With the inauguration behind him, President Obama’s agenda is set to move toward fulfilling its promise to revamp and revitalize the area that concerns Americans the most – the economy.
While the majority of House Democrats and the Senate support his proposed stimulus package, estimated to be more than $800 billion, discussion and debate still surround the plan and experts wonder if this package will be effective enough to help see us out of the recession.
UH economics professor Thomas DeGregori emphasizes the need for nationalization of our biggest and most prestigious banks in order to help solve this period of financial turbulence.
‘We need to nationalize any bank whose liabilities are greater than its assets,’ DeGregori said.
Instead of the government handing the bank a check, DeGregori said he wants to see more federal control of the bank itself.
‘You don’t pour money into it – you take it over,’ he said.
UH economics professor Dietrich Vollrath says that instead of a broad governmental take over of the US banking system, a method another country put in place to ensure bank-to-bank lending is preferable.
‘In Sweden, the government decided to guarantee the debts of every bank. This will increase lending between banks,’ he said.
This means that consumers will be able to receive more loans because banks won’t be afraid of collapse, Vollrath said.
The costliest part of Obama’s proposal is a $275 billion tax cut. As written, the plan awards $500 to individuals and $1000 to married couples who file jointly, similar to what the government did last year.
‘Because we have higher levels of unemployment this year as opposed to last year, I think more people will spend the money they get back,’ Vollrath said. ‘If you are concerned you might lose your job then you will probably save it, but if you are unemployed, then you don’t have anything else coming in.’
DeGregori emphasized the need for other proposals such as spending on infrastructure and investments in healthcare and education. As for U.S. investments for global competition in the workforce, DeGregori said we need to drastically improve our health care system and invest more in science and technology.
‘International competition means that our government needs a better healthcare system. We’re competing with countries that have a government health care system as opposed to firm health care,’ DeGregori said. ‘This means we lose out because firms will choose to go to another country because they don’t have to pay for health care.’
The U.S. needs to invest more in the sciences because other countries China and India are catching up the U.S. and we are losing our edge in developing new technology, DeGregori said.
Vollrath would like to see the money being spent to help us in the long term, but emphasizes the overall importance of immediate governmental action to pull the US out of recession.
‘There are lots of worthwhile investments and maybe this is the opportunity to make changes for the future,’ Vollrath said. ‘But that doesn’t matter for the short run. There’s not a financial crisis that has ended where everyone walked out of it thinking they got a fair deal.’
