More Pain to Come, Even if He's Perfect
By Joseph Stiglitz
WashPost
Sunday, November 9, 2008
This is one hell of a way to win.
Barack Obama owes his victory in large measure to the prospect of the longest and deepest economic downturn in a quarter-century and perhaps since the Great Depression. If he performs well, he could become a great president. If he flubs it, he could get the same reception as Jimmy Carter. In the crassest political terms, it was good luck to have the financial crisis hit so close to the election. But Obama's lucky streak will end in a hurry if he can't find a way out of this mess. He will also have to manage expectations: Even if he does everything perfectly, we probably won't turn the corner for 18 months, and the downturn could last far longer than that.
The first task facing President-elect Obama, after eight years of misguided economic policies, will be to begin the recovery -- or at least forestall a further decline. It won't be easy. Some 1.2 million jobs have already been shed this year, and some three-quarters of a million Americans are about to exhaust their limited unemployment-insurance benefits. By October, only 32 percent of unemployed Americans were receiving unemployment checks. To make matters worse, when Americans lose their jobs, they typically lose their health insurance, too. Meanwhile, 3.8 million homes are under foreclosure, and states are facing massive revenue shortfalls; without assistance, they will have to cut spending, plunging the economy deeper into recession.
So some steps are obvious: assistance to homeowners and bankruptcy reform; extending unemployment insurance; and making up for the gap in state revenue. The United States also has an infrastructure deficit, not just a fiscal and trade deficit, which means that spending more on infrastructure (such as public transport and technology -- especially of the green variety) will stimulate the economy in the short term and help us be more competitive in the long run.
But then matters start to get trickier. The economy obviously needs a direct shot in the arm, but the 44th president needs to be careful about the design of the stimulus he proposes. That's because President Bush will bequeath him a national debt -- $10.5 trillion and rising -- that has almost doubled since he took office, even before you factor in the full costs of the financial bailout and the Medicare prescription benefit, as well as the price tag for providing for the hundreds of thousands of returning Iraq war veterans.
(More here.)
WashPost
Sunday, November 9, 2008
This is one hell of a way to win.
Barack Obama owes his victory in large measure to the prospect of the longest and deepest economic downturn in a quarter-century and perhaps since the Great Depression. If he performs well, he could become a great president. If he flubs it, he could get the same reception as Jimmy Carter. In the crassest political terms, it was good luck to have the financial crisis hit so close to the election. But Obama's lucky streak will end in a hurry if he can't find a way out of this mess. He will also have to manage expectations: Even if he does everything perfectly, we probably won't turn the corner for 18 months, and the downturn could last far longer than that.
The first task facing President-elect Obama, after eight years of misguided economic policies, will be to begin the recovery -- or at least forestall a further decline. It won't be easy. Some 1.2 million jobs have already been shed this year, and some three-quarters of a million Americans are about to exhaust their limited unemployment-insurance benefits. By October, only 32 percent of unemployed Americans were receiving unemployment checks. To make matters worse, when Americans lose their jobs, they typically lose their health insurance, too. Meanwhile, 3.8 million homes are under foreclosure, and states are facing massive revenue shortfalls; without assistance, they will have to cut spending, plunging the economy deeper into recession.
So some steps are obvious: assistance to homeowners and bankruptcy reform; extending unemployment insurance; and making up for the gap in state revenue. The United States also has an infrastructure deficit, not just a fiscal and trade deficit, which means that spending more on infrastructure (such as public transport and technology -- especially of the green variety) will stimulate the economy in the short term and help us be more competitive in the long run.
But then matters start to get trickier. The economy obviously needs a direct shot in the arm, but the 44th president needs to be careful about the design of the stimulus he proposes. That's because President Bush will bequeath him a national debt -- $10.5 trillion and rising -- that has almost doubled since he took office, even before you factor in the full costs of the financial bailout and the Medicare prescription benefit, as well as the price tag for providing for the hundreds of thousands of returning Iraq war veterans.
(More here.)
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