Government spending is needed now

Published as an Op-Ed in the Daily Press


November 27, 2008

Spend, baby, spend! When the building is burning, put the fire out first. Worry about putting a sprinkler system in later. What we need right now is more government spending. In the right places.

Yes, the U.S. economy contracted by 0.3 percent in the third quarter, the weakest in seven years. Personal spending fell at 3.1 percent, the first time spending has contracted since the recession of 1991. The only good news? Economists expected worse.

"Increased government spending is just what the doctor ordered, and concerns about the budget deficit should be put on hold" according to Nobel Prize in economics winner Paul Krugman in a recent New York Times column. Yes, spend! Rescuing the banks is just the beginning: The nonfinancial economy is also in desperate need of help.

We can't allow retail sales or manufacturing to fall. The more we tighten our belts, the more we feed the frenzy and support the self- fulfilling prophecy: If things are bad, we don't spend money. Therefore, as we stop spending, we put people out of work. We cause businesses to close. Perhaps even our own employer. It's a vicious cycle.

Nationwide unemployment claims are at recession levels, already above 6 percent and moving toward 8 percent, which would make this the worst recession in 25 years. Thankfully, Hampton Roads is in much better shape than the national average, but …

The housing bubble has burst, and it's hard to see housing making a comeback any time soon. A cut in interest rates will do little more than provide a slight economic boost.

What we need is a rescue package from the federal government directed at us. Extended benefits to the unemployed, emergency aid to state and local governments (who are slashing budgets due to decreased tax revenues), restructured mortgages to help families keep their homes. Anything that can keep necessary public services AND jobs in place.

More importantly, this is the time to get serious about infrastructure spending. We all know it's needed, actually way past due. Long-term public works projects like bridge repairs and/or new construction, adding rail lines, etc. couldn't start soon enough. This isn't just an economic slump we're in. But, we can stave off a recession that could slip into a depression.

Think Franklin D. Roosevelt and the 1930s. We're in an economy more like that period in history than we care to think.

Do all of the same things over again! Why? Because they worked.

As Krugman tells us, the over- spending by government won't need to be sustained. The bailout may be considered by some to be "quasi- socialism" or "nationalism," but these are temporary measures and significantly less awful than allowing the U.S. economy to fail. And, the financial repercussions are global. The United States is just "too connected to fail." Today, Germany — the largest economy in Europe — is in recession, thanks to the United States.

Yes, there will be big federal deficits. But the responsible thing, right now, is to give the economy the help it needs. People are worried. I am worried. Consumer confidence is down. Building up our infrastructure builds a platform for us to compete globally, and we've already seen our global position slipping.

The formula is simple: Build infrastructure = jobs creation = business creation = increased standard of living.

Dickens is president and CEO of the Hampton Roads Partnership, a public-private organization convening regional leaders from government, business, education and the military.