what don't they understand?

As a photography student at New York University, I learned of the Farm Security Administration (FSA) and its cousin under FDR's New Deal, the Works Progress Administration (WPA). The FSA is famous for its small but highly influential photography program that ran from 1935-44 and realistically portrayed the challenges of rural poverty. It garnered support not only for its own projects but no doubt for other major New Deal projects such as the Tennessee Valley Authority which built dams to simultaneously provide jobs and electricity to the very poor in southeastern states. Many of the most famous Depression-era photographers were fostered by the FSA project, including Dorothea Lange, Gordon Parks, and Walker Evans. You may recall seeing some of their works:




Through the FSA, I learned of the Works Project Administration, established by President Roosevelt in 1935, which provided jobs and income to the unemployed during the Great Depression. The program built many public buildings, projects and roads and operated large arts, drama, media and literacy projects. It fed children and redistributed food, clothing and housing(2). On a personal note, nothing has ever tied together so neatly my love of photography and passion for progressive social policy as the FSA, which is why I share the connection and the images here.

But onto my point. Senator Obama has been criticized of late for being anything from cautious to absent (depending on your political leanings) in the current economic debate because he has yet to put forth a plan to deal with the crisis.

This is baffling to me, because he does have a plan and he's been talking about it since at least February 13 and most succinctly here. Five core underpinnings define that plan:

1. A National Infrastructure Reinvestment Bank to rebuild our crumbling roads and bridges and create jobs
2. Investments in new energy technology, in part to create jobs
3. Near-universal healthcare to alleviate expenses for families and businesses
4. Closing the gap between the middle and upper classes with a progressive tax policy to put purchasing power back in the hands of the middle class
5. Investments in education for future growth

The first two proposals create jobs through government works projects and incentives to the private sector. And jobs are what we need right now. Obama's healthcare plan would alleviate the crushing cost of healthcare for families and businesses. These costs prevent families from investing in education or debt reduction and diminish businesses' ability to invest in new technologies or compete globally. Closing the gap between rich and middle to lower income people through progressive tax policy puts real purchasing power back in the hands of the spending classes versus the savings class (see my last post), creating demand for goods and services, which in turn creates more jobs. And investments in education keep us competitive globally going forward.

This plan mirrors the economic policies of twentieth-century British economist John Maynard Keynes that FDR employed as he wrestled to get the US out of the Great Depression. The National Infrastructure Reinvestment Bank (NIRB) is a modern day WPA using government spending to provide much needed jobs and to complete public works which in turn yield improved infrastructure that businesses can use to transport goods more cheaply.

New jobs mean more money in the pockets of Americans, which stimulates demand, which leads to more business investment, which in turn creates more jobs, and so on. Keynes called this a multiplier effect. He argued that government spending should be used in times of recession in order to counteract an economy on a downward spiral and provide more long-term economic stability. In other words, when individuals and business stop spending for fear of a recession, which tends only to exacerbate or fulfill the expectation of that recession, then demand decreases and leads to less business investment, which leads to fewer jobs, then less consumer spending and so forth. It is at this point that only government can step in and reverse the economic freefall by creating a multiplier effect through investments until the economy is once again self-sustaining.

As for Obama's healthcare plan and tax policy which favor the middle and lower class, Keynes believed that fiscal policy should be directed towards the lower-income segment of the population, because that segment is more likely to spend the money, contributing to demand, than to save it(3). As I wrote in my last post, FDR's Federal Reserve Chief blamed much of the depression on a concentration of wealth in the upper class.

In March 2007, Senator Obama warned of the housing crisis and a year later in a speech in Manhattan he called for investment banks, mortgage brokers and hedge funds to be regulated much as commercial banks are, the streamlining of overlapping regulatory agencies, and the creation of a commission to monitor threats to the financial system and report to the White House and Congress - six months and several bank failures before John McCain called for the same types of reform(4).

Jobs creation through public works and new energy investments, closing the gap between rich and poor through progressive tax policy and healthcare reform, tighter banking regulations, improved business environment through improved infrastructure and lower healthcare costs - in short, a plan that draws on what's gotten us out of tough economic times before... what don't the pundits understand?

Maybe they wanted Obama to say something new? But Senator Obama's economic plan has always addressed the current crisis, because unlike most pundits, he's seen it coming all along. Maybe they just need to catch up with him.


(1) http://en.wikipedia.org/wiki/Farm_Security_Administration
(2) http://en.wikipedia.org/wiki/Works_Progress_Administration
(3) http://en.wikipedia.org/wiki/Keynesian_economics
(4) http://dealbook.blogs.nytimes.com/2008/09/16/...