May 22, 2024

Next: Stimulus Is Just The Start, Galbraith Argues, To Federal Leadership in Clean Energy Development

In mid-January, as the House of Representatives and the incoming Obama administration readied the nearly $800 billion economic stimulus bill, James K. Galbraith joined a 10-member delegation from the Apollo Alliance in Washington to make the case for a big investment in clean energy and green-collar jobs.

On Tuesday, February 17, 2009, President Barack Obama signed the American Recovery and Reinvestment Act, which contains $11 billion to build a state-of-the art national energy grid, $6 billion in loan guarantees for renewable energy, $2 billion for advanced battery manufacturing, $5 billion for home weatherization, $3.2 billion for state energy efficiency and clean energy grants, $17.7 billion to modernize and expand rail transit, and billions more for other clean energy programs.

Galbraith, a noted economist and professor of government at the University of Texas, commends the Congress and the president for enacting the largest spending bill in American history. But he said in an interview that both the $787 billion stimulus, and the $100 billion devoted to clean energy investments were just steps one and two in a long journey the federal government has started to lead the nation back to economic stability.

How Long?
His research and experience, Galbraith said, indicates that the country is in for a long ordeal. Much more government intervention is needed, and additional significant investment in the clean energy sector makes a lot of sense. “The policy needs to be bigger and we should be prepared for the crisis to go on longer,” he said. “That point is important for the Apollo Alliance. It is legitimate and important to have strong elements in the program that can spend out over a period, and on which you can build.”

“The reason why you want a program which builds for the long-term on energy and the environmental front is because that is the direction that the public and private economies want to take,” said Galbraith. “You can build an industrial sector on clean energy for the U.S. economy and it can serve as an export sector.”

Before last August when he published “The Predator State,” a penetrating and prescient attack on how conservative ideologues used free market dogma to enable the wealthy “to feast on decaying systems built for the middle class,” Galbraith had earned attention in academic and media circles as one of America’s leading economists.

A noted author and regular contributor to Mother Jones magazine and The Nation, Galbraith joined a dozen or so prominent economists, among them Nobel Prize-winning New York Times columnist Paul Krugman, who consistently attacked anti-government ideology as more than misguided, but as reckless and dangerous.

Galbraith now makes his home in Austin, where’s he’s taught since 1985 and where he is well-known as the brilliant son of the Harvard economist John Kenneth Galbraith.

Bill Now Due, Clean Energy Is One Critical Answer
Then in September the consequences of the “predator state” came due. On September 4, for the first time in history, the National Highway Trust Fund, which finances highway construction, was empty, the result of Americans driving billions of fewer miles each month and paying less gas taxes that fill the fund. Two days later, Fannie Mae and Freddie Mac, the largest holder of mortgages for suburban home and office development, announced they were insolvent. On September 17, Lehman Brothers, which held nearly a trillion dollars in assets connected to bundling bad mortgages, collapsed. Two days later the government poured $85 billion into AIG, the world’s largest insurer. Two days after that, on September 19, the Bush White House proposed a $700 billion financial rescue plan.

Galbraith, whose timely book was selling well, suddenly was called to action. Moreover, a career of making the case for a strong federal role in stabilizing the economy also found him well-prepared for the blizzard of invitations that came his way to speak, give media interviews, and consult with Congressional leaders.

At least three times since September, including the tour with the Apollo delegation in January, Galbraith has personally been called upon to provide his recommendations to top government leaders regarding  how to rebuild the economy. His message: more investment is needed, including for clean energy; much more over a longer period of time than most people in government are ready to acknowledge.

Advice Sought By Nation’s Leaders
Two weeks after the election, as the magnitude of the stimulus was becoming much clearer, Galbraith made his case in a speech to the Campaign For America’s Future , which is led by Bob Borosage, a co-founder and Apollo Alliance board member.

“While Mr. Obama got more or less what he asked for, he almost certainly didn’t ask for enough,” Galbraith said. “We’re probably facing the worst slump since the Great Depression. The Congressional Budget Office, not usually given to hyperbole, predicts that over the next three years there will be a $2.9 trillion gap between what the economy could produce and what it will actually produce. And $800 billion, while it sounds like a lot of money, isn’t nearly enough to bridge that chasm.”

“We are left with a need for public action on a sustained as well as substantial and speedy basis,” he added. “That means public investment on a large scale. Rebuilding America. And as we do it, partly because we need to do so as a matter of economic necessity and partly because it’s the right thing to do for the survival of the planet, we have to restructure the way we deal with energy, the way we produce it, the way we consume it. The design of our systems to life so as to place the country on a sustainable financial basis and the world on a sustainable ecological basis.”

There is a powerful precedent, Galbraith argues, for big and sustained government intervention and investment in new industry.  He cites a recent analysis of the New Deal by Marshall Auerback, a Denver-based financial manager, who found that the during the Depression the government hired about 60 per cent of the unemployed in public works and conservation projects.

Precedent Nearly 80 Years Ago
“New Deal workers built or renovated 2,500 hospitals, 45,000 schools, 13,000 parks and playgrounds, 7,800 bridges, 700,000 miles of roads, and a thousand airfields,” wrote Auerback. “The Roosevelt administration reduced unemployment from 33 per cent in 1933 to 13 per cent in 1936, to less than 10 per cent at the end of 1940, to less than 1 per cent a year later when the U.S. was plunged into the Second World War.”

Galbraith is convinced that government intervention on a similar scale as the New Deal will produce consistent results in this period of economic turmoil. And he said pursuing the transformation from fossil fuel to clean energy is essential.  “There is an enormous backlog of public work that needs to be done and enormous prospects for energy security and climate change,” he said. “This is the moment, if we are ever going to do this, to put such a program into place.”

— Keith Schneider

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