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.
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.