The Financial and Economic Crisis: Analysis & Action Plan

The article I have posted as a Page under this title was posted on the website of Progressive Democrats of America on May 18, 2009.  I began writing it as testimony to the Ways & Means Committee of the Oregon Legislature for hearings on how to handle the Oregon budget crisis.  I was primarily concerned about prospective losses of funds and services for people  with mental and developmental disabilities and other vulnerable people, but just about everyone who testified at that hearing in Eugene told of other worthy and crying needs that would be denied if the Legislature cut off funding.  I decided the most constructive thing I could do was suggest sources of funding.  After reviewing the recent reports of the Oregon Center for Public Policy, I wrote testimony in favor of a new tax on individuals with $250,000 or more in annual income and on profitable corporations.  But in addition, I suggested the Legislature ask the Congressional Delegation to seek additional federal stimulus money.

Much as the idea of more federal stimulus seemed unlikely — with the Republicans already attacking the stimulus that had been passed — the justification for it is quite reasonable:  The federal stimulus amounted to $787 billion to stimulate economic activity by creating jobs and funding needed services.  State budget cuts and tax increases were (and still are as far as I know) projected to be about $350 billion.  So nearly half of the first federal stimulus would be negated, undone, by those State actions.  Thus we would need more federal stimulus just to get the effect the first package was designed to deliver.

I got the idea for more federal stimulus targeting the States from Robert Reich.  It was also favored by economists Paul Krugman and James K. Galbraith, Jr.  But at that point it was just them, and me, and Progressive Democrats of America on record in favor of it.  However, the idea may be beginning to catch on.

Last week, Christina Romer, chair of the White House Council of Economic Advisers, acknowledged in an interview with the Financial Times that cutbacks by states facing budget crises would push in the opposite direction from the federal stimulus.  Meanwhile David Axelrod, a senior White House adviser, told NBC Television the administration would be open to more stimulus if it turned out to be needed.  These and related remarks are reported in the Financial Times of 6/29/09.

The idea for more federal stimulus, and the other policy proposals in my article for PDA, are intended to buy time for the transition to what I think will be a new economy.  The pessimism of my assessment of the economy back in mid-May seems to have held up so far, and there’s at least a strong chance the economy will resist the “jump start” the federal stimulus is intended to provide.  As unemployment continues to grow and more people become increasingly desperate, I’m afraid we may face a period of social and political unrest that may even degenerate into chaos and violence.   Our leaders, including President Obama, are doing nothing to prepare us for the worst case scenario that has at least a strong chance of coming to pass.  So the spirit of my “Action Plan” on the financial & economic crisis is really to make the transition to a lower living standard more gradual, and lay some groundwork for a transition to a more sustainable economy.

On a more fundamental level, we need an approach that is best described for me, so far, by Robert Jensen in his new book, “All My Bones Shake,” about seeking the prophetic voices we need to find and use in the times ahead — starting now.  I’m just beginning the book, but have read three excerpts posted in various places.  I’ll speak of them further in a later post.

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One Response to “The Financial and Economic Crisis: Analysis & Action Plan”

  1. UWF Says:

    Your post is really interesting to me. Knowing what is going on with the Action plan and your ideas about it increases my knowledge about this issue. I am also afraid that the country can possibly “face a period of social and political unrest.” But my real fear is the consequences of all this economic crisis, the chaos and violence that can result.

    I have been reading some articles about how the population is dealing with this crisis, and many people are afraid as well if the economy doesn’t become stable. A chaos can easily unfold and things can be out of control, especially concerning violence.

    (UWF)

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