Needed: Jobs

Two hundred fifty billion dollars budgeted for the Wall Street bailout has gone unused, the media reported this week.

Pundits, members of Congress and the White House seem to agree that the Wall Street leftovers should be used to reduce the deficit.

Before you say that seems reasonable, consider these facts. When the financial system collapsed in the fall of 2008, after a series of bank failures over the previous several months, the Bush administration in collaboration with bankers and financiers created a massive bailout scheme to shore up Wall Street profits. The reasoning was that this would stabilize the system.

Bush’s actions were swifter than his response to Hurricane Katrina, for sure. The scope of the action and amount of the money were big enough and swift enough to handle the crisis. Enough so that $250 billion is left over.

On the other hand, Republican wrangling and opposition to President Obama’s Main Street bailout – after blocking such a package in the fall of 2008 – forced a compromise stimulus package. The end result was a recovery act that fell short, by most estimates, to prevent the worst impacts of the recession on working families.

The Main Street bailout was too small and too slow. And we’re living with the consequences of that fact in growing unemployment.

With almost 15 million people out of work, and millions more underemployed, working families need a second economic stimulus package. We need to use the $250 billion left over from the Wall Street bailout to create jobs.

Obama’s economic recovery act is working – as far as it goes. Economists estimate that it has saved about 250,000 each month since going into effect.

Still, while monthly unemployment figures have been cut by almost two-thirds since February, the numbers remain staggeringly high. Imagine what a much larger recovery act would have been able to do.

What about the deficit? Economists argue that fears about high deficits in the current climate are unfounded. Economic Policy Institute researcher John Irons pointed out the generational impact of this recession in terms of lost income, retirement benefits and economic activity will be harsher for working families than the consequences of a large national debt. Recessions should not be thought of as “a one-time event” for the vast majority of working families, he argued, but as a crisis that “will have consequences for years to come.”

What to do? Irons explained: “An economic stimulus can lead to a short-run boost in output that outweighs the additional interest costs of the associated debt increase.”

The U.S. government moved swiftly and adequately to save the profits of the big banks and to stabilize the financial system. It should be just as quick and effective to do the same for Main Street.

 

Photo: Michael Rieger/FEMA

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