Republicans talk of stimulus as "targeted, timely and temporary". Even Vice President Biden warns of the need for the stimulus to not possess "a long tail" leading to future mandatory spending. But with America's roads, rails, water and basic systems receiving a D grade from the American Society of Civil Engineers, with the power grid failing under the stress and strain of a regular January snowstorm, with the US Postal Service considering scaling back deliveries of mail to 5 days a week, it is clear that the stimulus should go further.
In short, what is needed is not "targeted, timely and temporary" stimulus but rather a massive broadside of a stimulus, as far reaching as it is long lasting, that goes beyond the needs of the economic crisis at hand to address the fundamental structural weaknesses in the American economy as a whole. Such an economic package would have the following purposes:
1) Major economic stimulus in both the short and long term
2) Saving existing jobs and creating new jobs
3) Transforming the state of American infrastructure from thirdworld standards to envy of the world
Let's now conside how each of these can be achieved in turn:
1) Major economic stimulus
Keep in the bill and indeed expand those elements that have been assessed by Moody's Investor Service as having a direct stimulative effect on the economy far greater then that of either personal or corporate tax cuts. Remove from the bill, those elements that don't deliver value for the tax payers dollar.
That means food stamps (yielding $1.73 of economic impact per $1 of government spending), extending unemployment benefits ($1.64) and infrastructure spending ($1.59). Each of these elements has been assessed by Moody's Investor Service as having a direct stimulative effect on the economy far greater then that of either an across the board tax cut ($1.03) or a corporate tax cut ($0.30!).
As the saintly CNBC economic maven Erin Burnett notes: "Every billion dollars you spend on infrastructure CEOs will say is about 18 to 20,000 jobs."
With unemployment at 4.7mn and likely to climb far higher as the crisis's full force is revealed it would thus cost the Federal Government some $235bn to employ the entire unemployed workforce to date on infrastructure projects. In this Keynesian moment, that is probably a price well worth paying to not only stop unemployment but to secure the kind of infrastructure this nation needs - which leads us to our final point.
3) Transforming American infrastructure
The American Society of Civil Engineers have called for $2.2 trillion in infrastructure spending to modernise the very"roads and bridges, the electric grids and digital lines that feed our commerce and bind us together" that President Obama spoke of in his inaugural address. Although as the AP notes,
"even though the pricetag to fix America's physical needs is $2.2 trillion over five years, it's really only half that bad because $1.1 trillion of that is already being spent or planned, Herrmann said. The biggest "gap" between what's being spent or planned and what's needed is an additional $548.5 billion in roads and bridges, the report said. Second is $189.5 billion for public transit."
As such it's clear that a different approach to stimulus could have the desired economic impact in terms of stimulating spending, ensuring jobs and building up the nation's vital infrastructure in one fell swoop. What is needed now is the political courage, and indeed partisanship, to create a new stimulus package capable of achieving these aims through dramatic government interventions in the domestic economy. The scale of such an effort is likely to be staggering, but it is matched by the very scale of crisis itself. It is to this issue that we shall turn our attention next.