07.20.10

Reboot America—Manifesto Support Surges

As the Senate appears ready to finally pass an extension of unemployment benefits, two dozen more economists, including two Nobel Prize winners, have joined the call for action now, swelling the total of economic thought leaders to 40.

As the Senate appears ready to finally pass an extension of unemployment benefits, two dozen more economists, including two Nobel Prize winners, have joined the call for action now. UPDATE: Read the complete list of over 100 manifesto backers.

Yesterday morning, 16 notable economists, historians and thought leaders, including Joseph Stiglitz, Alan Blinder, Robert Reich, Richard Parker, Derek Shearer, Laura Tyson, and Sir Harold Evans issued a manifesto calling for more government stimulus and tax credits to save the economy and put America back to work.

By yesterday afternoon, two dozen more leading economists, including Nobel winners Eric Maskin and Daniel McFadden, had signed on, bringing the total to 40. Several of them went further, appending statements about why they thought this was so crucial to our collective future.

Everett Ehrlich, former Undersecretary of Commerce and Chief Economist of Unisys Corporation:

Economic policy under the Obama Administration has succeeded in averting the most stunning economic implosion since the Great Depression. And it almost succeeded in setting a sustained recovery in motion. But just at the point when self-sustaining growth was about to take hold, the world was buffeted by a new crisis in the Eurozone, which confronted the economy with new uncertainty and stifled growth. Economists are right to worry about the growth in federal debt. Hopefully, their rectitude will persist into 2012 and 2013, when deficit reduction will be of growing importance. But, for the moment, the economy’s primary need is additional stimulus, not fiscal contraction. The examples of overstimulus during economic crises are few if any. Moreover, the primary danger of overstimulus, inflation, is far from a realistic concern – the real threat is deflation, which favors deferring demand and investment. And if the overhang of federal debt were an active (as opposed to prospective) concern, the interest rate on 10 year government bonds would be substantially in excess of the current and paltry 2.6 percent. The economy is primed for growth. Banks hold over a trillion in nonborrowed reserves. Corporations have accumulated $1.8 trillion in cash. But a spark is needed to turn this kindling into a fire. Only government can do this – stimulus will never be more appropriate nor prospectively productive than it is now. We should extend employer Social Security tax reductions, provide more aid to the states and localities, commit to a long-term program of public infrastructure investment, and use the Fed’s balance sheet to buy small business loans from banks if they will absorb the first 10 – 15 percent of possible loss.

Richard MacMinn, Edmondson-Miller Chair, Illinois State University:

If we have learned anything from Keynes then it is that it takes a massive investment to restart a floundering economy. Given the aging infrastructure and the underinvestment in education as well as so many other fields including energy, the potential for large returns from those investments and to the economy seems clear. It is also clear that inaction will yield large losses in economic activity. This is not the time to let fear of a deficit create inaction. Rather the opposite is called for.

David I. Levine, Trefethen Professor, Haas School of Business, University of California, Berkeley:

We all agree the United States has a serious deficit problem over the next generation. This medium-term problem is largely due to the rising expected cost of paying for health care for the elderly. It is crucial we learn how to deliver quality care without ever rising prices. At the same time, the serious problem of exploding health-care costs is no excuse to ignore the urgent short-run need to get Americans back to work.

We know how to fight unemployment: Support the purchasing power of the unemployed with extended unemployment insurance, give states more assistance so cities and states do not keep laying off teachers and firefighters, and so forth. My description of the root cause of our long-term problem suggests one particularly useful way to fight recession: Research into how to provide high quality health care at lower cost is a great investment in creating in jobs today, ensuring fiscal soundness for the next generation, and improving the lives of Americans.

The Original Reboot America Manifesto Victor D. Lippit, Professor of Economics, University of California, Riverside:

There are only four sources of aggregate demand in the economy: consumption, private investment, government spending, and net exports. With high levels of unemployment characterizing the U.S. economy and household and retirement savings devastated by the fall in the stock market since 2008, the fall in house prices on which many households relied as their "store of savings," and the sudden realization on the part of many that household debt must be repaid and savings levels rise, the U.S. is in for an extended period of subpar consumption increases. Business investment to produce consumer goods and services will, therefore, remain modest as well. And weak economies in Europe and Japan limit export demand.

For some time, then, government spending will be needed to provide stimulus to the economy and aid to the unemployed, who can scarcely be faulted when jobs are unavailable. Over the medium and long term, government deficits must be addressed, but the time to do that is after a more substantive recovery has taken place and jobs are again available. Those refusing to support an extension of unemployment insurance at this time without government cutbacks elsewhere betray a deep ignorance of the fundamentals of economics, creating serious injustice to those who have lost their jobs and deep harm to the economy as well.

Michael Nuwer, Professor of Economics,
 SUNY Potsdam:

In early 2009, when the economic stimulus was being debated, many economists expected that the spending amounts under consideration were not enough to lift the economy out of the Great Recession. And sure enough, they were right. The unemployment rate remains unacceptably high, state and local government budgets are in crisis, and there are no signs of improvement in the economy. Now is the time for Congress to get the economy back on track and the American people back to work.

The July 19, 2010 manifesto reads:

GET AMERICA BACK TO WORK

Fourteen million unemployed represents a gigantic waste of human capital, an irrecoverable loss of wealth and spending power, and an affront to the ideals of America. Some 6.8 million have been out of work for 27 weeks or more. Members of Congress went home to celebrate July 4 having failed to extend unemployment benefits.

We recognize the necessity of a program to cut the mid- and long-term federal deficit but the imperative requirement now, and the surest course to balance the budget over time, is to restore a full measure of economic activity. As in the 1930s, the economy is suffering a sharp decline in aggregate demand and loss of business confidence. Long experience shows that monetary policy may not be enough, particularly in deep slumps, as Keynes noted.

The urgent need is for government to replace the lost purchasing power of the unemployed and their families and to employ other tax-cut and spending programs to boost demand. Making deficit reduction the first target, without addressing the chronic underlying deficiency of demand, is exactly the error of the 1930s. It will prolong the great recession, harm the social cohesion of the country, and continue inflicting unnecessary hardship on millions of Americans.

The original signatories were: Alan Blinder, Daniel Kevles, David Reynolds, Derek Shearer, Jim Hoge, John Cassidy, Joseph Stiglitz, Laura Tyson, Lizabeth Cohen, Harold Evans, Nancy Folbre, Richard Parker, Robert Reich, Sean Wilentz, Sidney Blumenthal, Simon Schama.

Yesterday’s two dozen additions were:

- Marshall Auerback
Senior fellow 
at the Roosevelt Institute

- Clair Brown 

Professor of economics, director of 
Center for Work, Technology, and Society, 
University of California, Berkeley

- Jim Campen
Professor of economics, Emeritus, University of Massachusetts-Boston

- Heidi Shierholz
Economist at Economic Policy Institute

- Michael D. Intriligator
Professor of economics, political science, and public policy, UCLA senior fellow, The Milken Institute, University of Western Sydney

- David I. Levine

Eugene E. and Catherine M. Trefethen Professor, Haas School of Business, University of California, Berkeley

- Victor D. Lippit
Professor of economics, University of California, Riverside

- Robert Lynch

Professor of economics, 
Washington College
, Chestertown, Maryland

- Arthur MacEwan

Professor emeritus, Department of Economics
, senior fellow at the Center for Social Policy, University of Massachusetts-Boston

- Richard MacMinn

Edmondson-Miller Chair
, College of Business at the 
Illinois State University

- Eric Maskin
Nobel laureate in Economics, A.O. Hirschman Professor of Social Science, Institute for Advanced Study, Princeton

- Daniel McFadden

Recipient of the 2000 Nobel Prize for Economics and 1975 John Bates Clark Award, University of California, 
Berkeley

- Walter W. McMahon
Professor of Economics (Emeritus), University of Illinois

- Peter B. Meyer

Professor emeritus of urban policy and economics
, director emeritus of the Center for Environmental Policy and Management, University of Louisville

- Michael Nuwer

Professor of economics,
 SUNY Potsdam

- Erik Olsen

Assistant professor
, Department of Economics, 
University of Missouri

- Dimitri Papadimitriou

President, The Levy Economics Institute

- Bruce Pietrykowski

Professor of economics, University of Michigan-Dearborn

- Robert Pollin

Professor of economics
 and co-director of the Political Economy Research Institute at the University of Massachusetts-Amherst

- Malcolm B. Robinson
Professor of economics,
 Thomas More College

- Mary Huff Stevenson

Professor of economics, 
University of Massachusetts-Boston

- Peter Skott

Professor, University of Massachusetts-Amherst

- Mark Zandi
Chief economist and co-founder, 
Moody’s Economy.com