President Barack Obama has only one option as he ponders a world economy teetering on the edge: He needs to go big, go long, and go global. Obama should not be constrained by what the Tea Party might allow subservient Republican leaders in Congress to do. He should state plainly, eloquently, and in detail what he thinks needs to be happen. Neither history nor the voters will be kind to him if he lets caution and political calculation get in the way.
Going big means immediate action to boost the economy, even though this will increase the short-term deficit. His proposals to continue the payroll tax cut, extend unemployment insurance, and enact patent reform are good, but not enough.
The federal government needs to come to the aid of state and local governments again; the budget cuts they are being forced to make are precisely what the economy does not need now. We must find ways of boosting spending as quickly as possible on roads, bridges, transit, and other building projects, including a new program to rehabilitate the nation’s dilapidated schools. And the administration needs to do far more to resolve the mortgage mess, which is holding back consumers.
Over the last week, big investors and business leaders have largely stopped talking about budget balancing and started issuing panicky calls for the world's governments to step up to the challenge of avoiding a second recession by spending more money. They know that austerity is the wrong medicine right now.
Note well: It's not only liberals in the United States and social democrats in Europe who are pushing to stimulate the economy. Calls to do so are also coming from the heart of the capitalist system.
At the same time, Obama should put forward a plan of his own to close the long-term deficit. He should not be hemmed in by his negotiations with congressional Republicans to get the debt ceiling raised. They don't hold the nation's credit hostage anymore. He should lay out exactly what he would do and abandon his practice of making preemptive concessions to his opponents.
That means Obama should not be shy about urging eventual tax increases, particularly on the wealthy. And let's be clear: these would not be immediate tax hikes; they'd kick in a year or two from now. Any plausible plan should include at least $2 trillion to $2.5 trillion in new revenues over a decade. Obama, who loves to quote financier Warren Buffett, should follow Buffett's lead on this. Writing in the New York Times last week, Buffet proposed that "for those making more than $1 million -- there were 236,883 such households in 2009 -- I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more -- there were 8,274 in 2009 -- I would suggest an additional increase in rate."
"My friends and I," he added, "have been coddled long enough by a billionaire-friendly Congress." Buffett, bless him, puts the lie to the foolish idea that we need fewer tax rates, which pamper the very wealthy by taxing them at the same rates as the upper middle class. We need additional tax rates for the truly rich.
A carbon tax, partly offset by tax cuts or rebates for middle-income and poorer taxpayers, could provide additional revenue. And we need to do still more to contain health-care costs without hurting those who can't afford insurance, and without voucherizing Medicare.
But our problems are not all made-in-America. This is a global problem requiring a global solution. Europe’s debt mess and its weird political structure -- a common currency without an effective common government -- helped trigger the near-panic we're in. Even China's growth rate shows signs of slowing.
World leaders came together in 2009 and stopped the slide toward depression. Obama should take the lead in bringing them together to act in concert again.
Ah, but won't congressional Republicans block as much of this program as they can? That's the wrong question. The point is to insist on a rational plan and to challenge the political system to act rationally. Most economists and business people not blinded by ideology believe we need short-term stimulus and long-term fiscal balance. Obama should explain what needs to be done and then fight for it. It's the only way it will have any chance of happening.
E. J. Dionne Jr. is a syndicated columnist, professor of government at Georgetown University, and a senior fellow at the Brookings Institution. His most recent book is Our Divided Political Heart: The Battle for the American Idea in an Age of Discontent (Bloomsbury Press).