses that the country “should support a big stimulus package that is focused on investments for the future. This is essential for sustaining the economy now and it will help our kids for decades to come.”

Inevitably, not everyone is going to agree on the best way to revive the economy. But with the constant repetition of appeals for infrastructure investment it would seem counter-intuitive to not follow this route. We need a new solution to a new problem. The conservatives' exhausted tax cut plan just doesn’t make sense for us anymore.

A Consensus Emerges: Build, and Build Big

Eric Lotke — Wed, 26 Nov 2008 14:19:01 -0500

Everybody is saying the same thing. Stimulus plans don’t mean tax rebates worth a few tanks of gas and a restaurant dinner. Stimulus plans means new roads and bridges, aid to states so they won’t lay off nurses and teaching assistants, and a down payment on a new energy economy with windmills and commuter rail.

Most importantly, people have turned the corner on money. Stimulus will take real money, measured in hundreds of billions of dollars and percents of GDP. Low estimates put the investment at $300 billion. High ones reach $700 billion. Paul Krugman, with his hot new Nobel prize in economics, recommends “figure out how much help [you] think the economy needs, then add 50 percent.”

The former but not future Treasury Secretary Lawrence Summers has changed his tune. No longer should stimulus be “targeted, timely and temporary.” Now it should be “speedy, substantial and sustained.” If he changes the first S to “strategic,” he’ll sound just like the Campaign for America's Future. "Strategic" points towards energy and education, investments that pay back over time.

Increasingly, even the deficit hawks recognize that this is not the time to worry about deficits. This is the time for action. To paraphrase FDR, when the house is burning, you don’t fret about the cost of the hose.

Over the weekend, president-elect Barack Obama started to define what the New York Times labeled a Vast Economic Stimulus Plan.

“We’ll be working out the details in the weeks ahead, but it will be a two-year, nationwide effort to jumpstart job creation in America and lay the foundation for a strong and growing economy. We’ll put people back to work rebuilding our crumbling roads and bridges, modernizing schools that are failing our children, and building wind farms and solar panels, fuel-efficient cars and the alternative energy technologies that can free us from our dependence on foreign oil and keep our economy competitive in the years ahead.”

He is exactly right, and he’s been saying this since the campaign.

In June he told the U.S. conference of Mayors:

“Now is not the time for small plans. Now is the time for bold action to rebuild and renew America. We’ve done this before. Two hundred years ago, in 1808, Thomas Jefferson oversaw an infrastructure plan that envisioned the Homestead Act, the transcontinental railroads, and the Erie Canal. One hundred years later, in 1908, Teddy Roosevelt called together leaders from business and government to develop a plan for a 20th century infrastructure. Today, in 2008, it falls on us to take up this call again – to re-imagine America’s landscape and remake America’s future. That is the cause of this campaign, and that will be the cause of my presidency.”

Back then he was estimating expenditures in the $150 billion range – and nowadays that's rounding error. But back then the Dow was at 12,000 and 1.5 million more people had jobs. It’s nice to see him up the ante.

The American people are behind this too. A June survey by Hart Research showed a country that wants more than quick stimulus. Nearly two-thirds (63 percent) of voters think the economy is facing “long-term, structural economic problems.” Only one-third (30 percent) say it is a “short-term economic downturn.”

Investing in physical infrastructure is among the most popular of long-term solutions. A June survey by Rockefeller Foundation found 82 percent support for “increasing government spending on things like public-works projects to help create jobs.” Reconstruction will take time and exceed the limits of a single budget cycle – but for long term solutions to long term problems, you don’t “pay as you go.” You invest over time.

We discussed all of this last week at our conference on Real Investment in America. I wrote all about it in our snazzy new report, The Investment Deficit.

Build, baby, build. The consensus is emerging.

With A Compass, Not A Roadmap

Eric Lotke — Wed, 26 Nov 2008 10:14:55 -0500

The complaints are starting on the new Obama administration. Some are concerned that he filled his administration with former Clinton hands, reflecting the old school (if more competent), not the change we need.

“What worries me is there is not one person in the senior group who is the outsider to this club,” cautioned Robert Kuttner of the American Prospect. “Where is the diversity of opinion in this economic team?”

David Sirota of our own Campaign for America's Future observes that some terrific progressives have been appointed to high-level positions in the Administration, but they are political jobs, not substantive ones. They are “positions that are focused on selling policy, whatever that policy may be. “ In contrast, the “policy advisers who actually craft policy are almost all right-of-center, Establishment choices.”

Discontent is coming from the other direction as well, as Democrats increase estimates of the cost to revive the economy. During the campaign Obama pledged roughly $150 billion in spending over 10 years to create new jobs for clean energy and rebuilding schools. Now Congressional Democrats are estimating immediate expenditures in the $700 billion range. The GOP has created a spendometer to track the continuing increases.

Obama himself dodges questions about cost. “It is going to be of a size and scope that is necessary to get this economy back on track,” he said in his November 24 press conference. “I don't want to get into numbers right now.”

The question for progressives is whether to demand the details or question his choices.

Both seem premature. Political change happens with a compass, not a roadmap. Obama has clearly indicated which way he wants to lead: in the direction of clean energy, massive public investments, an exit from Iraq and “affordable, accessible health care for all Americans.” These are important and fundamentally progressive goals.

Digby sees a positive side to the appointments to political -- if not substantive -- positions. Simply using progressive language drives our country in a positive direction.

Let’s hope that those old Clinton hands will have the skills and experience to navigate the changing terrain. Obama’s job is to set a direction. Our job is to push him forwards and keep him on course.

Orders of Magnitude

Eric Lotke — Tue, 10 Jun 2008 22:52:57 -0400

I had the privilege Tuesday morning of attending a hearing by Rep. James Oberstar, D-Minn., the chairman of the House Transportation and Infrastructure Committee, on the issue of America’s decaying infrastructure. It was an important hearing and everyone said the right things.

If that sounds encouraging, keep the good mood for a moment. Soon you’ll get to the “but.”

The people at the hearing all understood the problem. America is falling apart. Representatives and experts talked about our congested highways and collapsing bridges. They talked about bursting steam pipes and overflowing sewerage. They cited the American Society of Architects and Engineers’ conclusion that $1.6 trillion is needed to bring the nation's infrastructure to “good” condition. That’s just “good,” not excellent. They noted that our competitors in Asia spend five times as much on infrastructure as the U.S. as a percent of gross domestic product.

Most speakers credited historical America with great achievements – transcontinental railways, the interstate highway system, the Erie Canal – and they recognized the role that government played in those accomplishments. Our U.S. government recognized the need, provided the funding and organized the construction.

The ranking Republican, Rep. John Mica, R-Fla., recognized needs in excess of a trillion dollars. He went out of his way to praise conservative president Dwight Eisenhower, who proposed the interstate highway system in 1954 – conceiving a half-trillion dollar project at a time when the entire federal budget was $78 billion. He lamented that today’s conservatives aren’t equal to a challenge of that magnitude.

Not only did they see the magnitude of the problem, they spoke creatively about solutions. Proposals on the table ranged from public-private infrastructure banks to a National Development Infrastructure Corporation. Proposals were diverse and well-constructed.

Now the “but.” Having recognized the scale of the problem, the solutions barely nibbled around the edges. Connecticut Rep. Rosa DeLauro, a main mover, has championed a bill that proposes $9 billion over three years, or $3 billion per year. The main bill on the Senate side proposes $60 billion over 10 years, or $6 billion per year.

It’s good news to ante up several billion a year towards this serious problem, but get real. The same speakers outlined a $1.6 trillion problem. The solutions are off by orders of magnitude. Where’s the rest of the money going to come from? That’s the $1.59 trillion dollar question.

Our leaders are afraid of deficits. They are afraid of taxes, and under the thrall of paying as they go.

They need to let that go before we can solve these problems. These are long-term investments. They require long-term financing and long-term vision.

Real people pay as they go for household expenses like food and clothing. They borrow for investments like houses, cars and college. Responsible people do it, and so can responsible government. Smart investments pay back over time.

Tuesday's hearing provided an important service by outlining the problem and starting to look for solutions. But it’s only a first step. More is needed. By the speakers' own estimates, $1.59 trillion more steps are needed.

Financial Times: Soros Blasts Paulson

Philip Palij — Tue, 08 Apr 2008 04:50:00 -0400

None other than George Soros takes Paulson to task for the "False ideology at the heart of the financial crisis".

The thoughts of one of the worlds top financiers.