Ten-year T-bill returns are still well below where they were on the Aug. 5 downgrade of U.S. Credit. Despite everybody losing their mind during the second week of August, the stock market continues to limp along in stagnation. Here's a graph with the S&P 500, Dow Jones, NASDAQ, and 10-year t-bill rate all indexed to 100% at the close of business on Aug. 5:
This economy badly needs a major dose of economic stimulus and a huge jobs program. I know that idea gives people the heebie jeebies because we budgeted $800 billion in 2009 to deal with this economic disaster all we managed to do was to keep the Great Recession from turning into the second Great Depression. (Come to think of it, that's not all that bad for $800 billion.)
But we are losing trillions of dollars in potential productivity because we're stuck in neutral. And it's not just an economic disaster. It's a personal disaster for the millions of people who have lost their jobs and who now can't find good jobs.
I know the national debate has been focused obsessively on the long-term deficit -- which was created by the Bush tax cuts, by the way. But that deficit is a problem that gets much more manageable if you have a functioning economy. If you need an analogy, think of a second stimulus as electric paddles on a heart in defribulation. You wouldn't want it to be an ongoing treatment, but a good jolt is just what we need right now.
As for what shape that stimulus would take, I'd focus in two areas: infrastructure and jobs creation for the long-term unemployed. Our national infrastructure is still a mess, and continuing to fall behind our international competitors will only worsen our long-term prospects. Fortunately, although there's a lot of work that needs doing out there, there are also a lot of people who desperately need work. We can work out some pretty good ways of getting them together. (Want a starter? Municipal governments, state governments, libraries, and schools have all cut out tons of local services in the past few years to deal with their own fiscal crises. Let's get some three-year federal grants back into those areas to re-hire staff and rehire the teachers, cops, and firefighters that have been laid off over the past couple of years. That's easy AND good for our communities. It'd probably take a half-dozen Congressional staffers an afternoon to put together the whole program.)
Then let's just go ahead and build a high-speed rail system on the East Coast, the West Coast, and in the Midwest. And after that, maybe we can finally address our crumbling electric grid...
... What's that? Oh, you're still freaked out about the deficit? I have an easy solution if that's really your concern. Let's go back to the tax rates under Clinton, WHEN WE HAD OUR LONGEST, STRONGEST PERIOD OF ECONOMIC EXPANSION SINCE WORLD WAR II. Cutting taxes on the wealthy didn't lead to the giant economic boom and employment growth that it was sold with. And even that sales job relied on them "sunsetting" in ten years because even the most ridiculous projections couldn't make them work in the long run. So, here's another easy policy decision. Let's not do the thing that didn't work and led to economic disaster. Let's do the thing that worked.
What brought Mr. Crankypants back from his blogging exile, you ask? Sorry, I'm indexing part of a math book this afternoon, and preparing to index some economics charts and graphs on Monday. And I'm tired of policy debates that ignore math and economics.
Okay, Mr. Crankypants now returns you to your regularly scheduled and undoubtedly more-congenial-on-a-Friday-afternoon blog reading.