I don’t think there is anything wrong with recognizing that social programs serve several purposes. Most things do. The fact is that social programs do serve an economic stimulus purpose, and it would be dangerous not to recognize that. As the last 8 years should have shown so clearly – if you close your eyes for reality, it will hit you hard in the a**. I also will have to disagree with the idea that the richest country in the world cannot afford our current social programs. As a % of our GDP we are actually not spending much on social programs compared to other industrialized countries. Look at tax-rates and social program spending in the Scandinavian countries, and they are doing just fine. Even if we did have to accept slightly smaller houses and cars or cut in other self-indulgences to make sure everybody have a home and food on the table, we would still all be just fine.

The fiscical irresponsibility that has and will continue to hurt this nation was the rounds of taxcuts early in this decade at at time when we still had a huge national debt and there were no indication of a severe ressesion. On top of that we then had an even worse fiscical irresponsibility in form of a $ 2 trillion war without a corresponding war-tax to pay for it. Bush took over a budget that was slowly paying down the national debt (as it should) and then added $ 1 trillion to the debt for every year in office except for his first. The idea that poor people should be paying for this fiscical irresponsibility of huge taxcuts for the rich is not only morally bankrupt but also economically irresponsible.

Ted @ 11:14 PM

Yeah who needs knowledge when opinions are 5 cents a dozen :-)
And those opinions are only slightly used (they were used to put us in the hole we are today.

Want to talk about why FDR’s spending spree worked relatively well for the fix they were in? Sit back and think about the economic multiplier effect of programs like the Rural Electrification Act. Huge multiplier. Think about the economic assets created by Hoover Dam, the Grand Coulee, the TVA projects, etc. We could not have won WWII without those huge hydropower projects of the 1930′s.

Today, you’d never get past the environmentalists’ lawsuits to get those projects started, never mind started in the timeframe necessary to accomplish economic results. Just read the history of the TVA project in Tennessee and how quickly that project was started. Without the power from TVA, we would never have been able to enrich enough uranium for the Manhatten Project.

Second reason why trying to replicate those projects won’t fly: we’re already electrified. We don’t have any projects sitting on the drawing boards (or even in anyone’s imagination) that can employ that many people. We have transportation projects, true, but they won’t come close to employing that number of people, or creating the economic multipliers of those hydropower projects.

Third problem with trying to create mass employment by government project: absent a lot of manual labor (as on jobs in the 30′s), we don’t have a lot of projects that need the people hit the hardest – ie, people with less education. The skew in the unemployment stats is already saying something about this ‘recession’ – if you’re better educated and female, you have a significantly higher likelihood of keeping your job. If you’re male and less educated, you have a much higher likelihood of losing your job. I don’t see much spending in the stimulus bill(s) that is going to create work for these guys.

Fourth problem with trying to replicate FDR’s employment projects: the structure of the economy has changed. In the 1930′s, if we needed machines, tooling, etc — all of that was made here. Today, if you wanted to put up a wind power project (eg), it is entirely possible that you’d be using Suzlon turbines, which come from an Indian company, not a US company. Or if you’re going to do a whole lot of re-engineering of the power grid, many of the parts and control systems might be coming out of Europe. Right there, we’re giving away chunks of the economic benefit very quickly. The stimulus bill has all sorts of money in it for new computers for the USDA. Well, where are those going to come from? Taiwan, China or elsewhere most likely. How much of the money for a new PC stays here in the US? Not even a quarter of it, I’d guess. That condition didn’t exist in the 1930′s, Smoot-Hawley notwithstanding. There weren’t cheaper places to import trucks, concrete, machine tools, etc from. They were made here.

So how would we duplicate a FDR-style jobs program? I have no ideas, given the constraints we have to work with. If we could relax some of the constraints, then maybe the FDR-style major jobs programs could work.

With home equity reversed back a decade or more, and auto companies in dire straights financially, the lending for auto loans and other consumption will likely have to come from local banks, which will place tighter standards on lending than the former “manufacturing companies with a bank inside” setup.

It is time to get the crap out in the open, take under the banks that are insolvent, break apart their assets and NOT sell them to other “too big to fail banks.”

That’s part one.

Concurrently with that, the Fed should step up service to smaller local and regional banks and tell consumers to look to these smaller banks for loans and services. The Fed should help smaller banks assume the business that will be left behind by the larger banks.

There’s no way around it: we’re not going to get this economy going again until we have a functional financial system, and we’re not going to have a functional financial system until the zombie banks are put out of our misery.

Get the government out of the markets and get the markets out of the government.

What could be simpler?