Urgent Situation Calls for Aggressive Stimulus Strategy

Posted November 18, 2008 at 4:29pm

The election of Barack Obama as the next president was the culmination of an inspirational and transformative national election that involved and excited Americans like never before. But now comes the hard part: governing. Our incoming elected leaders will find themselves with the unenviable task of addressing myriad economic, social and security issues, from affordable health care to the financial meltdown to the Iraq War. It goes without saying that actions taken by the 111th Congress in the first half of 2009 may very well serve as America’s foundation for progress well into the next generation.

[IMGCAP(1)]Let there be no mistake: We must remain steadfast in our commitment to securing affordable medical coverage for working families and children; we must continue our quest for energy independence through the development of renewable resources, and we must keep a keen eye trained toward protecting out nation against outside forces that pose a physical threat to all Americans. But the dark cloud that stretches from coast to coast, and indeed, across the globe — the challenge that could impede our ability to address other critical concerns — is the toxic meltdown of our nation’s financial services industry.

While it is all too easy to perceive the current financial crisis as a big-business, Wall Street problem, the collateral damage has spread to kitchen tables, individuals and almost every Main Street in America. And this is where we must focus our immediate attention if we are to revitalize this great nation and firmly renew our rightful position as an international leader. video platform video management video solutions free video player

This is the approach I took when, as New Jersey’s governor, I addressed a joint session of the state Legislature to lay out a comprehensive, multifaceted plan designed to help our state weather the current economic storm and to throw out a lifeline to individuals, businesses and local economies.

Granted, the actions of one state will not have a measurable impact on the international, or even the national economic situation, but a similar strategy implemented by Congress on a national level could make a world of difference for Main Street America.

As I see it, there are four overriding themes at work for a comprehensive, effective national economic recovery plan: providing immediate assistance to those in greatest need, direct support for short-term employment and economic activity, enhancing the business climate and long-term economic development prospects, and a steadfast commitment to fiscal restraint with regard to government spending.

[IMGCAP(2)]First, we must address the millions of American families who, through no fault of their own, find themselves struggling to purchase the bare essentials: food, fuel and shelter. With unemployment rates rising and companies cutting back on their payrolls, families are at risk of losing their health care coverage, their homes, and the income necessary to purchase basic necessities.

To ease this burden, we must give serious consideration to increasing investment in winter heating programs, food stamps and other direct assistance aimed at those who are most vulnerable. We should extend jobless benefits to provide additional weeks of assistance, and temporarily enhance the percentage of federal medical assistance to states, as well as temporarily lift the cap on federal aid on health care, allowing more money to flow to states. These stopgap measures should provide the cushion necessary to sustain working families until the economic tide turns.

In addition, we must consider reforming the federal bankruptcy code, as well as a nationwide coordination with state housing agencies aimed at broad mortgage restructuring. Keeping families in their homes and implementation of a mechanism to allow residential loan portfolios to continue to perform will, ultimately, be key to a timely economic recovery.

Second, we must strengthen current economic activity and grow employment as quickly as possible. In New Jersey, we plan to attain this goal through the acceleration of currently funded capital projects that may already be languishing on the drawing board. On the national level, there are billions of dollars of critical infrastructure projects that are in the planning stages, are needed, but lack funding. Congress would be well-served to allocate approximately 2 percent of gross domestic product toward public works projects, totaling about $300 billion — less than half of the amount allocated to rescue banks and financial institutions, and with the payoff of 30,000 jobs for each $1 billion spent.

Third, we must lay the groundwork now for long-term economic growth, with a focus on small- and medium-sized businesses — the backbone of almost every local economy. This can be achieved through a tax credit for each job created and through a Small Business Administration “disaster loan” program similar to the program created in the months following the 9/11 attacks. This, in conjunction with some business-friendly revisions of tax codes, will give businesses the flexibility to maintain inventory, maintain employment levels and perhaps even expand and in so doing, give the economy a critical jump-start.

And finally, all levels of government must maintain fiscal restraint as to maintain and even bolster national and international confidence in the U.S. economy. While Congress can assist local governments, universities and hospitals by investing in short-term notes issued by these entities, Washington must keep spending in check and appropriate only what is necessary to fund essential services and nudge the economy back into high gear.

The bottom line is we need to turn this economy around. We need to create aggregate demand today, to replace the sharp declines occurring in the construction and manufacturing sectors — and now spreading into the service sector.

A comprehensive stimulus plan aligned with long-run objectives is undoubtedly a win-win situation. As individual states, we cannot stand alone against a national economic tide, but under no circumstances can we stand idly by. It is time for all of us, from city hall to the statehouse to the halls of Congress, to collectively demonstrate the leadership necessary to weather the current economic storm and emerge, as a nation, even stronger and more prosperous.

Jon Corzine (D) is the governor of New Jersey and served in the U.S. Senate from 2001 to 2005. He was previously chief executive officer of Goldman Sachs.