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There's a fight brewing between the conservative movement's bitter dead-enders -- ideologues clinging desperately to their discredited rhetoric about "limited government" -- and progressives, joined by most economic experts from across the political spectrum.
At issue is whether or not to spend as much as one-tenth of the projected costs of the Iraq and Afghanistan wars to help rescue the real "nuts and bolts" economy in which most Americans work and live.
Washington lawmakers were able to find more than $700 billion -- in addition to the $900 billion they had already spent this year -- to bail out the ailing financial sector. But that cash won't do anything to stave off the intense economic pain that ordinary Americans are already feeling and which most experts agree is likely to get much worse in the coming months and years.
For that, we need a bailout for the rest of us: a major spending program on public infrastructure that will put the unemployed to work; desperately needed funds for a tattered social safety net that will be sorely tested as we work our way through the economic crisis; aid to states and municipalities that are seeing their revenues crash and new protections for those who had built a nest-egg for retirement only to see a good chunk of it vanish in a poof of smoke.
It's not just an economic necessity but a moral imperative. We're experiencing a profoundly injurious economic meltdown that was created by the excesses of the wealthy but will be felt hardest by everyone else. According to Kiplinger Forecasts, "economic pain will be spread unevenly" over the next couple of years, with defense contractors, health care providers and "data providers, accountants and lawyers hired to man the massive federal rescue plan" doing just fine. Everyone else? Well, the news is bleak.
Industrial production has dropped in seven of the last eight months; the economy shed 159,000 jobs last month -- the highest number in five years -- and when you include people who are "involuntarily" working part-time because there are no full-time gigs available, and those who have been unable to find a job for an extended period, more than 1 in 10 Americans are struggling to find the work they need to stay afloat. One in six American homes are now "underwater" -- with more debt attached to them than they're worth on the market -- and the Congressional Budget Office estimates that $2 trillion in retirement savings has evaporated in the past year and a half. That estimate was made when the Dow Jones Industrial Average was around 11,000; it was under 8,500 as of the time of this writing.
When George W. Bush and his Treasury secretary, former Goldman Sachs CEO Hank Paulson, were pushing Congress to pass their plan -- 200 economists thought precipitously -- they used the Iraq War strategy, arguing that inaction posed an imminent threat to the security of the United States. They said that while a ton of new deficit spending was a tough pill for the taxpayers to swallow, not pulling the trigger would lead the crisis, using the clichés of the day, to spread quickly from "Wall Street" to "Main Street."
They were half right; "Main Street" had already been in crisis, and the financial sector's crack-up has made matters worse. Now we face the prospect of a vicious cycle in the "real" economy, with firms that are unable to secure the credit they need to function and grow laying off workers, which will create a climate in which people spend less, which will cause a drop in demand for everything a capitalist system produces, which will cause further economic contraction. Meanwhile, homes are being lost, and state and local budget revenues are plunging, which will lead to more layoffs of public employees, more lost homes, less tax revenues for local governments, etc. That will mean cuts for vital social programs at the exact time when people need them most. It's not a hypothetical scenario -- it's already happening across the United States.
See more stories tagged with: stimulus, bailout, financial crisis
Joshua Holland is an AlterNet staff writer.
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