Green powered electricity and transportation are going to cost more than fossil fueled. We'll be spending more to sustain the lifestyle we have now whether we like it or not. That will absorb a lot of consumer cash that's now blown at Walmart and Neiman Marcus.

. . . government would permanently fill the gap left by consumers who cannot and should not be expected to resume their old spendthrift ways. Robert Reich

What gap? Who says there's a gap? Why do you call it a gap? A gap in what?

Yap-a-Gap!

Robert: I just asked Krugman the same qwuestion b/c I think he's said in the past year or so that we kinda witnessed a mini-run on Hedge Funds since easy credit slammed shut in August 2007. Because of this $50 Billion BERNIE MADOFF scandal, are we going to witness a "classic" run on Hedge Funds with the ultra wealthy (and, apparently, charities and foundations and pension fund managers) literally lining up in their Maseratis outside the Hedge Fund offices trying to make their withdrawals?

Ok, here is a random pull on the kind of "Sustainable Economics" that I think Professor Reich alludes to and that I call for more examination of as part of this discussion:

https://netfiles.uiuc.edu/dtcook/www/CCCnewsletter/5-1/Rattle.htm

The existing model of consumption based growth really does need to be treated to a high profile critique before any large scale fiscal stimulus is given the go ahead. I first tumbled to this sub-topic in a book by Daly and Cobb I read about a decade ago.

http://rds.yahoo.com/_ylt=A0oGkif_BEdJ2Y8Aju1XNyoA;_ylu=X3oDMTByN2s4bDgzBHNlYwNzcgRwb3MDNARjb2xvA3NrMQR2dGlkAw--/SIG=12dg0sfu4/EXP=1229477503/**http%3a//www.amazon.com/Common-Good-John-Cobb/dp/0807047023

But if you want to start with health care, supertrains and wind power, and skip the controversey, that would be good with me also.

Please explain. Why don't we RAISE interest rates? The problem is that banks are unwilling to lend. So, why don't we REWARD LENDING by offering the possibility of a fair return?

Lowering interest rates REWARDS BORROWING and continues the disasterous policy of encouraging people rely on debt to finance their lifestyles.

Yes! Yes! I admit that I shop with the best of 'em, but I'm a small timer these days next to my fellows. But when we talk about spending on the commons, we often step on some expensively-shod toes. For instance, I consider it criminal that Americans spend so much more than people in other countries for high-speed Internet access--which explains why so few Americans have such access. But I already hear the screaming from AT&T, Comcast and the other providers that don't want to lose the $50 a month we have to pay them for the service.

And one does wonder how the US corporations that moved their production facilities overseas are going to feel about Americans deciding that we'd rather spend our time attending class rather than attending the mall. They have, I think, more power than I do.

"It's the unemployment, stupid!" I wish I'd said that. The problem with all the stimulus package talk is that in them employment is a byproduct of economic growth. Furthermore, it's a byproduct that consultants and contractors would like to keep to a minimum so they can maximize their "value added" rent.

Create jobs directly by reducing the hours of work and sharing the work and income. Or, to quote KEYNES (fer crissake) "It becomes necessary to encourage wise consumption and discourage saving,- - and to absorb some part of the unwanted surplus by increased leisure, more holidays (which are a wonderfully good way of getting rid of money) and shorter hours." ("The Long Term Problem of Full Employment," 1943)

It's nice to see RR's thinking evolve over time. He has now realized that the level of US consumption is not sustainable, but that's only because of "resentment" from the rest of the world.

So, he thinks that government spending, rather than personal spending, will be the cure. This still doesn't address the basic point that the US is consuming at an environmentally unsustainable level. In fact the world as a whole is consuming at a level that requires 1.5 planets to sustain. This will only go up as the population rises from 6.5 to 9 billion by mid century.

Maybe he will take the next intellectual step and realize that the continual growth/capitalist economic system is no longer viable. We need to devise a system which is sustainable or steady-state and which doesn't depend upon depleting unrenewable resources.

I've got two short essays on this:
http://robertdfeinman.com/society/no_growth.html
and
http://robertdfeinman.com/society/after_capitalism.html

Professor Reich, I was prompted to sit right up as I read this post. What you suggest will no doubt be greeted as heretical by many Libertarian "free market" economists. I, for one, say "Thanks!" for daring to look beyond the present crisis toward an understanding of some of the underlying structural problems in the economy.

We have built this as a consumer economy, dependent upon an ever-increasing appetite for consumer goods. The economy grows only for so long as more and more goods are produced and sold and consumed and then replaced.

And as you point out, much of the stagnant nature of the economy today is due to having driven this on consumer debt as a substitute for actual consumer wealth. But that would seem to be the least of our problems, long term.

This upwardly spiralling consumption of resources cannot be sustained. Although somewhat tepidly introduced, I especially like your hint at a proposed solution:

An "argument for maintaining aggregate demand through continuing government expenditure on the commons. Rather than a temporary stimulus, government would permanently fill the gap left by consumers who cannot and should not be expected to resume their old spendthrift ways."

But the trouble I see is this:

1.) What's in it for me, the present consumer? After all, I want more "stuff." Isn't that the reward for my labors in this economy?

2.) Gov't expenditure on the commons can be equally as consumptive of non-renewable resources as is the present "consumer driven" expenditures. (Think military spending on weapons systems; infrastructure expenditures that can in fact subsidize consumption of resources by providing roads to run on, power lines to rush more and more energy to be consumed, etc.)

Driving a "new, Green economy" as a common assault on non-renewable consumption is the type of reordering of the system that is required.

First, we have gained incredible consensus these last few years that global climate change, peak oil, and other "green" concerns are critically affecting our future viability as a species. It is widely recognized - and rightly so! - that we are confronting some real crises here if we do not substantially change our way of living.

Secondly, we have surrendered much of our manufacturing capacity to offshore outlets, and often specifically for reason that corporations can thusly avoid the extra financial costs of operating in at least a semi-responsible fashion in terms of their environmental footprint.

The American worker has always responded wondrously when confronted with a common challenge. WWII-era industry is only one example of ways in which the middle class can find sustenance in embracing patriotism to produce product at remarkable levels and with great efficiency.

What if we were to have leadership that could now appeal to these workers' patriotism, personal pride and sense of value by declaring it their role to "save the world" by providing the products and the means - and yes, even the necessary sacrifices - to put our species upon a more sustainable track? Could the sense of mission generated by this "call to arms" replace much of the present "desire for stuff" as the reward gained by the labors of the middle-class?

I think it can, especially as the prospect that there are simply no other real alternatives becomes increasingly apparent.

How might this work?

Well, I'm reminded that much of this present economic system was founded in our automotive industry. Perhaps we have opportunity now to build the new "green" economy upon the shoulders of this industry as well.

It could start by:

1.) selling the Big Three to its employees with assistance from the Gov't in providing loans, etc., as needed.

2.) Gov't assume costs of health care, pensions, etc., for all Americans, thus relieving our manufacturing industry from this overhead expense. This also represents some of the gov't "expenditure on the common" that was mentioned in your post.

3.) Establish through tax policy a floor for fuel prices, probably @$4/gallon. Use the tax revenue to reimburse those who cannot afford to pay these prices and also to reduce cost of national health/pension plan.

4.) Direct the employee owned carmakers to create "green" cars. The market for same will be assured by the stabilized fuel prices.

5.) Encourage growth and diversity of auto industry and other manufacturing interests into the building of locomotives, solar panels, windmills, renewable biofuels, etc.

In a way, this reordering would place upon the shoulders of the working class the responsibility to grow this economy in a sustainable fashion and therefore save this economy and even the world environment itself by rolling up their sleeves and getting the work done. I have faith that our workers would respond mightily, and that they would necessarily reorder their own priorities from that of acquiring more "stuff" to instead finding sustenance in the realization that they are helping to create a better world for themselves and for the generations to follow.

It's a tall order, I know. But the sate of our present economy and the environment require nothing less!

Warning: The following are thoughts from a complete economic neophyte, and are probably inane.

1) I wonder what role the so-called networked or information economy will play. The networked economy trades in knowledge, lot's of it, so it has a real supply-side dynamic to it. Lot's of stuff can get created, with virtually no environmental cost, and only the good stuff (along with too much of the bad stuff) need be consumed. Of course, the consumption is often at no cost, but it does seem to me that all sorts of knowledge based services/products can be generated that will spur consumption and at the same time create new wealth without necessarily trashing the environment.

2) Can we find some room for growth by spurring development in the so-called "base of the pyramid"? The base of the pyramid is the 4 billion or so people who live on two dollars or less a day. Unlike the top of the pyramid where most of us live, the base is not a saturated, highly competitive market. True, working in the base would seem to generate consumption and wealth creation within the base, and so would not immediately seem to benefit us, but I wonder if economic gold can be mined from efforts to expand significantly efforts to service the economic needs/desires of those in the base of the pyramid, rather than simply exploiting their labor.

3) Isn't the environment already screwed merely by population growth projected to level off around 10 billion by 2050? If so, is it possible that consumption, with its capacity to sort, select, and drive innovation, is actually the way out? If the only thing that will generate the sustainable products that we need is a healthy market, why is it necessary to trash a consumption-driven market as the enemy of the environment?

You go,Bob Reich!!!!
Keep saying this as loudly and often as you can.
And please throw in something about supporting sustainable local agricultural development for people in poor countries who could grow stuff for themselves if they could survive doing it.

I am ignorant of economics but it seems to me that I could buy a really good pair of shoes, for alot of money, that pays someone a living wage to produce, and they could be of such quality as last 10 years. or I can buy ten pairs of crappy shoes that get thrown out every year, and are cheaply made.

(roughly) The same money is spent but in one case less waste is created and better jobs are supported. Does this concept have a name?