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October 19, 2009Dear President Obama,In light of the recent dismal unemployment numbers, I am writing to you again tourge you and your colleagues in the Senate and House of Representatives to adopt astronger fiscal stimulus and cease subsidies to giant poorly run banks.There are a range of specific measures that the federal government can undertaketo stimulate the economy. These include:1. Support for state and local governments to avoid layoffs and cuts in basicservices.2. Extension of unemployment and other emergency benefits.3. Improvements and upgrades of federal, state, and local roads, bridges, andother infrastructure. Where appropriate new roads, bridges, train lines, and soforth can be built and will provide lasting value to the nation.4. Upgrades of existing federal, state, and local facilities and resources suchas purchase of new energy efficient vehicles, and so forth.5. The Defense Department has a perpetual wish list of new equipment andfacilities.6. Essentially all research agencies such as DOE, NASA, NSF, and many others fundonly a small fraction of grant and contract applications. The federal governmentcan easily both increase the size and number of research grants and contracts.Many other options can be suggested by competent experts. As I have writtenbefore, I urge you and your colleagues to seek counsel from economists and otherexperts such as Dean Baker, Nouriel Roubini, Robert Shiller, Paul Krugman, andothers who anticipated the current crisis and are generally not affiliated withthe financial industry.Now is not the time to be concerned about budget deficits. In addition, most ofthese measures can be funded by ending the explicit and implicit subsidies fromthe Treasury Department and the Federal Reserve to JP Morgan Chase, Goldman Sachs,Citigroup, Bank of America, and the several other giant banks that are grosslymismanaging our economy at public expense. Instead, these banks should be choppedinto smaller regional banks. Too big has failed. It is time to end the "too bigto fail" doctrine and replace it with sensible polciies. The Glass-Steagall Actand other Depression era regulations designed to prevent the current fiasco shouldbe restored.The federal government should take immediate effective measures to end the wave offoreclosures and reset mortgage principal amounts to non-bubble values.Attempting to reinflate housing prices to bubble values is futile. However, thefederal government can take measures to mitigate the cost of the bubble poppingand avoid a disastrous negative bubble in housing and other assets.In addition, the US Government should work with the governments of China and othernations to reduce the excessive value of the dollar in an orderly fashion. Thiswill help restore the atrophied manufacturing and R&D sectors of the US economywith a minimum of "industrial policy", long term government subsidies, and soforth. It will also enable nations such as China to shift to the production ofneeded useful goods and services for their own rural populations including farming
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