The Great Depression was an economic catastrophe that subjected much of the country to poverty and insecurity for more than a decade. But this catastrophe provided the political backdrop for enormous political change, including the national minimum wage, the 40-hour working week, full legalisation of labour unions, and social security.

The current economic crisis provides the same sort of opportunity. We are likely to see a higher minimum wage. It is possible that an Obama administration will bring the United States in line with the rest of the world by guaranteeing workers some amount of paid sick leave and/or holiday pay. It is also possible that it will act to protect workers' right to organise by pushing through the Employee Free Choice Act.

But the really big follow on to social security – national healthcare insurance – is an item that should sit at the very top of President Obama's agenda. The reason is that we need to pass a stimulus package right away, and healthcare should be a very big part of this package.

The need for large-scale stimulus is recognised by economists across the political spectrum. The housing sector has collapsed and will not be revived soon. The bubble in commercial real estate is also now collapsing, putting a further drag on the economy. Most importantly, consumer spending is crashing in response to the loss of more than $5tn in housing bubble wealth in addition to the loss of a comparable amount of wealth in the stock market. The drop in annual consumption spending is likely to be in the range of $300bn to $400bn.

A boost from the government is the only plausible way to replace this collapse in spending. Most economists put the size of the necessary boost in the region of $300bn to $450bn annually. New York Times columnist Paul Krugman has argued that $600bn is a more appropriate target. Given the recent rise in the dollar, which will kill export growth, this higher figure is almost certainly a better target.

The problem is that it is not easy for the government to find ways to usefully spend this much money. There are obvious ways in which the government can get money to help alleviate the impact of the downturn and increase spending, such as extending unemployment insurance benefits and increasing food stamps. But additional spending in these areas is not likely to exceed $30bn.

It can probably spend another $60bn a year on infrastructure projects, perhaps $50bn aiding hard-hit state and local governments, and maybe $40bn on green investment projects. This adds up to $180bn, a figure well short of even the $300bn to $450bn stimulus range.

This is where healthcare comes in. Healthcare is a $2.4tn sector. It can reasonably be expanded by 5% to 10% in a relatively short period of time, which would imply an additional $120bn to $240bn in annual spending. The jobs created in this sector would provide a substantial boost to the economy.

More importantly, we could substantially extend coverage through a stimulus package, getting much closer to the goal of a universal healthcare system. The quickest way to get there would be with a tax credit for employers who cover currently uninsured workers. Employers who already cover their workers can get a credit for increasing the generosity of their coverage. Generous credits should be sufficient to extent coverage to most uncovered workers.

At the same time, the government could open up the Medicare system, allowing all employers and individuals to buy into a Medicare-type plan that would compete with private insurers. This step, together with rules that limit abuses by private insurers, would be important in setting up a system that allows for cost containment over the long run.

After two years, the credits could be phased down to the earnings-based subsidies advocated by Obama during his campaign. In the longer-term, steps could also be taken to fill the gaps to ensure that people still left behind get covered.

The downturn has given President Obama the opportunity to quickly accomplish one of the most important goals he set himself during the campaign. One of the biggest problems in getting to universal coverage was finding the money to extend care before reforms could actually rein in costs.

The recession brought on by the collapse of the housing bubble has created a situation in which the main priority for the moment is spending money, not saving it. There is no better way for us to spend large amounts right now than getting our healthcare system in order. President Obama should seize this extraordinary opportunity.