Wednesday, Feb. 4, 2009 | 2 a.m.
- UNLV researchers: Recession gets worse in Las Vegas (2-3-2009)
- Obama’s olive branch met with skepticism (1-28-2009)
- State’s reps vent with bailout votes (1-23-2009)
As the country grows skeptical of the massive economic recovery package being pushed quickly through Congress, the White House’s chief economic adviser stepped forward Tuesday to make the case for acting boldly — and acting now.
The Senate is working late nights this week on a $900 billion recovery package. Majority Leader Harry Reid predicted that lawmakers have a “long, hard slog” ahead, with a goal of passage by Presidents Day, Feb. 16.
Some lawmakers, including Nevada Sen. John Ensign, have warned against hasty action. The bill needs to be done right. “There’s no hurry,” Ensign said Tuesday.
In pushing back Tuesday, Lawrence Summers, President Barack Obama’s top economic adviser, said the No. 1 lesson learned from the Great Depression is a simple one:
“You need to act,” Summers said during a White House briefing. “The market is not self-stabilizing. Herbert Hoover did not act; the situation got worse. FDR did act and the situation improved.”
Much has been made about what did and didn’t happen as President Franklin Delano Roosevelt engineered the New Deal in hopes of ending the Depression, which began on President Hoover’s watch.
Liberal economists say the federal jobs program helped bring unemployment down from the Depression-era high of 25 percent. They say basic government services, including unemployment insurance, gave a lifeline to families in grave need.
But conservative economists have a very different view of what transpired seven decades ago. Private enterprise was stunted as the federal government poured so much of the nation’s resources into federal programs and attacked big business, those economists say.
The current downturn is not the Great Depression — even Nevada’s 9.1 percent unemployment rate is still a far cry from 25 percent. The nation’s economic growth has not tanked the way it did then.
Yet the debate in Congress today is very similar to that of the 1930s.
Obama believes up to 4 million jobs, including 36,000 in Nevada, would be created by the federal spending on new roads, transit, school modernization and other public works programs. (Private forecasters have said as many as 62,000 jobs could be created in the state.) Many of the jobs would go to the hard-hit construction industry.
Democrats believe putting money directly into the hands of those who need it most will provide the jolt the economy needs, including money to avoid laying off teachers or health care workers and $25 a week extra in unemployment checks for those out of work.
Republicans are pushing for corporate and personal income tax breaks, as well as a massive proposal to fix the mortgage crisis through a new system of government-backed low-interest loans. Republicans believe jobs are created by the private sector.
Ensign says homeowners with lower mortgage payments will have more money to spend.
“All the government spending did not take us out of the Depression,” Ensign said last week. “It is the private sector that will grow us out.”
Summers is by no means a liberal economist. In fact, some liberal economists question his role in past administrative policy. He was treasury secretary in the final years of the Clinton administration and an adviser to Ronald Reagan.
But Summers, a former president of Harvard University, foreshadowed the downturn more than a year ago. Asked Tuesday about lessons to be learned from the Great Depression, his answer was a brief lecture making four basic points.
Taking action swiftly is foremost, Summers said.
Second, the government must maintain its stimulus efforts as the economy improves. He noted that midway through the 1930s, as conditions improved, the government lifted stimulative policies and the nation went into recession.
“We will have to persevere,” Summers said. The government should err on the side of doing too much rather than too little, he added.
“Third, I think the experience of the New Deal speaks to the importance of undergirding basic income protections for families and performing crucial state roles.
“The basic pillars of our program — support for middle-class families, support for necessary infrastructure — were crucial aspects of the strategy that was pursued during the Great Depression.”
For example, he said, while some in Congress criticize plans to expand government Pell Grants for college students, Summers said the money will mean middle-class parents won’t have to sell their homes to send their kids to college.
To critics of plans to hire smoking-cessation counselors at hospitals, Summers said the jobs will keep adults working in addition to curtailing teen smoking.
“And last, the Great Depression pointed out the dangers of untamed finance. And we’ve been reminded again of the dangers of untamed finance.”
Obama’s Treasury Department is fast at work evaluating the Wall Street excesses that underline the recession as the administration prepares to send out the second half of the $700 billion Wall Street rescue approved last fall.
Americans are skeptical. A Gallup Poll out this week showed while 75 percent of those surveyed believe a stimulus package should be passed, they are deeply split over the details.
Thirty-eight percent of those polled said Obama’s package should be passed as is, while 37 percent believe it should undergo major changes.
“It has a simple premise,” Summers said of the Obama plan. “There are millions of Americans that need work and there is an enormous amount of work that needs to be done in the country.”