When Obama took office in 2009, senior administration officials equivocated over how to jump-start recovery amid the Great Recession. “Because monetary policy had been the key anti-recessionary tool for the previous 20 years, we had little knowledge of exactly how well fiscal stimulus would work and which type of stimulus would be the most effective,” said former Chair of the Council of Economic Advisers Christina Romer. Speaking at the Economic Policy Institute last week, Romer argued that since the Fed has limited power when a recession hits, creating adequate fiscal policy is essential.
The long-lasting consequences of the Great Recession, combined with a generation of underinvestment, has left U.S. communities vulnerable to another economic downturn. A recession could hit in the next 18 months, according to experts speaking at EPI's Next Recession event, and the fiscal policy necessary to combat it needs to be put in place now. Public-investment legislation, including the right automatic stabilizers and creating government jobs, could mitigate the potential blowback of a fiscal plunge.
In recent years, tax cuts on the wealthy and loopholes for corporations have kept large sums of money in the hands of the wealthy. President Trump's Tax Cuts and Jobs Act of 2017 only excacerbated the divide, hurting vulnerable communities that have not had the chance to fully recover from the previous recession. An Economic Bill of Rights, insists Kirwan Institute Executive Director Darrick Hamilton, would ensure an inclusive economy that benefits all. Protecting economic stability for every American would uplift underserved communities and reduce the consequences of a financial panic, even for those still recovering.
Greater public investment could invigorate the economy from its roots. During Romer's year and a half in the Obama White House, she learned the importance of “jobs not checks.” She cited New Deal–era programs like the Civilian Conservation Corps that put Americans back to work.
“When you create a public-sector job, that has spillovers. An employed worker goes out and buys things and that puts other people to work,” Romer said. These programs boosted morale and improved public spaces to benefit the community as a whole.
That said, it's difficult to ensure the prioritization of workers as economic disaster unfolds. Automatic stabilizers that protect jobs at the local, state, and federal levels are essential to keep the basis of the economy intact in the worst of times. They would guarantee that even if another bubble bursts, roads will be paved, children will be taught, and criminals will face justice.
“Public jobs are the cornerstone of what is needed to emerge from a recession stronger,” said Amy Hanauer, executive director of Policy Matters Ohio. Investing in workers who keep the economy thriving is a surefire way to pull through a recession and enrich our economic future.
Before the next recession hits, Democrats need to outline a persuasive narrative to spur large-scale investment. Romer admits that the administration should have done more to make the case in favor of fiscal stimulus to the American public. But since then, the American public has seemingly grown skeptical of much-needed interventions. As Romer told EPI, “Even actions like extending unemployment insurance during a long downturn are now highly controversial.”
Part of the reason for misguided public attitudes, experts lament, is the failure of Democrats to shape the debate. Margarida Jorge, a grassroots organizing expert and executive director of Health Care for America Now, commented on how easy it is for Republicans to monopolize the conversation about the economy when Democrats remain silent about the issue. “When you have nothing to say and your opposition has a lot to say,” Jorge said, “people tend to believe your opposition.”
Crafting the right narrative about defending workers, reining in Wall Street, and strengthening the social safety net is the first step to drafting adequate policy.
