Time to Think Big

The fierce partisan battle over the size and composition of the economic-recovery bill is a harbinger of battles to come. "Bipartisanship" evidently means giving veto power to a tiny group of center-right Republicans who are eager to cut, in this case, $40 billion of desperately needed aid to states -- and a lot more -- in order to finance more business tax cuts that will have a far less stimulative effect. The full list of cuts extracted by Sen. Collins and company is an absolute disgrace.

The original Obama bill signaled that this was not just a one-shot effort. Policies like the development of a green-energy economy, a smart grid for the electricity-distribution system, and ongoing investment in children and families are all part of the road to a more efficient and just economy, not simply a temporary injection of emergency funds.

This is the right strategy. It would be no victory at all to get the economy off the path to Great Depression II only to return it to the economy of the recent past, the economy that crashed and burned in 2007. That was an economy where real wages for 70 percent of Americans were flat or declining, despite productivity growth that doubled in three decades. Since 2001, 95 percent of Americans lost real earnings adjusted for inflation. This was an economy where regular people made ends meet by borrowing against temporarily inflated assets, like their homes or their retirement plans. It was an economy of vast inequality and insecurity, where risks were shifted from companies onto individuals and families.

Looking forward, we need a very different sort of economy, one that restores a balanced form of capitalism. At the core of this change is a long-term increase in public outlay, investing in areas vital to economic growth and social decency. Once the recession is over, this increase in public investment needs to be paid for with a more progressive tax system. The short-term stimulus – if it is large enough – will help compensate for collapsing private demand. But the stimulus package should be understood as a down payment on increased federal spending for social and economic needs that have been deferred for four decades.

An enhanced federal role, in turn, provides the moment to reclaim the public philosophy of activist government that effectively services people’s needs where market forces fail. With a serious commitment to public investment, ordinary people would once again get real value for their tax dollars, as they did in the era between 1932 and 1968.

For Obama’s entire four-year term (or eight years if he gets it right), there will be relentless pressure to think small and not to seize this opportunity. The Republicans have already made clear what they think of Obama’s bipartisan gestures: They take these olive branches as a sign of weakness. The tiny handful of so-called moderate Republicans, such as Sen. Susan Collins of Maine, see Obama’s conciliation as a chance for themselves to play the role of kingmaker.

The undertow of conservative obstruction doesn’t end with Republicans. Fiscally conservative Blue Dog Democrats want to slash Social Security and Medicare in years to come as the price of allowing temporary deficits now. The new billion-dollar Peter G. Peterson Foundation held a press conference last week launching an initiative explicitly targeting social insurance for big cuts. Even President Obama has agreed to a White House "fiscal responsibility summit" scheduled for late February. Fiscal conservative Sen. George Voinovich of Ohio said at Peterson’s press conference that he already had a commitment from the White House to cut entitlements.

Politically, there are two ways to counteract this continuing undertow of conservative pressure to resist the change that the moment demands. The first is for Obama himself to make his case more forcefully and take it to the country. This is the essence of leadership. It is what all great reform presidents have done. Obama is capable of this brand of leadership, but he has just begun.

But moments of reform in America have also been built on pressure from below -- social movements and new bursts of intellectual fervor.

In this spirit, the Prospect has helped organize a one-day national conference to be held on Feb. 11 to make the case for an expansive vision of activist government rather than the use of the stimulus as a temporary one shot. The conference is titled "Thinking Big, Thinking Forward." It is co-sponsored with the Institute for America’s Future, Demos, and the Economic Policy Institute. It will be the first in a series of events designed to make the case for transformational policies and political strategies, not just temporary palliatives.

Only if there are potent counterweights to the conservative undertow will the new administration be able to seize the moment and restore not just an unbalanced form of "prosperity" but a just and dynamic society.

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