Recent economic data confirm what every American already knows: The economic crisis that began in the housing and financial markets has spread to the whole economy. Hardworking Americans lost more than 1.5 million jobs over the last three months of 2008 alone.
Since the recession began more than a year ago, we have lost 2.6 million jobs, and another 3.4 million workers have been forced to move from full-time to part-time work. Topping off this bad news, we learned last week that real GDP, an indicator of overall production, fell at an annual rate of 3.8 percent in the last three months of 2008 — the worst drop since the severe recession of 1982.
We cannot allow these conditions to continue. To do so would expose millions of Americans to unemployment, foreclosure and bankruptcy, and would further weaken our financial system. The downward spiral that could result from a catastrophic financial failure is something that our parents and grandparents experienced in the 1930s — and something we can and must use every available tool to prevent.
That’s why President Barack Obama has been working with Congress to pass the American Recovery and Reinvestment Plan to provide more than $800 billion of fiscal stimulus to put our economy back on track. We also need a long-term solution to strengthen our financial institutions and improve financial market regulations, but jumpstarting the economy and putting people back to work has to be job one.
The recovery plan is bold and large, because big problems require big solutions. But it is also well balanced, with each piece of the bill serving a crucial purpose. It will cut taxes for middle-class families by $1,000 per year and extend unemployment insurance to boost spending quickly. The business-investment incentives should encourage firms to resume investment as soon as possible. And relief to the states will help prevent critical layoffs of teachers, nurses and first responders, and by doing so spur state economic activity.
The plan also includes bold spending initiatives to repair crumbling roads and bridges, spread broadband to rural communities and improve water treatment and provision. It allocates funds to weatherize homes and buildings, spur alternative energy production, and help bring our doctors’ offices and hospitals into the computer age. And because the health of our economy will depend on the skills and ingenuity of the next generation, the plan provides funds for renovating and modernizing 10,000 schools, bringing computers to classrooms, and promoting training and education.
Although they may take a little longer to start operating, these bold spending initiatives will ultimately create even more jobs than the other measures. And they will provide extended relief at a time when the forces slowing the economy are likely to be with us for several years.
As the president has often said, conditions will surely get worse before they get better. But they will get better. The plan will save or create up to 4 million jobs by the end of 2010.
The program will not just deal with the immediate crisis, but will help the economy grow faster long after the recession and recovery are over. Repairing our infrastructure will help American businesses be more competitive and will make American commuters safer. The energy investments will put us on a path to a cleaner environment and energy independence, while the health information technology investments will lower medical costs and save lives by preventing mistakes.
The recovery plan has been designed with care, but we will have to monitor it closely. The website, , will provide the American people with the ability to watch how their money is being spent and what is being accomplished.
This is indeed a bold plan. Times like these demand nothing less.
Christina D. Romer is chair of the President’s Council of Economic Advisers.
