This is an odd moment for optimism: we’re facing the likelihood of a serious recession, and the global equity markets have already lost trillions. Yet I believe there are several silver linings beneath the current crisis.
Here are my reasons why America will ultimately be much better off:
1. Obama’s victory is almost assured, along with larger Democratic majorities in both the House and the Senate.
A focus on the economy usually favors the Democratic candidate. This time around, John McCain’s bumbling and craven response to the financial meltdown seriously eroded what miniscule credibility he had on economic matters.
The most important thing needed to get America back on track is an Obama Administration with solid Congressional backing. It’s the only way that major institutional reform can be undertaken; any legislation drafted by a McCain Administration would take us in the wrong direction. Want proof? Just look at the dictatorial-style powers Paulson asked for last week.
With Obama at the helm and the adults back in charge, legislation will begin with the public interest front and center. Thanks to the Democratic left, the legislation might get even better in the Congressional negotiations.
2. Progressive legislation may be easier to pass given the Wall Street bailout
In the first debate, Jim Lehrer tried to get Obama to state which programs he might need to cut because of the worsening budget situation. I think this is exactly wrong. By bailing out the fat cats who got us into this mess, it will be easier for Democrats to spend on social programs and give tax cuts to the middle and lower classes. The Congressional refrain in 2009 is likely to be: “If we had enough to help investment bankers, we have enough for health care, universal preschool, college tuition relief, etc.”
In addition, I think it will be easier than expected to let Bush’s tax cuts for the top 5% expire as scheduled. There is widespread outrage that those who have done the best under Bush are being bailed out. This added revenue, plus the savings from ending the Iraq War, should allow the Democrats to fund significant new programs.
3. The bailout is not likely to cost $700 billion
While the final outlay may total $700 billion, proper safeguards and oversight should enable the government (and taxpayers) to get back most if not all of the money. This will only reinforce Point No. 2, since the public’s perception will be that $700 billion went to the fat cats and it’s time for Main Street to get its share.
4. New investments and real regulation will strengthen America
For years, America has been on an unsustainable path and living beyond its means. Our infrastructure has aged; we trail much of the world in broadband access and other requisites of today’s digital age. We need a serious push to upgrade our infrastructure, to develop new industries in green technology and biotech, and to modernize our financial system. We need all of these things to maintain our competitive edge in the global economy of the 21st century.
This will take some time. Obama plans $150 billion of federal spending over 10 years on alternative energy, and he will immediately open up federal funding for stem-cell research. I am confident he will also put our best minds to work on updating our financial regulatory apparatus, as he called for back in March. Wall Street may not see the growth in asset values that we have experienced in other periods; at the same time, a steady growth rate of 3-5% without as much volatility would be a great development. It is certainly within reach.
In summary, while things may get worse before they get better (which is quite scary), I think America’s best days lie ahead. The country is on the verge of self-correcting, even if the process is going to be painful.
P.S. Once we send Palin back to Alaska, we can all laugh (or shudder) at the fact that someone with so little knowledge about virtually anything (and seemingly proud of her ignorance) ever got anywhere near the vice-presidency. She didn’t deserve to be on the same stage with Joe Biden.
Jason Scorse