Can more spending revive the American dream?

What the American economy needs is spenders.

It needs big spenders, such as states and municipalities, to build bridges, pave roads, and keep garbage trucks running and police on the beat. It needs tens of millions of smaller spenders to buy blankets and cars and television sets to help businesses prosper so they can keep their employees.

More spending is the goal of a fiscal stimulus package or packages being debated in Washington as President-elect Obama prepares to move into the White House.

Such spending is required, says liberal economist Robert Kuttner, "to prevent recession from turning into depression."

The fear is that the credit squeeze plus rising unemployment and a weakening business scene will snowball, leading to even more businesses cutting back or closing their doors and more people losing their jobs.

One spending suggestion of Mr. Kuttner and other economists is to step up federal financial help to states and municipalities, many facing severe budget squeezes. There is at least a $1.6 trillion backlog of needed infrastructure projects in the nation that could be usefully launched, reckons Kuttner, author of a new book, "Obama's Challenge: America's Economic Crisis and the Power of a Transformative Presidency."

Because of reduced funding by states, many state colleges and universities are boosting tuition fees, making it more difficult for poor and middle-class families to afford higher education for their children. State schools, notes Kuttner, are becoming more like private universities with their $40,000 plus charges for tuition and board.

But with the federal government already facing a likely $1 trillion deficit this fiscal year, wouldn't more federal outlays be an irresponsible fiscal policy?

"No," says Kuttner. "It is the lesser evil."

Without the help of federal subsidies and policies to help low-and-middle-income people, the economy could fall into a depression with its multiplicity of economic damages – more joblessness, additional business failures, declining incomes, extra misery in general. Federal revenues in a depression "would fall through the floor," making for even bigger budget deficits, says Kuttner.

Besides, argues Kuttner, the United States can afford huge federal deficits for two years or so. Total federal debt currently is sized at about 40 percent of gross domestic product, the nation's total output of goods and services. That's "relatively low" by American historical standards and by comparison with some other well-to-do industrial nations, he adds.

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