The Reindustrialization Bank of America

Unfortunately, the reporting about Obama’s ‘stimulus” in the Press has concentrated overwhelmingly on the price tag. This is the kind of thing that is catnip to the economists, who love a number and a model the way a kitten loves a ball of yarn. It is also a way of shirking the occasion. No number will bind up the economy. No number will produce out of its pocket the road back from the abyss for the U.S, still the most powerful nation in the world. The abyss is not just getting fewer video games for the kids at Christmas. It involves a worldwide environmental crisis, as well as a nationally limited one – the drought in the West – that is getting bigger every year. It involves a worldwide cultural crisis, as thirty years of dumbing have put us all on the day shift of endless pantysniffing idiocy, strangling the capacity to daydream and replacing it with various forms of porno. It involves the decline and fall of the war system – Hitler’s triumph, the system has been used for sixty years in the developed countries (as well as the U.S.S.R) as the economic stimulus of first resort, the prosperity of which served to buffer the population that gained from it from feeling the traditional reach of the wars that were directed against less fortunate populations.

The list of projects included in this article by James Galbraith, who has been reliably clearsighted about the problem of predator capitalism, is a great place to start putting faces on the -000000000000 numbers. Here’s a selection:

The industrial crisis requires immediate action if the auto companies are to survive. For such cases in the future (and there probably will be some) the relevant precedent is the Reconstruction Finance Corporation, headed during the New Deal by an intrepid businessman, Jesse Jones, who saved many important companies with a combination of loans and workout plans. A new RFC would enable the federal government to assist industries– perhaps not as large, not as essential, or as threatening as the collapse of the automobile industry would be — but on a somewhat systematic basis for the duration of the crisis.
As for helping the workers who are most severely affected by the industrial aspects of this crisis, Teresa Ghilarducci, professor of economics the New School, has proposed a simple and effective step that would further the cause of universal health care: reduce the age of Medicare eligibility to the age of 55. That would take much of the cash burden of healthcare costs off of enterprises, where they don’t belong anyway. And it would provide the opportunity for many workers who would like to retire but won’t do so because they can’t afford to lose their health insurance.
The housing crisis requires mortgage abatement, a resetting of the toxic adjustable rate mortgages already being initiated through Fannie Mae and Freddie Mac, and also a concerted effort out in the neighborhoods to restructure mortgages and to keep people in their homes. Here the historical model is the Home Owners Loan Corporation, which did this in the 1930’s — an enterprise that took about 20,000 people to manage 1 million mortgages. Essentially the same effect could be achieved today by buying back the mortgages through Fannie and Freddie and then turning them over to a restructuring facility – the present version is known as the H4H, or Hope for Homeowners program.
The point is that while you cannot effectively stabilize the price of housing, you can try to save the existing housing stock, stop the spread of blight, the abandonment of homes, and the homelessness that results from an unchecked wave of foreclosures. We will then have preserved those neighborhoods and those communities for a better day.

The great mistake of the boys of October was not just in approving a program that could easily be seen to be the biggest bank robbery in history, perpetrated by the CEOs of the financial system, but in not seeing the opportunity before them - given the numbers the government was willing to put up, we could easily have created a national bank, capitalized to the tune of some 700 billion dollars, that would invest in re-industrializing the U.S. True, the political fighting would be intense, as this kind of thing entails some shocking encroachments on U. of Chi school verities, and would rightly be seen by the upper 10 percentile as an erosion of their share of the national wealth. But the falling of the industrial base has since made it even more obvious that Citi was a bad investment for America. Galbraith is right to hark back to the Reconstruction Finance Corporation of the 30s, and if such an entity had been in place in December, we could have begun to coordinate a really comprehensive response to the twin problems of a worsening dependency on oil and an American auto industry in freefall. A number of intermediate steps might have to be taken to solve these problems that would involve creating public entities ex nihilo, and then spinning them off to private investors. For instance, it just might be the case that U.S. autos could double their mileage if, as in Europe, cheap diesel fuel were available. In Europe, such fuel has long been subject to a refining process such that it is a lower emission fuel than U.S. gasoline. There is no comparable refinery capacity in the U.S., so the U.S. government should simply build one. Such would by no means be the final step towards creating a much more sensible green vehicle –hydrogen offers one path, electric rechargeable batteries another. Now is the time to pour money into R and D on all innovative engine types, so that we have the prospect of replacing the entire fleet of cars in the U.S. with green ones that can hook up to be recharged anywhere in the U.S.

At the moment, the idea of the state interfering this massively in the economy still lacks popular support. However, it doesn’t lack economic rationality. The private sector has long misallocated capital to projects with short term horizons to please equity investors. This has been a big factor in the de-manufacturing of America – which is a story not only of manufacturing jobs lost, but of big manufacturing opportunities squandered. Investors are as aware as anyone that those companies that are innovative – that show the greatest productivity growth – aren’t as profitable as those companies that are quarter to quarter beauty pageant winners. There are exceptions, like the computer industry, but one notices the shortfall in say broadband too – as opposed to, say, the abundance of I-phones. One requires heavy capital investments that will result in a slow but steadily increasing yield, the other doesn’t.