A New Deal for the 21st Century

In the past two weeks the Fed has committed hundreds of billions of dollars to bail out Fannie Mae, Freddie Mac, and AIG, following up the March bailout of Bear Stearns. This evening, Bloomberg reported that "Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke will seek support from Congress for an agency to buy bad debt to address the deepening credit crisis," a move which could further increase taxpayer commitments to business bailouts. The rapidly developing situation carries a serious risk that the future of the U.S. economy will be mortaged to pay off the costs of the spreading financial crisis.

Robert Kuttner, liberal economist and editor of The American Prospect, sees the crisis as a historic turning point and calls for Obama to project a transformational message. On WBUR's On Point yesterday when a caller proposed "a New Deal" as a slogan, Kutter took it up, said FDR was his hero, and used it as a theme for the rest of the show. I would like to take up the slogan of a New Deal and spell out what it would mean.

Kuttner bemoaned Obama's caution, but by this afternoon his Huffington Post entry saw improvement, and approvingly quoted Obama's new campaign rhetoric on the economy. However, a campaign ad on the economy distributed by the Obama campaign today contains only a repetition of the modest proposals he made in his convention speech. Obama continues to avoid proposing anything that will cost real money.

Here are some elements of a New Deal to address the financial crisis:

• Suspension of foreclosures and restructuring of mortage debt to allow homeowners to stay in their homes on reasonable terms
• Comprehensive regulation of hedge funds, private equity, investment banks, and derivatives, so that they are fully transparent and leverage is strictly controlled.
• No more bailouts of Wall Street using taxpayer money without full compensation to the Treasury
• Businesses taken over by the government as a result of the financial crisis will remain in the public sector and be operated in the public interest, not returned to the private sector.
  

In addition, the New Deal must propose how to reconstruct the American economy in the people's interest.

• Enact a universal health care program based on a single payer model.
  
• Improve and expand K-12 education and support students' college education. Free tuition at state universities.
• Fund science and technology research to develop green technologies and improve health, not to build weapons.
  
• Fix America's infrastructure, creating hundreds of thousands of construction jobs and giving priority to green transportation. Instead of hiring construction monopolies like Bechtel, these projects should be directly managed by public sector entities like state Departments of Public Works and the like.
• Develop green energy through construction of massive wind, solar, cellulosic biomass, and tidal projects, and transmission capacity, by public entities, not subsidies to monopoly corporations. No bailouts for Detroit, but re-employ workers on new projects.
  
• No to balanced budgets. Deficit spending to reverse the economic downturn.