Robert Reich: We Need More Stimulus, Not More Bailout

[flpoljunkie]

TUESDAY, APRIL 14, 2009

We Need More Stimulus, Not More Bailout

With only $110 billion remaining in the TARP bailout fund, all signs are that Tim Geithner is preparing to return to Congress seeking more bailout money. He’ll bring along the results of his bank “stress tests,” which will probably show many that big banks are still technically insolvent, along with bankruptcy scenarios for General Motors and Chrysler, and a couple of CEO scalps – he’s already got GM’s. Congress won’t be happy but in the end it will cough up another 300 to 500 billion.

Geithner believes the only way to rescue the economy is to get the big banks to lend money again. But he’s dead wrong. Most consumers cannot and do not want to borrow lots more money. They’re still carrying too much debt as it is. Even if they refinance their homes – courtesy of the Fed flooding the market with so much money mortgage rates are dropping – consumers are still not going to borrow more. And until there’s enough demand in the system, businesses aren’t going to borrow much more to invest in new plant or machinery, either.

That’s the big issue – the continued lack of enough demand in the economy. The current stimulus package is proving way too small relative to the shortfall between what consumers and businesses are buying and what the economy could produce at full capacity. (According to today's report from the Commerce Department, retail sales fell in March, as did prices paid to U.S. producers.)

Worse yet, the states are pulling in the opposite direction. States cannot run deficits, which means that as their revenues drop in this downturn they’re cutting vital services and raising taxes to the tune of $350 billion over this year and next. This fiscal drag is wiping out about half of the current federal stimulus.

If Geithner gets Congress to give him more bailout money, Congress won’t be in any mood to do what it really needs to do – which is to enlarge the stimulus package. Voters are already worried about too much government spending. At most, the administration is going to get only one more bite at the congressional apple. Make that more stimulus rather than more bailout

posted by Robert Reich

http://robertreich.blogspot.com/2009/04/we-need-more-stimulus-not-more-bailout.html

[polichick]

1. That's how I see it - let's have less "trickle down" and more "bottom up" thinking!

[Birthmark]

2. I love that guy.

Reich seems to see things the same way that I do.

[mcjenn]

3. I doubt Olympia Snow, Specter and Collins will vote for a 2nd stimulus

This is why I think the first one was good, but not quite big enough.

Think about it. If the three wishy washy Republican pseudo-centrists thought a trillion was too much, imagine what they will think about a second stimulus. They don't think about the nation. They put their political aspirations first.

[PBS Poll-435]

4. Welcome to DU

:-)

[Better Believe It]

7. We don't need them to write and vote for a new stimulus bill. 51 votes will pass it.

Three Republicans wrote the last puny stimulus bill and we don't need their votes.

51 votes will get a new stimulus bill passed.

And please don't anyone suggest that a fake Republican "filibuster" will stop a bill. That can only happen if the leader of the Democratic Party permits Republicans to stop legislation with a phantom non-filibuster "filibuster" without even taking the floor of the Senate to debate!

[mcjenn]

11. Problem is, Evan Bayh and his gang of 16 aren't crazy about reconciliation

But may God hear you and let's keep our fingers crossed.

[Fireweed247]

5. K&R

:applause:

[AzDar]

6. Damned straight!

:thumbsup:

[Political Heretic]

8. I agree completely.

[Skwmom]

9. People would be CRAZY to use the low interest credit card

offers that increase after a set period of time. Many credit card companies have switched to prime plus. If inflation takes off, the interest charged on those balances will be astronomical.

[Thrill]

10. Good Luck with that with these Senators