Business, Finance & Economics

Opinion: President Obama's grand bargain


US President Barack Obama walks to the Oval Office upon returning to the White House.


Jewel Samad

BOSTON — New York Times columnist Thomas Friedman called on Sunday for the president and congressional leaders to work together to engineer a grand financial bargain designed to save America from a second Great Depression.

Brushing aside the increasing pessimism that has settled over this country like a dark cloud, Friedman made a brave and wise call to action.

Here is the core of Friedman’s proposal:

“If the President really wants to lead from the front, he should summon the Democratic and Republican leadership, along with all 12 members of the House-Senate deficit ‘supercommittee,’ to join him at Camp David and tell the world that they are not coming back without a Grand Bargain — one that offers some short-term stimulus, a credible long-term debt reduction plan with entitlement cuts and tax reform that increases revenues.”

Yes, it’s really that simple.

And the country’s leaders need to act now, not in 3 months or 12 months, to get some of our 25 million unemployed and under-employed Americans back to work  — and, yes, that does mean stimulating the economy through additional government spending.

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We also need to cut longer term spending wherever possible in order to reduce the nation’s enormous indebtedness — and that means cuts in retirement benefits, health care expenditures and defense.

Finally, we need to increase tax revenues to replenish the trillions of dollars lost in the Bush tax cuts of 2001 and 2003.

What’s really at stake in 2011 is not which of our two major political parties is up or down. It’s not about the re-election prospects of this or that senator or congressman. Nor is it even about who the next president of the United States will be.

No, what’s really at stake this September 2011 is nothing less than the future of America; whether we are going to condemn ourselves and our children to one, or more than one, lost decades.

We also have a crisis of confidence in America, a crisis of confidence in our political establishment. We do not have a deficit of ideas about how to fix our problems. We have a deficit of courage to implement the sane, reasonable, and obvious solutions that have been put forward by thoughtful people of all political persuasions.

Friedman brings up the unsettling thought of a new great depression and warned President Obama, Speaker Boehner and other leaders to beware of becoming the new Herbert Hoover. In case you don’t remember, Hoover was president when the Great Depression began with the stock market crash on Black Friday October 29, 1929 — 82 years ago next month.

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The Great Depression was the most severe economic decline of the 20th century and it swept the entire industrialized world. In the United States, unemployment reached a peak of 25 percent in the early 1930s and remained as high as 15 percent until 1940, just before American entry into World War II.

World trade dropped by more than 50 percent, crop prices crumbled, thousands of banks failed, industrial production plummeted 46 percent. Misery stalked the land and although the economy did begin to recover after 1933, the Depression did not really end until WW II when millions of Americans went off to fight in North Africa, Europe, and Asia, and millions more went back to work to produce the vast stream of goods needed to fight Germany and Japan.

The causes of the Great Depression continue to be a subject for intense debate. But without question they included a sudden contraction in consumption, declines in business investment, major declines in global stock markets, bank failures, a shrinking of the money supply — and a general lack of confidence in the future.

Our situation today is quite different in many respects but there are some alarming similarities. Most importantly, Americans have lost confidence that their leaders in Washington have the will or the desire to work together to forge a solution, whether or not you call it a Grand Bargain.

As Friedman writes, “the toxic paralysis in Washington is, in and of itself, slowing growth. It is keeping a black cloud over the center of the country and creating a sour mood wherein people just want to hold on to what they have.”

Inaction in the face of this profoundly grave national crisis would be forever inexcusable and the judgment of both history and the present will be unforgiving.

Phil Balboni is Chief Executive Officer and Co-Founder of GlobalPost and writes a regular column on national and international affairs.

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