By the way, I saw you recently on the Daily Show - nice job - and I was also very pleased to see you were on Barack Obama's team of economic advisers.

Great article, Mr. Reich. Sometimes I feel like I'm psychic (or crazy) because I've been saying all this for months. Defecit spending is the key to getting us out of this crisis, despite however much we all want a balanced budget. But, alas, sometimes you have to spend money to make money. Reich correctly points out that the money we pay out now will vastly improve things for future generations- so hopefully they'll be able to "rake it in" even more efficiently and thus, the defecits we are paying forward will not sink future generations.

I agree infrastructure and healthcare should be top priorities, I'm hoping some (or alot of) "green energy" projects will fall under the infrastructure umbrella as well. However, with people such as Mr. Reich advising Obama, and with Obama's thorough and analytical nature, I'm confident this will get done right.

Thank you, Dr. Reich. Please, please scream if you must, but whatever it takes, get Obama's ear.

Well said, Mr. Reich! I couldn't agree more...

I definitely agree. Though I am worried about one thing -- are these jobs building light rail system and fixing roads any good? Working on a road crew is basically backbreaking work for not a lot of pay. It's not the kind of job most people want. You have a lot of people facing job losses who are trained for the information side of the economy. How will government spending create good jobs in those sectors?

What about the other argument against infrastructure spending, that it doesn't get money into the economy fast enough to give the immediate stimulus needed? Listening to NPR's Marketplace the other day, they heard only from economists who voiced this concern.

It seems pretty silly, since there's any number of pent-up infrastructure projects that we can pay for if we approve funds for them. Many of them have already been evaluated, but just haven't been deemed worthy of the limited infrastructure funding made available under this administration.

It seems to me that if the administration targeted $1 billion to each of the largest 50 metropolitan areas, plus another $1 billion to each state, for transit, they would find the best ways to spend that money. We'd create lots of jobs, PLUS we'd be preparing for the inevitable rise in energy costs, since we'd have light rail, subway, commuter rail and bus expansions well in advance. Where's the downside?

Mr. Reich,

I sincerely hope Obama gives you an important job in the upcoming administration, where you can put your skills for clear and intelligent public communication to work on behalf of a progressive agenda. I don't disagree with anything you say here, but would like to add some complementary observations and suggestions.

Our stimulus spending on infrastructure needs to go beyond the repair of existing infrastructure, and should help implement a bold and creative strategic plan for building the new infrastructure of the 21st century. And a key organizing theme for this work should be the transformation of our national energy system and energy economy in a way which promises to make us independent of the persistent political chaos in the world's petroleum-rich but stability-poor basket cases. Americans on the left and the right are desperately eager to participate in this kind of patriotic and productive national project. They are tired of sending their sons and daughters around the world to protect our strategic position among the world's most brutal and godforsaken oil patches.

I am not opposed to a Detroit bailout. But we should think about folding a Detroit bailout into the sort of project I just vaguely described. Don't just give Detroit the money, but attach strings which mandate deep structural changes in the industry, and tie it to strategic targets on environmental protection, energy independence and energy transformation, thus using the investment to create demand and stimulate research and development in a host of other allied and subordinate industries. And perhaps the US taxpayer should purchase a piece of the action - a buyin rather than a bailout - and get a return on their investment when their project comes to fruition.

For decades US automakers have focused on serving the large US market, and abandoned the rest of the world to foreign companies who are more responsive to the needs of foreign consumers. As a result the US has continually fallen behind in both markets. There is no reason why the US should not be the global leader in the next generation of energy efficient personal transportation vehicles. We have the good workers, the engineering smarts, and the potential governmental wherewithal.

As tens or hundreds of millions of increasingly affluent Chinese start to drive more and more cars during the next several decades, who will be making those cars? Why not us? And the Chinese have deep environmental challenges of their own. Why not respond to the needs of that vast, and still mostly untapped market, along with the strategic environmental plans of the Chinese government.

And what can we do to get the Chinese - and others - to buy into this project in a way which defrays the cost to the American taxpayer? The whole world has a stake in the success and prosperity of the American economy. The capital shouldn't all come from us.

The community green or the ground we all share, it is time! Others call it common ground, common good,common purpose, etc. Reich calls it perfectly.
Definitions of the common good will be the underlying basis of the political fights. A solidified widely held and practical understanding of the public good is distasteful to much of the likely opposition as they prospered and governed with the absurd simplicity of guns and flags for everyone but with butter for the select.

On practical levels the so-called ownership society construct will not have much appeal. A prime example is health insurance; regardless of form all citizens need be covered at a some basic level as the cost of none is simply too great; i.e., the society as a whole cannot afford not to have health insurance. Finally, the inevitable debt associated with Reich's suggests are basically capital spending,bonds. The short term investments are in human capital, human beings not CDOs!

I'm not trained as an economist, but if you just look at the money flow, you know where the big rocks are... you know where to find the money to bail us out of the mini-Depression.

The entire economy is somewhere north of $14 trillion. Of that Price Waterhouse Coopers recently estimated that $1.2 trillion is WASTED by the health care "system" (that's not for any care, it's JUST for the waste in pushing paper around, doctors filling out forms, and paying for profit of insurers, etc, etc)

Add to that the cost of "national defense" (which really means killing brown-skinned people who themselves lack adequate clean running water)... and you come up with a figure that is approaching $2 trillion of (essentially) WASTE. What country can thrive when it blows 13% or 14% of its entire economy on NOTHING at all?

The first "spending of last resort" the government should take on this time is *National Health Care.* It meets a permanent social need and eliminates the greatest weakness in our economy (employer based health insurance). It produces professional jobs.

We can then add infrastructure work, but it must be more than down-cycle infrastructure work. The infrastructure must be maintained, not just developed.

Repairing highways, bridges, and airports are good projects since they can begin almost immediately and are mostly publicly owned. But we also need to repair and electrify our railways and update the electric power grid which will take a bit longer. Frankly, we already have the technology to make much greater use of the wind, the sun, and geothermal sources to generate our electricity. Some of the now vacant automobile plants ran around the clock to make airplanes during WW2. Imagine those idle plants being used around the clock to manufacture wind turbines and large solar arrays. The labor to build, install and maintain these systems would all come from right here in the USA.

Reich on!

The importance of targeting spending properly can be seen from the Iraq war. For the past 6 years we've been spending $100 billion plus a year, almost all of it (initially at least) going to US citizens and companies, and it's gotten us diddly. (Well, it's gotten us being an international pariah, and it probably helped prop up consumer spending in ways that guaranteed an even harder landing now that things are on the way down, so make that negative diddly.)

What's really sort of freaky to me is just how much infrastructure you could buy with, say, $700 billion (since that's apparently the number of choice for bailouts). You could fund pretty much all the transportation requests currently in the pipeline with enough money to provide health care for everyone currently uninsured, triple the budgets of the NSF, NASA and NIH, and still get back enough change to bail out the auto companies.

(I think the proposals above for conditions on bailouts are way too timorous. That's not even what we asked of Chrysler. The government should take warrants, should take -- probably through an intermediary -- seats on the board, and the bailout money should be used for complete retooling. Not "stop producing so many SUVs", but straight to the vehicles and other products people might actually need. Think more of the creative destruction at the end of WW2, when factories and production equipment were available for next to nothing to people willing to build things with them.)

Dr. Reich, I'm a big fan of yours and am very willing to buy your argument for this approach of going for the stimulus and the deficit be damned.

But I must add that your brush-off of the latter as part of your argument is not a good idea if you really want understanding on this subject. Look, don't forget how it was the 1992 election - with Perot and, God love him, Bill Clinton - when we all learned ad nauseum how the deficit really mattered. And after Clinton got into office and addressed it, we seemingly went into a good long period of prosperity. And he attributed his focus on the deficit as a winning strategy.

So I think you and others who are out there working hard to ensure our support now of the stimulus package approach need to be sensitive to our "training" by previous Democratic braintrusts that addressing deficits is THE strategy for economic recovery. Once you help us get through this 180-degree change in direction, you can be sure we'll keep going with you - full speed!

I hope your advice is adopted ver batim, Mr. Reich. In my view, the singlemost important stimulus would be a PAYROLL TAX HOLIDAY of perhaps three months, or a substantial lowering of the current rate. The effect would be to immediately boost take-home pay AND add cash flow to businesses, particularly small mom and pops. Without the govvie expense of printing and sending stimulus checks.

The problem with prioritizing infrastructure jobs is that, absent a major affirmative action program, these jobs largely benefit men. Not only are men already employed by the firms that will do the work, but the jobs have specific requirements that make them difficult for women who have children. For instance, hours are often scattered across the day, particularly highway work, which would require that women have access to early morning and nighttime childcare. While these jobs might reinvigorate retail trade, I can't see women being enthusiastic about a job that pays a third of what their tax dollars are going to pay men hired for the infrastructure jobs.

But in the meantime have the underlying fundamentals of the economy changed? Doesn’t “peak oil” and the rising costs of externalities from 60 years of cheap oil change the basic calculus of economic development? And doesn't that mean a total retooling of our infrastructure to adapt to expensive energy?

Totally agree with everything you say. However, when it comes to the definition of 'infrastructure' -- I think we should look beyond the classic 'road-building' concept.

I would look ahead 30-40 years, think what kind of society we want to live in and work our way backwards to today. What does the ideal look like? Say we'd like to see educated (and nourished) children, healthy people, and reasonably high employment. To get there, we would need good schools, a decent system of food production and delivery, accessible healthcare, and good local jobs. Whatever infrastructure goals we adopt today would have to prioritize based on those principles.

Let's set the goal at 10,000 news schools, 10,000 new libraries, 10,000 day-care centers, 10,000 new neighborhood health clinics (staffed with people who live nearby), 10,000 parks, 10,000 new family farms who distribute their goods within 100 miles, and 100,000 new small business startups each with less than 100 employees (with tax breaks to encourage buying from supplies manufactured within 100 miles of each other). Too modest? How about 100,000 schools, libraries, etc.

Imagine all the support activity that this will generate across all levels of society. Forcing geographic proximity cuts down on energy use, wear-and-tear of the roadways, and builds local hives of self-supporting commerce. By reducing concentration of location-specific industries we make it so trained personnel can flow between regions and be assured that they can find jobs. We make it so the brand isn't just 'Made in the USA' but 'Made in Jackson County.'

This will go hand-in-hand with distributed green-power generation plants. If the power doesn't need to be shunted across a nation-wide grid, you can make do with smaller generation facilities. The more local it stays, the less you lose in transit. Instead of large-scale power generation sources using polluting fuels, we have 10,000 local power plants that use renewable sources, are cost-effective, and can keep going for the rest of the century without ever running out of fuel.

Distribution (of energy, knowledge, manufacturing, commerce, etc) also gets us better fault-tolerance and built-in redundancy. It means that if something disruptive happens in one region, it won't affect the whole country. Yes, you don't get the economies of scale, but the goal is to jump-start the 'distributed economy' and build a vibrant commercial ecosystem, not to make cheap, low-margin junk that benefit only a few companies.

To be able to pull this off, we'd need training, communication, and good coordination. That's where high-tech investment comes in. It'll help spread the knowledge, boost efficiency, and push the benefits down to the local level. Let's also remember that the Internet infrastructure was designed from the beginning for this sort of decentralization.

As an aside, I believe the so-called 'Shock Doctrine' can be harnessed for both good and bad. An emergency can be abused by those who want to acquire power or wealth, or used to 'shock' society out of complacency and past the petty objections of those who only care about their taxes.

We are clearly in an emergency. Where we go with it is largely up to those in charge and whether they have the vision to look ahead 30-40 years and act now.

We're broke, the empire is fading, the oil is petering out,the spirit is lacking, and the leadership is truly Roman. Time to become like Britain.

OK people, what sort of economy we have is dependent on what sort of expectations we have. People won't take risks because they believe there is no reward. A paradigm shift is required, much like WW2 changed depression era thinking. It's what brought us the internet age and all the benefits it brought along.

Here is the kind of thing that can excite optimism about the future as opposed to depression era nostrums that just remind us all what a grind we have to endure....

Mini nuclear plants to power 20,000 homes
Nuclear power plants smaller than a garden shed and able to power 20,000 homes will be on sale within five years, say scientists at Los Alamos, the US government laboratory which developed the first atomic bomb.
The miniature reactors will be factory-sealed, contain no weapons-grade material, have no moving parts and will be nearly impossible to steal because they will be encased in concrete and buried underground.
The US government has licensed the technology to Hyperion, a New Mexico-based company which said last week that it has taken its first firm orders and plans to start mass production within five years. 'Our goal is to generate electricity for 10 cents a watt anywhere in the world,' said John Deal, chief executive of Hyperion. 'They will cost approximately $25m [£13m] each. For a community with 10,000 households, that is a very affordable $250 per home.'

The eminent arrival of low cost, nearly limitless power, transportable to any place in the world, by a process safe enough to be used by students, will literally change the world. Deliver this, and everything else will take care of itself.

Excellent piece. I would add: (1) bring the troops home from Iraq as quickly as reasonable, (2) terminate as many federal contracts with third parties in Iraq as possible, (3) use some of the savings to meet the medical and employment/training needs of our returning soldiers, and (4) eliminate as much of the Bush/GOP pork and redirect it to programs that further stimulate the economy.

Two other points: (1) We need rail -- all kinds of rail. (2) The weak demand is largely a function of government-sponsored upward income redistribution under Bush. Tax progressivity and raising the cap on Social Security are overdue.

Obvious yet brilliant. Dr Reich is basically saying J Consumer can be raped by Reaganomics for only so long.

Consumers are cutting back on everything other than necessities. Because their spending accounts for 70 percent of the nation's economic activity and is the flywheel for the rest of the economy, the precipitous drop in consumer spending is causing the rest of the economy to shut down.

70 percent! I have never understood (well no; I actually do) why US fiscal policy ignores Joe/Jane Consumer in favor of 'the wealthy;' is there anyone here who actually believes in the trickle-down/supply-side theory of ecomonics?

What's the minimum wage again? How's median income doing (and btw, what's the actual difference between median and avg income?)? Etc etc.

I agree on all the fundamental assumptions you make Prof. Reich, however, I would love to hear from you why you don't mention and nobody (as far as I can tell) on the Democratic side of things ever mentions direct relief for ALL homeowners on their mortgages.

Why wouldn't it make sense for Uncle Sam to offer ever homeowner in America a 3% fixed rate, 30 year mortgage on their primary residence right now? Lowering mortgage interest rates on all existing mortgages would have a very favorable impact on stemming the rising number of foreclosures taking place and it would also free up an enormous amount of money for consumer and other spending because a great deal of money currently being spent on mortgage interst would become available in ever region of the nation and among all income groups. It seems to me this would be an excellent means of stemming the tide of economic collapse, provide a great deal of relief to regular American families who need and deserve it and help to stabilize the economic climate.

Why do Democrats never talk about this? I really would like to hear what you have to say about this Professor Reich.

A revival of FDR's WPA to rebuild our infrastructure would probably be the best path to economic recovery, although I still think it will be a tall order for President Elect Obama and his Administration when we're facing wars on two fronts and an economy in crisis. I think Professor Reich that you've laid out some pretty solid solutions in this article and I have great faith that an Obama Administration will be able to take great strides in undoing the errors of the past 8 years.

I think you have made a strong case for your perspective but clearly it is meaningless unless it is tied to a long term strategy. I am not in support of us spending more massive amounts of money until it is thought through with all of its ramifications for our country and the world. How will we get out of debt? How will this strategy affect the world economy? I would really like to see the experts supporting our new president bring back the old native american tradition of asking how their decision will affect that next 7 generations... well at least a couple would be great!

Discussing productivity in the context of demand stimulus:

"The pertinent issue is how much underutilized capacity exists in the economy. When there's lots of idle capacity, deficit spending is entirely appropriate, as John Maynard Keynes taught us. Moving the economy to fuller capacity will of itself shrink future deficits."

That's supply side, a contradiction of the thesis. Churning is not productive economic behavior. It's a cancer on society, recycling wealth at best, theft otherwise.