First Move

November 9th, 2008

Obama revealed his economic stimulus package, and it looks pretty clear that he is staying true to his word: that he believes in an economy that works from the bottom up, that it grows not when you give massive tax breaks and giveaways to corporations and the wealthy (in the hope that they’ll decide to spend some of that on hiring people so the money will work its way back into the economy), but that it works best when you give the money instead directly to the lowest ranks of society–jobs for the lower & middle class instead of cash gifts to the rich, for example–knowing that they will spend the money in ways that will kick-start the economy. In other words, cut out the wasteful middleman who usually takes a huge slice of cream off the top.

Obama’s economic plan has at its heart a move to start rebuilding the nation’s infrastructure. To me, this is a no-brainer–as Roger K. Lewis as the WaPo points out, infrastructure is a “capital expense” because “money spent for labor and materials yields something durable, useful and often financially productive.” Bush just blew $700 billion on bailouts for irresponsible banks, much of which we might never see again. Obama might have gotten behind it because he knew that fighting for a more responsible package would have simply made things worse, not to mention helped lose him the election, but I have little doubt that his approach would have been far different had he been the author and the president who pushed it. (And he did push an alternate plan which would have given more money to people trying to keep their homes rather than the banks that were taking them away.)

This infrastructure push is one example of that mindset: spend money on things that will bring a return and boost the economy, rather than the right-wing method of throwing wads of cash at people already flush with it in the hope that enough will fall through the cracks and create some jobs somewhere. Obama’s plan has heft–invest in roads & bridges, railways, seaports, water, energy systems, and schools. The immediate effect is to create many new healthy construction jobs, pump money into the lower & middle class, pump up local economies where the projects take place, and then sit back and profit from the results for the next half century.

Believe it or not, Bush has been against such projects. And we wonder why our bridges are collapsing, why our construction jobs are disappearing, why local economies are drying up.

Another element of Obama’s plan is to give money to states to support their faltering social support systems–buying food for families that don’t have enough money, extending unemployment benefits for people who have lost their jobs for long periods of time–you know, frivolous stuff. Or what right-wingers call “welfare”–something they approve of if it’s a billionaire who just lost his yacht, but not if it’s a hardworking average Joe who’s trying to work but can’t find it, or a single mother working two jobs to raise her kids but still can’t make ends meet. These people aren’t investing in junk bonds or stashing their loot in the Caymans. They’re spending pretty much everything at home, money that goes right back into the economy. But conservatives see these people as greedy welfare queens who don’t deserve it. Give Paris Hilton a bigger inheritance instead–after all, she earned it more, didn’t she?

Obama is also looking to help out the auto industry, but also seems intent on using that influence to help steer them toward those green technologies he’s been talking about.

In short, Obama is not wasting any time in doing everything he can to deliver on his promises, and to create a stimulus package which has the best promise of having the strongest impact on the economy.

Even as he remains careful not to officially kick at the heels of the current administration, he has made it perfectly clear that he seriously intends to waste no time in getting to work–and already he sounds smarter, more determined, and more effective that the administration still in power.

Categories: The Obama Administration Tags: by
  1. Tim Kane
    November 10th, 2008 at 09:15 | #1

    If Obama had been President there would not have been any need for bailouts. If you pull on the thread long enough, you find that the source of the crisis is Supply side economics. I’m just guessing but in eight years Bush’s policies moved some 3-5 trillion (with a T) dollars from the demand side of the economy to the supply side. In other words he redistributed wealth to the top 30,000 families. Perhaps most of that money went to the top 1500 families in America. Regardless as to the specifics, the dynamic works like that.

    This causes demand to decline, and then, to collapse. Because their is no demand, the people with the money don’t invest in building factories to create jobs. No one will buy the out put of the factories. Instead they lend money to the middle and lower classes. The middle and lower classes essentially barrow the money back that was shifted to the upper classes as they try to maintain their life styles during what they hope is a temporary glut. When the bridge loan doesn’t make it to the other side, not only does demand collapse but the whole financial system goes down with it.

    I know the reality is more complex than that, but in essence we had a borrowing scheme in place to try to create demand in the face of falling median wages.

    This disaster is entirely of Bush and the republican party’s making. Supply Side economics is just 1929 republican economics rehashed.

    Obama is spot-on in wanting to stimulate the economy from the bottom up.

    In regard to the auto companies I wish he’d take this time to introduce some structural reforms. He should force them to alter their corporate charters to cause them to look and behave more like Japanese companies. Japan provides widescale tenure for employees. In essence this makes them quasi public jobs projects. But when this occurs it forces the company to plan long term and put workers interest on one of the front burners. In the 1990s Toyota was developing hybrid technologies because it needed to safe guard or hedge itself from a market shift in that direction. Meanwhile, at the exact same time, Ford was abandoning cars for Trucks and SUVs. Ford made more in the short run and their execs took home the bonuses. But the market shifted towards the hybrid technologies and Toyota and Honda were there ready and waiting.

    While he’s at it, I wish he would break the auto companies up. Chop Ford in two, and GM into 3 or 4. Japan has five or six independent auto companies at half the market size. You need multiple companies to have healthy domestic competition. I would do this and inject 3-6 years of a protection scheme to provide for re-adjustment with tarrifs and quota to the foreign imports, and a bias towards those companies that had plants in the states already.

    Question for Luis:
    Being in Japan, do you think the infrastructure projects should include Bullet Trains in the U.S?

  2. Luis
    November 10th, 2008 at 09:41 | #2


    While I agree with you on most of that statement, I have to correct you on the Japanese automakers tenure bit. That was mostly an illusion held up in the 80’s as an example of Japanese economic prowess, and was not wholly true. “Lifetime employment,” as it was referred to, was not as widespread nor as “lifetime” as it was made out to be. Only a limited cadre of workers had strong employment guarantees (I have heard the 30% figure most often quoted); but much of the auto industry workers were in the subcontracting field–the automakers would hire out for companies to make fenders, or seats, or whatever parts they would later assemble, and the subcontractors would be the ones who took the brunt of hard times. The subcontractors did not have “lifetime employment,” nor did they have many of the perks and benefits held by many in the big corporations.

    When times got tough, the auto companies would use the subcontractors to compensate. They would demand lower prices, so salaries would fall and workers would get laid off at the subcontractors. Japan’s “just in time” system was less a matter of perfect planning, rather more a case of using the subcontractors to cut costs. Automakers would simply demand the subcontractors produce and deliver “just in time,” meaning that subcontractors would have to store excess parts until they were needed, or take hits to gear up and over-produce if the auto companies demanded it. Whereas US automakers would lay off X number of workers, the Japanese auto industry would simply squeeze the subcontractors.

    Essentially, Japan created an auto industry ghetto which would suffer while the assembly plant and corporate office people would benefit; in the US, it was all kept more or less in the same area, giving the illusion of a worse-maintained workforce.

    And now that the shine is off of Japan’s economy, you almost never hear about “lifetime employment” any more. Sure, many Japanese companies go a lot farther to prevent laying people off, but mostly in the upper echelons, and usually in different ways, including salary cuts and so forth. A lot of older workers get placed on half-time, or reassigned in a way that they lose their accumulated raises and start again at a lower salary.

    We can see quite a bit of change from the college level–Japanese companies used to demand workers without pre-learned skill sets so they could train them themselves. Again, you don’t see that as much anymore, and people understand that it helps to bring skills to jobs.

    Japan has its advantages, but is not the employees’ paradise that many believe it to be.

  3. Luis
    November 10th, 2008 at 09:46 | #3

    Sorry, forgot about your ending question. No, I don’t think a bullet train would work for the US. People just don’t use the rail systems there as much, and I don’t think the gas crisis changes that much. In the SF Bay Area, where gas prices are very high, there’s not too much rail, and it’s not used as much as it could be. In my home town, there’s just one train line, and trains come along only once every 30 or 60 minutes. In Tokyo, that’s unimaginable; such a line would be used constantly, and would have to be supported by many other train lines.

    A bullet train would be a pretty showcase project, but would not carry the benefits to justify the price, I would think. Better to invest in schools, roads, and new energy systems, I would think. But then, I am hardly an expert or even knowledgeable about such stuff.

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