Already, the economy is being starved of investment it needs to nurture growth. Net private investment, which includes spending on everything from machine tools to new houses, minus depreciation, fell to 0.1% of gross domestic product in the second quarter of 2009, according to the latest government data. That's the lowest level since at least 1947.
(Update: graph now included, thanks to Melanchthon. Link to eurotrib original story where it is also visible here)
The recession can be said to have "ended" because corporate profits are doing better than expected, and the stock market can celebrate that thanks to the oodles of cash injected into the financial economy by the Fed. But this is like losing weigth by starving oneself...
Read that again: there is NO net new investment in the economy by the private sector, right now, it's barely keeping what exists in condition. This is unprecedented since at least WW2.
If this doesn't point to the urgent, desperate, need for more public sector investment to plug the unprecedented gap in the private sector, I don't know what will.
And if that doesn't point to the incredible opportunity for Obama (and governments elsewhere) to shape the economy for the next 50 years by putting in place new collective infrastructure (energy, transport, healthcare, education, etc) I don't know what will.
The main argument against government spending and borrowing is that it will "crowd out" investment in the private sector (ie prevent it from happening) and increase interest rates. Well, private sector investmetn is already not happening, and interest rates can basically not be any lower.
The other, more reasonable argument is that debt should not be used to fund consumption - thus the focus on public investment - and the beauty is that the needs are huge and perfectly well identified. To name just a few: investment in house energy efficiency (this will additionally help the construction sector); investment in public transport and high speed rail; rebuilding, strengthening and smartening the power grid; new investment in education opportunities and healthcare for all, not to mention the industrial facilities behind each of these, if appropriate.
It's the perfect time to show that government can plan for the future, and help solve the problems of the present at the same time. It's a once-in-a-lifetime opportunity to prove (yet again) that government is the solution, not the problem, to many of our collective woes.
Instead, we get the "government has grown too big already" pollyannas choking off any alternative voice. The right (and the neolib or bank-affiliated "left" like Summers and Geithner) have already succeeded in limiting the stimulus, and blaming its insufficient results on its being too big, rather than too small. Right now, we have runaway debt and no real recovery plan, ie the worst of all worlds. Time to do somethign about it, and be bold!