Goldmark: We've got to kick-start recovery

What do we do now?

We bailed out the banks. We couldn't sit back and let one of the critical pumps in our economy close down. Now those same banks are sitting on piles of cash and not investing in business expansion and job growth. But in fairness, businesses haven't been coming in, demanding a lot of loans for expansion.

And that's because business isn't feeling much demand out there. We see why every day: Family budgets are tighter. Some people have lost jobs; many more have chosen, or been forced, to limit use of their credit cards. People are spending less and saving more. That's good, but it doesn't help businesses expand.

A lot of corporations are reporting high profits, but since sales aren't growing, that means they've been hammering at the cost side of the equation. They're consolidating, automating, outsourcing and laying people off. So those corporations are sitting on a lot of cash, too. That doesn't produce jobs or grow the economy.

You'd think those profits at least would make their stock go up, and it did for the first half of this year. But then people who buy and sell stocks saw that these profits weren't associated with growth. The "real" economy -- factories, the service sector -- had excess capacity and wasn't expanding. And there were dark clouds on the horizon for Europe and its banks, which are guarantors to a lot of U.S. and global hedge and money market funds. So stocks started going down . . . and down.

Neither consumer demand nor housing sales are going to power the economy forward as they once did. The agricultural sector will be generally strong because the world is entering a food squeeze and the United States can produce a lot of food. And the energy sector will continue to be strong all over the globe because energy is indispensable to a modern economy. Our problem there is that our biggest energy expenditures are for vehicle fuel, and most of that is imported.

So where's the lever that can reverse this vicious cycle and get dollars flowing . . . into activities that create jobs . . . that will boost consumer demand . . . so business can grow again and create more jobs?

There's only one that can be launched at scale and kick-start the economy in a way that can be sustained for decades. And that's massive capital investment in our infrastructure: roads, rail, bridges, water supply, sewer systems, modern electricity grids, retrofitting our physical plant to be more energy efficient, and modernizing our ports, airports, and other facilities of commerce and transportation.

Our infrastructure needs to be modernized in any case for us to be competitive. The borrowing can be shared among governments at all three levels -- federal, state and local -- and if we get our governments into sound fiscal condition (by cutting deficits and making sure expenditures don't exceed revenues), then those investments can be made economically.

But there's only one way to do this all at once: Raise taxes. Wipe out the gimmicks, loopholes and subsidies for corporations and the wealthy, and then put in a modest, across-the-board increase to finance all this and work the deficit down. Otherwise we will sit at the bottom of the stagnating economic swamp we're in for a long, long time.

These investments will create jobs, most of them in the private sector, and those jobs will last. These are long-term projects that will get money flowing to private companies, and these companies will hire people and invest in new equipment.

It kick-starts the economy, makes us more competitive globally and creates jobs. Along the way, we have to get our federal and state governments into sound fiscal condition -- and that'll be hard. But does anyone see an alternative that will create jobs and help private companies grow again?

Peter Goldmark, a former budget director of New York State and former publisher of the International Herald Tribune, headed the climate program at the Environmental Defense Fund.