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Bonddad has YERRD (yet another reclisted Rosenberg diary) up, on the issue of whether the recession is coming to an end, or the sky is falling and we face an unending recession from now through to the visible horizon.

But the Great Depression was not made of a recession that did not end for ten years. It was, indeed, made up of one and a half complete business cycles ... the post-Crash Recession, from late 1929 to 1932, the New Deal Recovery, from 1932 to 1937, the Roosevelt Recession of 1937/38, and then the recovery that merged with the start of WWII, which was the government spending program substantial enough to actually bring us back to a full employment macro equilibrium.

So the question of whether or not we face another Depression is not, "will this Recession ever end?" ... but rather, "After this recession, what comes next?"

So over the fold, I turn to that, far more urgent, question.

UPDATE: Transportation for America reminds us that its not too late to tell your Congressmen to increase support for clean transportation.

Burning the Midnight Oil for a Brawny Recovery, also available at My Left Wing, Docudharma, and ProgressiveBlue

Indeed, that is the important aspect of Rosenberg's analysis ... we have played the "consumers borrow us out of recession" card too many times, and its no longer in our hand to play.

At the same time, Rosenberg may well be too optimistic, since there is evidence relating oil prices to oil production (Oil Drum) that we are on a "reverse L" oil supply curve, and since production capacity will be lower next year than it was in 2008, it will not take as much economic activity to generate the same crude oil prices.

And our economy is far more exposed than the Japanese, European or Chinese economies to crude oil price shocks.

So putting two and two together, we need an investment-led recovery, and we need a sustained crash program to address our oil addiction.

That adds up to a Brawny Recovery in pursuit of Living Energy Independence as the alternative available to us that can possibly offer a recovery that can last long enough to generate substantial employment gains.

And if NIMBY's and some misguide environmentalists try to get in our way (California HSR blog), we have to organize to run right through their opposition.


What are the "Seed" Projects to Drive an "Brawny" Recovery

I call an Investment-led recovery a "Brawny" recovery, because the idea is that our capacity to do things increases, in line with the spending of money in the short term.

However, finding these projects is not the problem. The problem is shaking off the dead hand of Reagan Framing and understanding that if there is a $1T+ gap between our current GDP and our full-employment capacity, that means there will be $100b's of gap for the next six years ahead. Especially given that the "easy" aggregate demand of consumer-debt-fueled growth is not going to be available to us over the next decade.

So, we can spend $75b per year over the next six years to electrify the Dept. of Defense "STrategic RAil Corridor NETwork - STRACNET. That requires capital funding, but only when oil is cheap ... in the context of expensive oil, bonds to electrify STRACNET are readily self-funding through user charges. A form of crude oil import tariff that slides off as crude oil approaches $80/barrel would suffice to "fund" that. Or else, we can simply deficit spend for that ... since cutting off 10% of our demand for petroleum imports is an investment that pays for itself in multiple ways.

We can spend $75b per year over the next decade to build local electric transport corridors ... from trolley buses and Rapid Streetcars through conventional Light Rail and commuter heavy rail all the way to the mass transit niche for the biggest cities. Fund those projects on an 80:20 federal match, include both direct and indirect impacts on Energy Independence and Congestion Relief, and there will be no difficulty finding projects that justify the public investment. And, again, we can simply deficit spend for that ... if we can spent $1T+ on trying and failing to gain access to the last big pools of cheap crude oil in the world, we can definitely spend $750b on permanent alternatives to crude oil based transport.

We can spend $5b a year over six years on Electricity Superhighways to connect our main regional consumption grids to renewable resource areas. We can spend $20b a year on electric inter-urban transport over the next decade, from Express HSR through Regional and Emerging HSR to electric stopping trains. We can spend $25b a year on interest subsidies for Connie Mae finance for decentralized CO2 emission reduction and energy efficiency improvements, repaid out of the reduction in operating costs, on an ongoing basis.

My, word, $200b over the next six years, $120b over the next decade. The Deficit! My God! The Deficit! screams the ghost of Reagan.


Yeah, What About the Deficit?

We are so heavily indoctrinated in this frame that its normal for people to think they have escaped it, when they have just escaped from one part of the frame into another part of it.

Now, look around at State Governments. Look at Medicaid funding and Unemployment Insurance funding. Look at Federal tax receipts. How's the biggest recession since the Roosevelt Recession (itself generated by giving in to "balanced budget" ideology) working for creating budget surpluses?

Now, think about what happens next after this recession is over. "Recession" is a term that just means changes in economic turnover, focusing on sales of newly produced goods and services. And while unemployment is directly related to GDP growth:

  • GDP growth around 1% per year implies falling employment

So, suppose that we just stand up and cheer when the recession is over, and do not do anything about the massive mess we have made of the economy over the past thirty years by abandoning the industrial development approach we followed for most of the period from the 1790's to the 1970's and adopting Reagan's Do-Nothing-Republicanism instead.

We are going to muddle along, perhaps for years, without any employment growth.

Then, somewhere in the world, someone will get their act together, and get some substantial economic growth going. And the price of crude oil will zoom up and the United States will slide into an oil price shock recession.

Lather, rinse, repeat.

What's that going to do for our "deficit" ... especially with $500b+ a year in government spending on military production dragging down our trade account ... especially considering that if we do not get our act together and someone else does, that'll spell the end of the US dollar as a global reserve currency.

Indeed, we could be treated to the wonderful prospect of a currency collapse inflation in the middle of an oil price shock recession.

Contrast that with the prospect of making serious investment in housing and transportation that can withstand an oil price shock, while generating economic growth sufficient to generate employment growth.

And remember that the key comparison is not the dollar value of the national debt, but the national debt compared to the size of the national economy.

$200b is under 1.5% of a $14T economy ... and the difference in growth rates between the Brawny Recovery policy and the Republican Après Moi, Le Déluge policy approach will easily be 2% or more.

Now, if we put together tricks and gimmicks to "pay for" $200b in Brawny Recovery spending over the next six years and $120b in Brawny Recovery spending over the next decade, and those tricks and gimmicks help the politics of getting it passed, fine.

But, between you and me, the argument that we cannot "afford" to invest in programs that will directly generate hundreds of billions in private investment and will start to close the massive bleeding hole in our trade account ... its pretty moronic. We have followed that policy of not being able to invest in the things we need for the future for thirty years, under Democratic and Republican Presidents and Congressional Majorities ... and the results of that policy are in.

We have already relinquished the title of highest income nation on the face of the planet, when you look at median rather than average incomes. Our claim to be the "wealthiest" nation on the face of the planet will collapse if our currency does.

Before that happens, time to try going back to the policy of substantial investment in infrastructure that brought the US from one among many developing nations to the highest income, wealthiest economy on earth.


And on it goes

It goes without saying that no matter how heavily the "sustainable" in Sustainable Energy Independence is stressed ... its only one dimension of a big, complex problem. Join the Daily Kos Environmentalist group for a multi-dimension look at all sides of an ecologically sustainable economy.

Originally posted to BruceMcF on Mon Jul 27, 2009 at 11:49 AM PDT.

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Comment Preferences

  •  OK, the Tour de France is over ... (19+ / 0-)

    ... the biggest energy hog version of a "green activity" is over for one more year ... though when gasoline hits $10/gallon ($15+/gallon in Europe, of course), even the Tour will have to start thinking about cutting their massive energy footprint.

    Progressive Economics Shortcut: just read the billy blog

    by BruceMcF on Mon Jul 27, 2009 at 11:46:52 AM PDT

  •  There is only ONE way out of this shit. (5+ / 0-)

    Tax the shit out of the bush era's fat cats - I mean, tax them into destitution - and thus rebalance the budget. Also, liquidate the tumor-like banks of the deregulation era, and punitive-tax the shit out of their kleptocratic executives to return at least part of the loot to the depositors and small investors, which will free up the system to fund smaller and untainted banks. Liquidate insurance companies and such health profiteer vermin, and use the proceeds to initially fund a socialized - actually, civilized - health care coverage system. Finally, by fiat, mark to market both residential and commercial properties, and their extant loans. If any money is still needed after all this, just bite the bullet and f*cking print it.

    Don't do these things, and recession or no recession, we will never be out of the shit.

    The well-known phenomena of pshychological projection and confirmation bias account for 198% of conservative so-called 'ideas'

    by power2truth on Mon Jul 27, 2009 at 12:08:16 PM PDT

    •  I would argue with accepting the Reagan budget .. (6+ / 0-)

      ... ideology, that "government spending" is one amorphous blob (except of course for "Defense Spending" which is exempt from criticism) and taxes are "required to balance the budget".

      If insanity is defined as doing the same thing over and over again and expecting a different result ... it is insane to would want to balance the budget under current economic conditions, after what we learned from the Roosevelt Recession of 1937/38.

      This is exactly what I mean by thinking that we have broken free of the Reagan Ideology frame, only to find we have moved from one corner of the frame to another corner.

      OTOH, it is definitely a step in the right direction to adopt a genuinely progressive income tax structure.

      And of course, I have repeatedly called for taking these bankrupt financial firms into receivership, pulling out the bits that actually do some good for the "Main Street" economy, and letting the majority of the speculative games that they play work their way through bankruptcy court.

      Progressive Economics Shortcut: just read the billy blog

      by BruceMcF on Mon Jul 27, 2009 at 12:13:02 PM PDT

      [ Parent ]

  •  Defense Spending (4+ / 0-)

    If we link the railroad spending to defense, as was done with the Interstate Highways, we may be able to get it thru. Get catch Bruce.

    •  Energy Independence is a strong ... (5+ / 0-)

      ... "Progressive Patriot" policy plank ... if "National Defense" is reframed from "Spending lots of money on boys for the toys and invading countries full of black and brown people" to "Defending the Nation", the whole program could rightfully be placed in the defense budget.

      Rather than fighting the behemoth head on, though, I would dearly love to see Congress task the Pentagon with studying the impact of an extended closure of the Straits of Hormuz on our capability to provide "logistical support for essential defense priorities".

      Progressive Economics Shortcut: just read the billy blog

      by BruceMcF on Mon Jul 27, 2009 at 12:50:45 PM PDT

      [ Parent ]

  •  That electrification plan should include ... (6+ / 0-)

    ...upgrading the whole grid (or three grids) nationwide for another $60 billion. Using Ultra-High Voltage Direct Current Power Lines would mean that wind-generated electricity in places like North Dakota could be supplied to places like Denver and Chicago without huge leakage, as is now the case.

    There are foes of this approach. David Morris at the Institute for Local Self Reliance is one of these, and I generally respect his take on things. But on this, I believe he is wrong. Local generation of electricity with renewables can only go so far - you can't cover high-rise apartment buildings with PVs.

    Some people would be better off not reading diaries they comment on, since they already have all the answers.

    by Meteor Blades on Mon Jul 27, 2009 at 12:29:33 PM PDT

    •  And, by the way, excellent diary. n/t (0+ / 0-)

      Some people would be better off not reading diaries they comment on, since they already have all the answers.

      by Meteor Blades on Mon Jul 27, 2009 at 12:30:58 PM PDT

      [ Parent ]

    •  I agree with David Morris on the ... (4+ / 0-)

      ... benefit of Local Self-Reliance, but I do not believe in putting all of our eggs in any one basket.

      The HVDC Electricity Superhighway is distinct from the distribution grids, since the same technology that minimizes line losses when we start talking 500 miles and 1,000 miles is for bulk, long-haul transmission ... the Smart Grid upgrade to the distribution grid is a distinct project - and well worth pursuing, and a powerful complement toward accelerating investment in the harvest of all manner of volatile renewable energy.

      OK, so add $10b/year over six years to bring our main distribution grids back to a state of health and $10b/year over six years to upgrade to smart grid. I'm down with that.

      Progressive Economics Shortcut: just read the billy blog

      by BruceMcF on Mon Jul 27, 2009 at 12:47:35 PM PDT

      [ Parent ]

  •  great diary. Outstanding concepts! (4+ / 0-)

    Now all we need is a certain President and Democratic-majority congress to follow thru.

    •  Ah, there's a whole diary on its own ... (6+ / 0-)

      .. we got to primary enough Corporate Democrats to drive a wedge into the Corporate Majority in Congress.

      Given the Administration's Congressionlist approach to legislation, forcing the issue in the Congress is likely to be the strongest means of putting pressure on the White House ... just as the threat of Long and Upton Sinclair pushed the Roosevelt administration into a much more progressive stance after the midterms of 1934.

      Progressive Economics Shortcut: just read the billy blog

      by BruceMcF on Mon Jul 27, 2009 at 12:43:05 PM PDT

      [ Parent ]

  •  Water Problems? (2+ / 0-)
    Recommended by:
    tmo, BruceMcF

    Don't forget water, either. We are running at top speed against a wall there too.

    Anyone who is seriously worried about water problems should consider that there are many midwestern cities that have virtually unlimited supplies of fresh, clean water. Among them are Detroit, Toledo, Cleveland, and Buffalo. Ironically, they need people. MOVE THERE!

    •  We have periodic water problems here ... (2+ / 0-)
      Recommended by:
      tmo, benny05

      ... in Northeast Ohio. Every spring and fall I see warnings about possible flash floods.

      This is another advantage of existing, mature wind turbine technology - that it has very little thirst per MW, compared to coal.

      Progressive Economics Shortcut: just read the billy blog

      by BruceMcF on Mon Jul 27, 2009 at 01:32:32 PM PDT

      [ Parent ]

  •  #s??? (2+ / 0-)
    Recommended by:
    benny05, BruceMcF

    You're suggesting $200 billion/year or $200 billion over decade?  Believe this is per year.

    And, well, I would throw in roughly $400 billion for the Architecture2030 concept ($160 for first two years and then remain $240 billion for phasing over over next 6-8 years). Buy down mortgages based on energy efficiency, putting home construction and commercial construction workers to work making existing infrastructure 21st century efficienct.

    And, well, I would put in $10s billions / year in renewable energy production capital investment.

    And ...

    •  The $10b's per year in renewable energy ... (3+ / 0-)
      Recommended by:
      dsteffen, A Siegel, Turbonerd

      ... production capital investment is why the program does not try to fill the entire output gap on its own.

      Similarly, Connie Mae finance on its own could generate $100+b's/year ... $25b/year in Connie Mae interest subsidies leverages far more than $25b in construction work per year. Consider that the Connie Mae finance would be at interest rates on federal bonds, with an interest rate subsidy to cover the period of construction for construction projects so that the interest payments are not due from the borrower until the benefits are available, and payment of a loan insurance premium to avoid the borrower having to pay a default premium on public interest rates ... $25b in interest rate premiums could easily be financing $100b-$200b a year for the first few years and additional amounts in the out years as the finance for the quicker payback projects is rolled over.

      Progressive Economics Shortcut: just read the billy blog

      by BruceMcF on Mon Jul 27, 2009 at 02:05:30 PM PDT

      [ Parent ]

    •  So, the 'per year' in the terms used ... (2+ / 0-)
      Recommended by:
      dsteffen, A Siegel

      ... translates to 'per year' for the total. Talking about costs of programs aggregated over multi-year time periods is a Reason Foundation / Radical Reagan Reactionary trick.

      The flow elements in our annual production capacity are our labor resource, our installed productive capacity, and our available renewable resources, while the stock element is the depletion of non-renewable natural resources. So a program that will have an Energy Return on Energy Invested (EROI) of over 100% (indeed, many components will be among the highest EROI presently available to us) should be measured in per-year terms.

      Progressive Economics Shortcut: just read the billy blog

      by BruceMcF on Mon Jul 27, 2009 at 02:15:47 PM PDT

      [ Parent ]

  •  Asian countries are investing heavily (0+ / 0-)

    Tell doubters and naysayers that the 10 hottest years on record have all occurred since 1990.

    by tsunami on Mon Jul 27, 2009 at 07:52:09 PM PDT

  •  Great diary, Bruce. (0+ / 0-)

    Sorry I missed it till today -- too late to tip or rec. But good job!

    "The true strength of our nation comes not from the might of our arms or the scale of our wealth, but from the enduring power of our ideals." - Barack Obama

    by HeyMikey on Tue Aug 04, 2009 at 11:19:09 AM PDT

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