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A Bold Stimulus

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By JON S. CORZINE

Special to The Washington Post

Published: December 27, 2008

When New York Gov. Franklin Delano Roosevelt delivered a commencement address at Oglethorpe University in May 1932, the economic crisis that had befallen the United States three years earlier had already morphed into the Great Depression: One in four Americans was out of work, banks were failing at a rate of 10 per week and the gross national product was at half its pre-crash level.

FDR called on the federal government to "correct, by drastic means if necessary, the faults in our economic system." The times called for "bold, persistent experimentation," he declared.

Strictly by the numbers, today's economic crisis is, fortunately, not as severe as the Great Depression. But that's cold comfort to the millions of Americans who have lost their jobs, homes, health care and retirement savings. We are living through the toughest times since the 1930s. People reasonably expect government to act boldly.

First, the states, local governments and the federal government must be full partners in the recovery process. Working with counties and municipalities, states have mechanisms in place to pump stimulus funds into the economy quickly and responsibly. But we don't have the federal government's financial capacity or borrowing authority. Any recovery effort should reflect our mutual strengths.

Second, the package should be large. Some estimates put the cost of the economic crisis next year at $700 billion, or about 4 percent of gross domestic product. To offset this, the cumulative value of the stimulus plan should be $1 trillion over two years. This is a large sum, but if the spending is executed effectively, it should be a significant investment in our country's physical and human resources that will pay long-term dividends while also creating and saving jobs.

The stimulus should be roughly divided into five categories: infrastructure, countercyclical programs, housing, education block grants and middle-class tax cuts.

For every billion dollars we spend on infrastructure, we can put upwards of 20,000 people back to work. Unless we also help states shore up their safety-net social programs, the economic impact of the federal stimulus will be negated.

Most states are constitutionally required to balance their budgets. Given the sharp decline in state revenue, we are not able to support, let alone increase, spending to meet growing demands for basic needs such as unemployment insurance, food assistance programs and health care - including mental-health services to those with developmental disabilities.

Unless we strike at the cause of the meltdown - the collapse of the housing market - our economy will continue spiraling downward. The federal recovery package should include funding for state housing mortgage authorities and for programs that help people restructure their mortgages, stay in their homes and find new shelter if evicted.

If we are to pursue relief and recovery, it's essential that we continue developing a workforce that is able to meet the demands of the 21st-century economy. At least $250 billion in preschool-through-college education block grants would help states meet their school budget obligations; more important, such grants would enable greater strides toward universal early childhood education and fully funded programs for special-needs students - improving the situation today and laying the foundation for a better tomorrow.

A sizable middle-class tax cut is key. Over the past decade, median family income has failed to keep pace with inflation, especially given the sharply rising costs of health care and education. Relief for the middle class would help our families weather the storm and also boost economic demand.

We must be bold - $1 trillion bold. America has abundant resources and a generous, ambitious spirit. If we work together, we'll emerge stronger and more prosperous than ever.

Jon Corzine, a Democrat, is governor of New Jersey.

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