Remember the bailout? (3 cents)

Remember how crucial it was to give $700 billion to financial companies?  Well, now we aren’t going to do it, apparently.  Instead, we are going to be concentrating on mortgage defaults.

Well, that may (or may not) be well and good, but both were simply stop gap measures.  As this crisis continues to deepen, I think that it will be clear that nothing can successfully can happen to the supply side (i.e., helping credit markets, or helping industry) unless there is a corresponding increase of demand (which can come only from jobs).  So, I think we will wind up with a major jobs program:  we will see physical infrastructure repair, new public construction projects, energy retrofitting and renewable energy programs, etc.).  But this will take some time, and in the mean time we are going to suffer and to struggle.

Of course, I am not experienced enough to know how this will work.  But if governments issue bonds to, say, repair roads, and the bonds have the full faith and commitment of the government, then (assuming interests rates are reduced, and other steps taken, to permit the flow of credit) investors will acquire the bonds and the proceeds will be used to pay construction and other workers, who will in turn use their salaries to support the rest of the economy.  Whether the projects are undertaken directly by the government, or through government guarantees, might not matter.  The goal should be to prime the employment pump, and to make sure that companies take their profits and reinvest a large portion of them, rather than shipping them off as CEO salaries or as shareholder distributions.

Not only will this help get us out of our economic doldrums, but we will wind up with a more modern and user-friendly country, and a strong infrastructure base to go into the 21st century.

But we do need consistency, and from the speed with which the bailout was created, sold and now changed, consistency does not seem to be in anyone’s mind.  Perhaps, after 1/20, this will change.

The Obama administration will have to hit the ground running; I am sure that they know this, and I am confident that they will do so.  It is fine to say that politics should not be “as usual”, but this needs to apply to intraparty as well as interparty differences, and that will be a challenge.

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