The Brand New Deal: Obama's Economic Recovery Plan

I've opposed every one of the bailouts that has been proposed and implemented this year. Bear Stearns. The Wall Street bailout in October. I'm opposed in concept to the Detroit bailout currently under consideration, although I think it would definitely be the most meritorious case to date.

But the Economic Recovery Plan proposed Saturday by President-Elect Barack Obama (boy do I like saying that!) is like finding water after wandering in the desert. It's the best idea for addressing this crisis that I've yet seen and it's what we should have done from the start.

Here's the relevant text from Obama's proposal:

I have already directed my economic team to come up with an Economic Recovery Plan that will mean 2.5 million more jobs by January of 2011 - a plan big enough to meet the challenges we face that I intend to sign soon after taking office. We'll be working out the details in the weeks ahead, but it will be a two-year, nationwide effort to jumpstart job creation in America and lay the foundation for a strong and growing economy. We'll put people back to work rebuilding our crumbling roads and bridges, modernizing schools that are failing our children, and building wind farms and solar panels, fuel-efficient cars and the alternative energy technologies that can free us from our dependence on foreign oil and keep our economy competitive in the years ahead.

-- President-Elect Barack Obama, November 23, 2008

Note for grammar geeks only (others please skip this paragraph): I altered the punctuation from the official report because I thought it was wrong. The last sentence in the original transcription read:

We'll put people back to work rebuilding our crumbling roads and bridges, modernizing schools that are failing our children, and building wind farms and solar panels; fuel-efficient cars and the alternative energy technologies that can free us from our dependence on foreign oil and keep our economy competitive in the years ahead.

It's a "Brand New Deal". Obama may just be our FDR indeed, just as we all thought. The original argument made last spring against infrastructure spending for stimulus -- that it would take too long to be put into action -- never held much water, but in any event has been conclusively proven wrong by the length and depth of the economic crisis. Projects under construction can be sped up. Projects "on the shelf and ready to go" can break ground. Projects under consideration can be transformed into concrete proposals.

Let's just look at this in terms of rail projects here in California. The State of California just passed a $10 billion bond measure for the construction of a high-speed rail line cutting the trip between San Francisco and Los Angeles to two and a half hours, connecting through San Jose and the Central Valley, with future extensions planned to Sacramento and San Diego. Meanwhile, Santa Clara County just passed a sales tax to fund the extension of BART into San Jose, and Los Angeles County just passed a sales tax to fund, amongst other things, the Subway to the Sea, connecting with scores of other new light rail lines and Rapid bus routes. Two rail major rail lines are already under construction in the city of Los Angeles right now, one to East Los Angeles and the other going west to Santa Monica.

I'm sure there are a thousand other similar scenarios nationwide.

The downside? It basically comes down to deficits and dollars.

Contrary to Dick Cheney, "deficits do matter". The question is when and for what purpose? Running huge deficits during good economic times in order prosecute illegal and unjust wars in distant lands is not a good idea. Increasing government spending on public infrastructure, education and health care in order prevent mass unemployment and suffering during bad economic times is a (very) good idea. It's called Keynesian economics and it pulled our nation out of the Great Depression and into decades of post-war prosperity.

More fundamentally, I disagreed with the Wall Street bailouts for a very capitalist reason: I recognize the importance of Creative Destruction to the proper functioning of the free market system.

If we are to have a successfully functioning capitalist system, failure must be recognized just as much as success. Propping up failed companies with taxpayer dollars is probably the worst use of public funds possible. I think it would actually be unconstitutional under Article XVI of California Constitution:

SEC. 6. The Legislature shall have no power to give or to lend, or to authorize the giving or lending, of the credit of the State . . . in aid of or to any person, association, or corporation . . . or to pledge the credit thereof, in any manner whatever, for the payment of the liabilities of any individual, association, municipal or other corporation whatever; nor shall it have power to make any gift or authorize the making of any gift, of any public money or thing of value to any individual, municipal or other corporation whatever . . . and it shall not have power to authorize the State . . . to subscribe for stock, or to become a stockholder in any corporation whatever . . .

A gift of public funds is public spending on private goods. Public spending on private goods = bad. But, public spending on public goods = good. Public spending on private goods is bad, corrupt, ideologically bankrupt, crony Republicanism. Obama's proposal is for public spending on public goods, i.e. public infrastructure, public education, public health.

OK, maybe some of these funds will go to support private initiatives in areas like alternative energy, universal health care, fighting climate change. The federal government can at very least direct its own purchasing efforts in ways that support the development of such initiatives. But supporting new private companies struggling to help our nation achieve broader social goals is fundamentally different than throwing money at failing, outdated enterprises with little redeeming social value.

We are all racking up huge deficits. Already, over $8.5 trillion in commitments have been made. There is a very real risk that bigger deficits will lead to higher interest rates on our debts and overburden our children and grandchildren with too much debt. Even the most hard-core deficit hawks, however, recognize that it is better to run deficits than suffer a depression, and the issue of intergenerational justice can be solved by making smart investments in our common future.

The value of the dollar may diminish in relative terms internationally, but that may not be a bad thing.

First off, the value of the dollar-denominated debts that have overburdened not only the federal government, but our entire society will be reduced in absolute terms.

More importantly, however, a depressed currency acts as a massive subsidy to homegrown industry and tax on foreign imports. There are a number of key American industries that would absolutely benefit from a lower dollar value: agricultural exports, Hollywood, almost all kinds of manufacturing starting with Detroit, tourism. A lower dollar may mean more jobs and higher wages.

China by way of example has been deliberately depressing the value of the yuan as a matter of state policy for the past decade at least.

Our largest vulnerability in terms of a reduced dollar is probably our thirst for petroleum and other sources of imported energy. The cost of oil will go back up again, particularly as measured in dollar terms. The flip side is that a reduction in the relative value of the dollar may also expedite our transition to alternative energy technologies.

But no matter. It is likely that we can make tough choices about printing dollars at another point in time. Right now, we are a long, long ways away from paying for federal expenses with printed dollars. Short-term interest rates on U.S. Treasury bonds are effectively zero. People all over the world are willing to give us their money for free on the promise that it will be returned. Even long-term rates are at historic lows. The dollar has actually been rising, even as this crisis has unfolded. The price of oil has plummeted.

The only real risk IMHO is that the negative effects of too much spending might come suddenly instead of gradually, leaving us without an opportunity to respond. But the chances of that being the case seem much smaller at this point than the chances of us otherwise continuing to sink further and further into economic ruin and even if it doesn't work at all in terms of spurring on new economic activity, much of what will be built will be public goods in and of themselves. More high-speed rail and transit, repaired roads and bridges, better schools and hospitals, improved energy efficiency, those are all good things in and of themselves. The money won't have been "wasted", although it should be spent as efficiently and effectively as possible.

But in all likelihood, it will work. Millions of new workers will circulate their earnings through local economies. There will also be billions in contracting opportunities, millions of spin-off jobs and businesses.

You would be surprised just how far federal spending can go in sustaining entire communities. Go visit Los Alamos County, NM, the richest county in America. Los Alamos has had only one major employer for all of its 65+ years in existence: the federally-funded Las Alamos National Laboratory, the birthplace of the atomic bomb.

Silicon Valley didn't spring up out of the fertile California soil by accident. There were massive federal contacts for military and space-related technologies being fulfilled at places such as Moffett Field in Mountain View.

The biggest challenge is to make sure that the projects to be funded are smart projects that will be wise investments in our future. It's too late in the game ecologically for us to build 20 Century "white elephants". Decisions need to be made quickly, but with the input from those who know what will work best on the ground. We the people need to stay active in order to make sure that these dollars are directed toward their "highest and best" uses. Obama has taken up the gauntlet of a "Brand New Deal". It's up to us to help make it successful.

Obama, Wright and Building a Progressive Majority

Even though I am a stalwart Obama supporter, I believe that the Reverend Wright issue does in fact represent a fundamental threat to his campaign. Yes, it's a "distraction" from the "issues," but let's be real here folks; the American people do not elect Presidents based on issues. If that were the case we would have had nothing but Democratic Presidents from FDR until the present. They vote based on personality, or to put it in a better light -- leadership, character and integrity.

If we remind ourselves of the Rovian school of politics, you take your opponents greatest strengths, and by hook or by crook, you turn them into weaknesses. Thus, the textbook example would be the "Swift-boating" of John Kerry, who I think we can all agree won the Democratic nomination because of his record of military service and was then turned into a traitor.

If we can summarize Obama's greatest strengths, it has to be his unique ability to bring people together across racial, political and other divides, his "Mr. Smith Goes to Washington" sort of image as a non-politician politician who has not yet sold his soul to the ways of politics, and his judgment. Reverend Wright is a living, breathing fundamental threat to all of those claims . . .

We are, of course, well acquainted with the first aspect of Reverend Wright's challenge to Obama's candidacy -- his status as a racial conciliator. Obama responded with his "race" speech, which seemed to quell things. For myself, I must admit that I thought that speech was his first major mistake of the campaign in that he racialized the issue with Wright, i.e. made it into an issue between white America and black America, whereas it should've just been an issue with a cranky old preacher who sometimes says things that make no sense and our way outside the bounds of acceptable political discourse, something that many religious leaders, white and black, tend to do. Here the things that Obama said instead that I find problemmatic:

Like other predominantly black churches across the country, Trinity embodies the black community in its entirety - the doctor and the welfare mom, the model student and the former gang-banger. Like other black churches, Trinity's services are full of raucous laughter and sometimes bawdy humor. They are full of dancing, clapping, screaming and shouting that may seem jarring to the untrained ear. The church contains in full the kindness and cruelty, the fierce intelligence and the shocking ignorance, the struggles and successes, the love and yes, the bitterness and bias that make up the black experience in America.

And this helps explain, perhaps, my relationship with Reverend Wright. As imperfect as he may be, he has been like family to me. He strengthened my faith, officiated my wedding, and baptized my children. Not once in my conversations with him have I heard him talk about any ethnic group in derogatory terms, or treat whites with whom he interacted with anything but courtesy and respect. He contains within him the contradictions - the good and the bad - of the community that he has served diligently for so many years.

I can no more disown him than I can disown the black community. I can no more disown him than I can my white grandmother - a woman who helped raise me, a woman who sacrificed again and again for me, a woman who loves me as much as she loves anything in this world, but a woman who once confessed her fear of black men who passed by her on the street, and who on more than one occasion has uttered racial or ethnic stereotypes that made me cringe.

These people are a part of me. And they are a part of America, this country that I love.

. . .

The fact is that the comments that have been made and the issues that have surfaced over the last few weeks reflect the complexities of race in this country that we've never really worked through - a part of our union that we have yet to perfect. And if we walk away now, if we simply retreat into our respective corners, we will never be able to come together and solve challenges like health care, or education, or the need to find good jobs for every American.

Understanding this reality requires a reminder of how we arrived at this point. As William Faulkner once wrote, "The past isn't dead and buried. In fact, it isn't even past." We do not need to recite here the history of racial injustice in this country. But we do need to remind ourselves that so many of the disparities that exist in the African-American community today can be directly traced to inequalities passed on from an earlier generation that suffered under the brutal legacy of slavery and Jim Crow.

. . .

This is the reality in which Reverend Wright and other African-Americans of his generation grew up. They came of age in the late fifties and early sixties, a time when segregation was still the law of the land and opportunity was systematically constricted.

. . .

For the men and women of Reverend Wright's generation, the memories of humiliation and doubt and fear have not gone away; nor has the anger and the bitterness of those years. That anger may not get expressed in public, in front of white co-workers or white friends. But it does find voice in the barbershop or around the kitchen table. At times, that anger is exploited by politicians, to gin up votes along racial lines, or to make up for a politician's own failings.

And occasionally it finds voice in the church on Sunday morning, in the pulpit and in the pews. The fact that so many people are surprised to hear that anger in some of Reverend Wright's sermons simply reminds us of the old truism that the most segregated hour in American life occurs on Sunday morning. That anger is not always productive; indeed, all too often it distracts attention from solving real problems; it keeps us from squarely facing our own complicity in our condition, and prevents the African-American community from forging the alliances it needs to bring about real change. But the anger is real; it is powerful; and to simply wish it away, to condemn it without understanding its roots, only serves to widen the chasm of misunderstanding that exists between the races.

Not to overly simplify matters, but Barack essentially said that we should give Reverend Wright a pass on the statements in question because of his race. For a minute it seemed to work, and everyone congratulated Obama on having made an amazingly adult and poignant speech about our nation's "original sin" -- the problem of race that has never been adequately addressed, and it was true. It was an amazing speech on race, probably the best given by a major public figure since the 1960's. The only problem was that it did not address the issue at hand: Jeremiah Wright's statements were outside the bounds of acceptable political discourse in America, no matter the race of who said them.

I don't know the inside story of course, but based on the succeeding events, I gather that Reverend Wright did not take kindly to Obama's characterization of him as some old, out of touch black man still caught up in the resentments of the past, while at the same time white working class voters in Pennsylvania didn't buy that Reverend Wright's comments were nothing more than a good starting point for a long-neglected national conversation about race.

Now, believe me, I do not blame Barack for his approach. The truth of the matter is that there is a lot of truth in Reverend Wright's words, both as a matter of factual history, and in so far as he is expressing the frustration and bitterness that is part of the black experience in America. But unfortunately, that has nothing to do with politics, particularly politics of the variety in which Barack is currently engaged. Barack is looking to build a new progressive majority of Americans of all kinds that can bring about fundamental changes in our government. Reverend Wright's rhetoric does not help in that cause, because that is not the cause to which Reverend Wright owes his allegiance.

Which brings us to the second and potentially even more damaging aspect of Reverend Wright's threat when he told the National Press Club that Barack's disassociation with him was just based on politics:

Politicians say what they say and do what they do based on electability, based on sound bites, based on polls, Huffington, whoever's doing the polls. Preachers say what they say because they're pastors. They have a different person to whom they're accountable.

Not only was Reverend Wright casting doubt on Obama's identity as a racial conciliator, but he was now basically calling him a typical lying politician to boot. The mythic quality of this situation is almost too much to believe. It's a very old story, the mentor father figure who becomes jealous as his mentee far exceeds him in fame and power and undercuts him at his most vulnerable moment. It finally became clear to Barack that Jeremiah Wright may be a part of this country, but his rhetoric and his views were plainly antithetical to everything that Obama was seeking to accomplish:

His comments were not only divisive and destructive, but I believe that they end up giving comfort to those who prey on hate, and I believe that they do not portray accurately the perspective of the black church.

They certainly don’t portray accurately my values and beliefs. And if Reverend Wright thinks that that’s political posturing, as he put it, then he doesn’t know me very well. And based on his remarks yesterday, well, I may not know him as well as I thought either.

Now, I’ve already denounced the comments that had appeared in these previous sermons. As I said, I had not heard them before. And I gave him the benefit of the doubt in my speech in Philadelphia, explaining that he has done enormous good in the church. He has built a wonderful congregation. The people of Trinity are wonderful people, and what attracted me has always been their ministries reach beyond the church walls.

But when he states and then amplifies such ridiculous propositions as the U.S. government somehow being involved in AIDS, when he suggests that Minister Farrakhan somehow represents one of the greatest voices of the 20th and 21st centuries, when he equates the United States wartime efforts with terrorism, then there are no excuses.

They offend me. The rightly offend all Americans. And they should be denounced. And that’s what I’m doing very clearly and unequivocally here today.

I consider this a potentially seminal moment in the history of the progressive movement in America. The trap that Barack fell into with Reverend Wright is a trap that has ensnared many of us. Where do we draw the line between speaking out about the injustices and wrongs of our nation and our government and engaging in divisive, unproductive and unnecessarily inflammatory rhetoric that gets us no closer to our goals? Even more complex is how do we draw those lines in a way that works for people on all sides of our racial divides?

The fundamental lesson that I think Barack and the rest of us should take from this episode is that the answer to the question of whether Jeremiah Wright gets a pass on his rhetoric of anger and frustration because he's black is a resounding, "No!" If we are going to build a true progressive majority for social change in America, there has to be established boundaries of discourse, and those boundaries have to apply to everyone, regardless of race, religion, class, etc. Now reasonable minds can of course disagree about what those boundaries are, and that's completely fine. But the larger point is that the transgressions of those boundaries cannot be excused by reference to the racial background of the speaker in question.

Of course there's always free speech and freedom of religion, etc. People are free to say whatever they want, but not if they want to be a part of the movement to build a progressive majority for change. And if you don't want to be a part of that, then please don't pretend to be. You are marginal (by your own choice) to this political cause. If you can gather enough people behind your version of the world, more power to you.

What does this mean for Barack going forward? In the end, this will come down to the third aspect of Jeremiah Wright's threat to Obama's candidacy: the question of judgment, i.e. why did he join this church and stay there for twenty years? Personally, I don't blame Barack for falling into this trap, which was set long before he came upon the scene. He met Jeremiah Wright when he was 27 years old, and living for the first time in his life in a black community. For a young politically-motivated, religious skeptic like Barack, Jeremiah Wright's brand of socially and politically conscious faith understandably must've have been a powerful attraction. As the years went by after that, I'm sure Barack may have had increasing second thoughts about his choice of religious institution, but how do you just leave the church where you were baptised, married, and where your kids were baptised because of something your pastor said?

Hopefully, however, Barack's final rejection of and disassociation from Jeremiah Wright will prove to be his "Sista Souljah" moment, the point in time when he conclusively demonstrated to America that he will be a President for all of Americans, not just black people. I think many Americans are well aware that we have far more to gain by helping Barack build a progressive majority for change than by reverting to the kind of unproductive rhetoric that Reverend Wright seems intent on bringing us back to. Barack has only to lead the way and we will follow. Barack has been making lemonade out of lemons throughout this whole campaign, and this is certainly the ultimate lemon. I, for one, am very thirsty.