Nobody needs to be told our economy is going down the tubes. Every week brings new record-setting numbers. In just the three months that ended in November the job loss was 1.26 million, the worst since 1975. We lost more than 2 million jobs in 2008.
To arrest this downward spiral, the Obama team is talking about an economic stimulus package of about $800 billion over two years. Some complain it's too much. But it's actually not so large considering the size of the problem. It is about 2.7 percent of GDP. The recent increase in military spending plus tax cuts for the rich -- compared to 2001 levels -- added up to about the same.
Even if we take into account the rest of our red ink, and we actually hit the dreaded $1 trillion deficit in 2009, how extreme would this be? A
$1 trillion deficit would be about 6.7 percent of GDP. In 1983, coming out of our last deep recession, President Reagan ran a deficit of 6 percent of GDP.
The Obama stimulus differs from the deficit spending accumulated in the Bush and Reagan years in a profound way. Tax cuts for the rich -- and much more horrifically in the case of spending on the Iraq war -- are unnecessary and socially destructive. By contrast, President Obama is proposing to spend money on things actually needed.
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State and local governments need at least $100 billion to $150 billion next year to keep from cutting back on employment and education. We need increases in food stamps, unemployment insurance, and Medicaid spending for the poor, the ones most at risk of suffering from the excesses of Wall Street financiers and the government officials who failed to police them.
Obama's plan includes spending to repair roads, bridges and schools -- much of which is long overdue. There will inevitably be tax cuts in the package, but at least these will go to working- and middle-class people.
Two things that could turn the stimulus package into an even more positive force for change would be health care and environmental spending. The federal government can subsidize health insurance for the uninsured, with public-sector insurance like Medicare.
To begin the transition to a less fossil fuel-based economy, the federal government can also subsidize mass transit and the retrofitting of buildings to make them more energy efficient. And it can start building a 21st-century electricity grid to handle wind and solar energy sources.
The exact details of the package are not as urgent as its size and the speed with which it is implemented. President Bush and his Republican Party have unforgivably destroyed thousands of businesses and hundreds of thousands of jobs by delaying the package until Obama takes office. Further delays by Republicans in Congress should be met with mass outrage.
If anything, the Obama team's proposed stimulus may not be enough. Nobel laureate economist Paul Krugman suggested 4 percent of GDP, or
$600 billion for just next year. He may well be right.
Mark Weisbrot is co-director of the Center for Economic and Policy Research in Washington, D.C.
