In what I conjecture is an end-run around the Wall Street types that currently dominate the economic advice President-elect Obama is getting, former Clinton Secretary of Labor Robert Reich late this afternoon uploaded a blog on TPMCafe entitled The Mini Depression and the Maximum-Strength Remedy. Reich writes that we are not in as bad shape as the Great Depression, but we are in worse shape than a "normal" recession. So, he calls it a "mini-depression." And he writes that the real problem is NOT the failure of banks to start lending again, but the collapsed earnings of American workers who have now tapped all available sources of credit, and are moreover holding back because they fear they may soon lose their jobs.
There's more downstairs
Reich argues the answer is a massive stimulus program of spending on infrastructure, and uses the figure of $700 billion. Reich then warns that there are two camps opposed to this idea. First are the conservative supply-siders who will demand tax cuts instead of enlarging government spending and programs. Reich quickly shows why these dead-enders are wrong. Second are the "fiscal hawks" who argue that the most important thing government can do is balance its budget, and are freaked out at the likelihood that the deficit for 2009 is going to be $1 trillion or more.
Besides the problems and proposed solution Reich lays out, I think it is extremely important to ask ourselves why Reich has gone public in the way he has, and, more importantly, at this time, just days after Reich was on stage for President-elect Obama’s press conference just a few days ago.
My thought on this point is that Reich is very upset to find that of the dozen or so economic advisors around President-elect Obama right now, only he, Reich, and former Michigan Congressman David Bonior are advocates for what can be termed Main Street’s interests. All the rest of the economic advisers, such as Robert Rubin, Larry Summers, Warren Buffet, and Paul Volcker, are advocates for Wall Street’s interests. And they're trying to maneuver Obama into the same bond market straight-jacket they were able to maneuver Bill Clinton into. So Reich is taking the fight into the open – an onto the tubes.
Which means he’s asking for our help.
First, of course, you should go read Recih’s blog.
Then I want to reiterate here something I’ve written many times in the past. Compared to what this country needs in terms of building infrastructure that will begin transitioning us away from a fossil-fuel based economy, even the stupendous sum of $700 billion is actually paltry. Yes, paltry. No where near enough. Just like after World War Two, we are sitting on top of a powder keg of pent-up demand. But this time the pent-up demand is for a green economy. Just think of what needs to be built:
Every single car and truck in the United States needs to be replaced with hybrids or super fuel-efficient vehicles.
A replacement for the entire system of gasoline delivery and distribution.
Almost the entirety of the U.S. housing stock needs to be replaced or retrofitted with green technology.
Same with commercial buildings, especially skyscrapers built in the 1950s to 1990s, which is almost all the core downtowns. Tear `em down and start over again, make them user friendly and environmentally neutral.
Urban mass transit rail systems. New York City has the most dense network, and it is only half as dense as what you find in Tokyo, London. Paris, Moscow. Cities like Miami and Phoenix, which are now in the top ten urban areas in the U.S. don't have ANY mass transit rail, or have a single line with one or two dozen stations.
Passenger rail with its own rights of way. How many people know Amtrak has to run on rails owned and maintained by the freight railroads? In the northeast corridor, from Washington DC to Boston, we really should build this entirely underground. One long tunnel from DC to Boston.
The entire grid for electricity generation and distribution needs to be almost entirely replaced.
Just to give you some numbers to think about: Just to build rail transit systems in the 39 largest urban areas in America (all with over 1.5 million in population) to the same density as rail transit in New York City is going to require, by my estimate, $3.5 trillion, and two and one half years of total steel production in the U.S.
That’s just one program, folks - $3.5 trillion.
The Dept of Energy in May released its report on achieving 20 percent windpower by 2030 (warning – PDF). That is actually an extremely modest goal - and the price tag for it was over $1 trillion. Ramp it up to something like 50% windpower by 2020, and you're easily looking at a $3 or $4 trillion program.
So, I think the fight is on. Either we force Wall Street to back off, so that we can get going with building a new American economy for the twenty-first century. Or, we can sit back and try to reassure ourselves that President-elect Obama is a really smart guy, who will get it all figured out.
With a little help from his Wall Street advisers.