No, Call Me "Jay"

Final is Optional

TO:  Problems of Democracy students.

What: The final is optional

Email me jmaggio@ufl.edu for details. 

Stimulate WHAT? HOW? WHEN?

So what the hell is Obama's stimulus?  Well, here is just MY take:

For immediate stimulus NOW, it is more important that Treasury Sec. Geithner use the rest of the TARP money in a smart way--by FORCING banks to led 70% (or so) of the money.  This will bring more quick stimulus than the so-called "stimulus" plan. Sadly, under Bush, former Sec. Paulson just gave money to banks, and they used it to recapitalize, NOT lend. Geithner needs to attach strings to fed money. And some huge investment in SBA loans would be good too. Also, a "Bad Asset Bank"--which is what Paulson told Congress TARP would be--is a pretty decent idea.  This "bad bank" would buy up the toxic assets and let them sit for ten years (like in New Deal).  When FDR did this, the Government eventually made money on the bad loans.  (Of course the assets now are a more confusing.)

Contrary to its moniker, Obama's plan is more a long-term / New-Deal style investment plan than a true immediate "stimulus" plan.

What it does:

Roads/Bridges (Army Core of Engineers rank us as a C- or D+ for interior investment. Lower than Cuba for fucksake.)
New public schools
New Hospitals
Nationwide Electric Grid
Alternative fuel R and D
Country-wide public broad-band wireless
Tax incentives for small businesses to make new jobs
SBA loans
Tax cuts for businesses to basically write off all of last five years losses on this year (even if they wrote them off previously)
Digitizing medical records

All of these not only create jobs in next three years, but lay a foundation for a "managed capitalism" just like New Deal laid foundation for our ability to eventually militarize in WW2 and for the great expansion of the middle class.

Think of a nationwide electric grid, broadband national wireless internet, alt fuels, and etc, as analogous to the TVA and REA bringing electricity to the southern US or the Fed interstate system. These are investments that payoff for 50 years (or more).

It is true that, "monetary policy" is usually better than spending and tax cuts to quickly stimulate economy. But we dont have any monetary policy any more because we cannot cut interest rates anymore. (They are at, what, .5%?)

Economists think that for every dollar you spend in public spending you get 1.50$ to 1.70$ return in the economy. Tax cuts have only a return of about 75% because people save. BUT, if you can target tax cuts to create jobs and stimulate the economy, that will help.

This crisis is a perfect storm: housing crisis, unemployment, and (the worst) a credit crisis.

As I wrote, Obama's plan is more of a long-term investment than a stimulus. . We will not see full effect until 2011. That is OK because the GAO--under Bush--said the recession will certainly last until 2010 and possibly to 2016. (This report is a nice cover politically for Obama, especially because Bush's people did it.)

Even though the House vote was along part lines, Obama meeting with (only) GOPers was a nice piece of good-will. It is also a nice contrast with Bush who wouldn't even meet with Sens and Reps from his OWN party, no less the Dems.

But, yeah, 2009 and probably 2010 is shot economically. But people will suffer less under Democratic control.  (New plans give longer unemployment benefits, lower taxes, more food stamps, roads, bridges, etc etc). Dems will likely lose seats in Congress in 2010 (like Reagan's GOP did in 1982, and Clinton's Dems in 1994). Luckily, the GOP are on the defense in Congress again when it comes to retirements and such.  (It is very unlikely that Dem would lose CONTROL of either chamber.)

Some other stuff Obama/Gienther/Congress need to do:

- re-regulate the banking industry so that commercial and investment banks are separate again
- re-instate the "uptick" rule so traders cannot short sell and then drive down the price of the stock, short selling is ok, as long as you cannot manipulate the stock
- refigure the capital-to-debt ratio of banks
- reguglate commidies so that things like "credit default swaps" can be a thing of the past
- return to older lending rules regarding loans, possibly by changing CRA.  Get rid of ARM loans and etc
- Extend the Dow dropping "time-out" to a full 24 hours
- Back-up stocks in 401ks if people invest in certain types of funds

FDR saved capitalism once; Obama could do it again. 

If Obama does it right, he can not only take us out of this bad economy, but he could put an end to the "yo-yo" or "casino" capitalism of the last 30 years. It will finally be the end of Reaganism.  The greatest expansion of the middle class was from 1935 - 1968, which also coincides with the New-Deal / Great Society managed capitalism.  A new, information-based version of "managed capitalism" can recreate a "middle-class focused" America and create a long-term Democratic majority. 

Just some thoughts. 

Problems of Democracy - (POT4311 section 4768)

Attached is the syllabus for Jay Maggio's Problems of Democracy class:

Download Prob of Dem POT4311syllabus (Maggio)

See you in class. 

Jay