An economic prescription

Our view: America should invest in a brighter future to help meet the challenges of a worsening economy and stimulate a recovery

November 21, 2008

America is in urgent need of economic reassurance.

The outlook continued to darken yesterday, as the auto industry's Big Three were warned by congressional Democrats that they faced a tough road in pursuit of aid, the Federal Reserve predicted a deeper recession and higher unemployment in 2009 and stock values plummeted. Statistics showed that businesses had cut prices at a record rate last month, builders started fewer homes than any time on record and applications for jobless benefits reached new highs.

While consumers are reluctant to spend the dollars they have, the government should go on a spending spree - rebuilding America's crumbling infrastructure, creating hundreds of thousands of jobs in new environmentally friendly businesses, reforming a crumbling health care system and helping revitalize the nation's housing industry. That's the road to recovery. The costs of pursuing all of these goals at once will be in the trillions, but our leaders should not hesitate. The danger is not spending too much but spending too little to promote an economic revival.

Economists on the right and left agree that deflation, a steady decline in prices, is the most dangerous potential economic threat we now face. It took the start of World War II to end the persistent deflation that impeded America's slow recovery from the Great Depression in the 1930s. While inflation can be easily assaulted by raising interest rates, deflation is tougher to combat. Significant government spending on projects will create jobs, but as important is to spend the money well. That brings us to yesterday's appropriate demands by congressional leaders of General Motors, Ford and Chrysler. They must produce a recovery plan by Dec. 2 that proves accountability and the prospect of viability before a request for $25 billion in short-term financial aid is considered. In short: No plan, no money. The auto executives offered lawmakers little evidence this week that they had a strategy to carry them through tough economic times and a brighter future. Here's one suggestion: Sell the corporate jets on eBay.

On a more hopeful front, President Bush appears to be ready to sign legislation to extend unemployment benefits from six to 12 months, a necessary move with unemployment expected to rise above 8 percent next year. President-elect Barack Obama should be prepared to provide additional assistance for a growing army of unemployed. He could start with a job training program to build a greener, more energy-efficient America.

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