Economic Crisis Demands Big Ideas & Urgent Action

As Barack Obama prepares to become the nation's next president in January, the country he'll govern faces multiple economic crises, including the Wall Street financial meltdown, the subprime mortgage disaster, a growing recession with rising unemployment and the prospect that one or more major U.S. car companies could fail.

So far, the Treasury Department has allocated $158.56 billion to 30 banks as part of the $700 billion bailout program designed to boost the nation's financial and credit system. The original plan approved by Congress to fund the purchasers of so-called toxic mortgage assets, has been set aside. But there is growing pressure from lawmakers and the public to get more direct help to struggling homeowners who face foreclosure. The number of homeowners facing foreclosures across the country grew 25 percent between October 2007 and October 2008.

As Congress raps up their last session before newly-elected members take office in January, Democrats are proposing a $100 billion economic stimulus plan that would provide funds to rebuild the nation's infrastructure, assist state governments and allocate $25 billion in loans to the auto industry. Although General Motors has reported that it may run out of cash early next year, all three major U.S. automakers are in trouble. Together with their suppliers, they employ 2.5 million workers, nearly 2 percent of the nation's workforce.

Between The Lines' Scott Harris spoke with Thea Lee, AFL-CIO policy director, who talks about the nation's largest labor federations' priorities for addressing the U.S. financial crises.

THEA LEE: Well, it certainly is a daunting set of challenges that our incoming president will face. And, the top priority for us is certainly to get the economy back on track and it doesn't look like the Congress is going to be able to get too much done in the lame-duck session. And so that means in January of '09, it's going to be very urgent that the Congress and the president act together quickly to create some energy in this economy, create some jobs. And we're looking at a very substantial economic recovery package that we think needs to be done, on the order of $300-$400 billion. So it's really a large package that would include unemployment insurance, new spending for infrastructure and clean energy as well as aid to state and local governments. And those are all what we think the quickest way of getting the money back into the economy and getting some jobs created. And of course, the aid to the auto industry is crucial as well.

BETWEEN THE LINES: Now with tax revenue going down and the government in deeper and deeper deficit over many years with the Iraq war piling up lots of debt, should there be a concern about adding to that deficit? Spending billions or trillions of dollars more to invest in infrastructure? Do you think one offsets the other?

THEA LEE: Well, certainly we do need to think about the medium and the long term-- how we are going to close that budget deficit. I think in the short term, it should be a priority to get the economy going again. But we do need to figure out how we can bring revenues and expenditures closer together and that is something important, I think, President-elect Obama has talked about the need to pull back the Bush tax cuts for the very wealthy and that goes a certain distance. Then, also, of course, bringing the Iraq War to an end, eventually, that will bring some money home.

But I mean, I think one the distinctions we need to think about also is, thinking about the budget spending as the difference between consumption and investment. If we are investing in the future, we are rebuilding the economy to the point where we'll be more productive and people will be able to pay higher taxes in the future. If we just toss money away, if we give people tax cuts to go to mall and buy another DVD player, then we're not investing in the future productivity of the U.S. economy. So we do need to make a distinction between those two kinds of spending – consumption vs. investment.

BETWEEN THE LINES: One of the features of the U.S. economy over the last couple of decades, at least, is growing income inequality, stagnating wages, the inability of middle class families to pay for health care, to pay for college tuition, and some of the basics are going by the wayside. People of course had mortgaged their houses several times in order to get the money to do these things for their kids and themselves. But, when it comes to income inequality, Thea Lee, what kinds of issues and solutions are you thinking about at the AFL-CIO?

THEA LEE: Well that's an excellent question. I think you're getting right to the heart of the problem, which is one of the reasons we're in this economic mess right now, is that we've been trying to boost the economy -- a consumer-driven economy -- by busting unions and globalizing and driving wages down and inequality higher, and people don't have the money at the end of the day to go buy this stuff. And so people were making up for the fact that their wages and their income weren't really keeping up with inflation by spending more money through consumer debt, through their credit cards, or borrowing money on the value of their homes, and so debt was really substituting for wages and income over the last decade or so. And that was a dangerous place to be. So we do think that's really important that we redress the inequality of this economy.

The key thing for us is the Employee Free Choice Act, which is labor law reform, to make it easier for workers to join a union. And we think that will help rebalance bargaining power in the economy so that workers can bargain for their fair share of the wealth that they create. And that will help strengthen the middle class. And that in fact, is good for the economy at a moment like this. What we need to do is to strengthen people's purchasing power, to rebuild our middle class. And so, we think that the Employee Free Choice Act is actually very timely even as we are in a deep recession.

Call the AFL-CIO at 202) 637-5000 or visit their website at http://www.aflcio.org

Scott Harris is executive producer of Between The Lines, which can be heard on more than 45 radio stations and in RealAudio and MP3 on our website at http://www.btlonline.org. This interview excerpt was featured on the award-winning, syndicated weekly radio newsmagazine, Between The Lines for the week ending Nov. 28, 2008. This Between The Lines Q&A was compiled by Anna Manzo and Scott Harris.

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