William Greider, of the Nation, paints today the bleakest economic picture that I’ve seen, suggesting that Obama’s stimulus package of 800 billion dollars is too small by at least HALF. He also suggests that Obama will need to nationalize the nation’s banks before the economic crisis is over.
But I would also note that Greider, though a highly accomplished journalist who has focused on economics and globalism for many years, is NOT a professional economist.
In other words, I’m hoping that Greider’s economic analysis is wrong, but his essay is still worth a read.
The nation’s fast-darkening circumstances define the essential dilemma of Barack Obama’s presidency. His instinct is to govern by consensus, in the moderate middle ground of politics. Yet dire events are pushing the new president toward solutions more fundamental than those he had intended. The longer he resists taking more forceful action, the more likely it is that he will be overwhelmed by the gathering adversities.
Three large obstacles are blocking Obama’s path. The first is one of scale: his nearly $800 billion recovery package sounds huge, but it is perhaps two or three times too small to produce a turnaround. The second is that the financial system–still dysfunctional despite the bailouts–requires much more than fiscal stimulus and bailout: the government must nationalize and supervise the banks to ensure that they carry out the lending and investing needed for recovery. This means liquidating some famous nameplates–led by Citigroup–that are spiraling toward insolvency. The third is that the crisis is global: the US economy cannot return to normal unless the unbalanced world trading system is simultaneously reformed. Globalization has vastly undermined US productive strength, as trade deficits have led the nation into deepening debtor dependence.