Sunday, January 11, 2009

Stimulus: Too Much is Nowhere Near Enough

We've had a good time lately reciting the nearly endless list of conservative republican failures. Is there anything these chumps can't fuck up? Is there anything they've ever been right about?

No, of course not. But in the current discussion of the economic stimulus we see the results of the repug's singluar post-Reagan success:

They've convinced the nation and the world that government spending is bad.

Even when government spending is patently necessary, obviously the only way to avoid utter disaster, the discussion is not "on what" and "how soon" but "how little can we get away with."

How about a five-year moratoriam on the word "deficit?" Because all those times that repugs were mendaciously proclaiming "deficits don't matter," they were accidentally telling the truth.

As James Galbraith explains in his new book, the economy-destroying policies of the last thirty years have actually proven that cutting taxes and spending almost always causes inflation and/or recession, and raising taxes and spending almost always causes economic growth without inflation.

And the worst thing any government can do is spend public resources propping up capital markets (Wall Street) at the expense of workers in the real economy.

Sound familiar?

By letting concern about deficits shrink his stimulus plan while the U.S. economy is literally disintegrating for lack of public spending, President-elect Obama is ensuring the stimulus - and thus his presidency - will fail.

Paul Krugman, Concience of the Economy:

"I don't believe it's too late to change course, but it will be if we don't take dramatic action as soon as possible. If nothing is done, this recession could linger for years."

So declared President-elect Barack Obama on Thursday, explaining why the nation needs an extremely aggressive government response to the economic downturn. He's right. This is the most dangerous economic crisis since the Great Depression, and it could all too easily turn into a prolonged slump.

But Mr. Obama's prescription doesn't live up to his diagnosis. The economic plan he's offering isn't as strong as his language about the economic threat. In fact, it falls well short of what's needed.


The bottom line is that the Obama plan is unlikely to close more than half of the looming output gap, and could easily end up doing less than a third of the job.
Why isn't Mr. Obama trying to do more?


Whatever the explanation, the Obama plan just doesn't look adequate to the economy's need. To be sure, a third of a loaf is better than none. But right now we seem to be facing two major economic gaps: the gap between the economy's potential and its likely performance, and the gap between Mr. Obama's stern economic rhetoric and his somewhat disappointing economic plan.

Krugman explains that the economy is currently falling about $2 trillion short of what it should be producing. Obama's $775 billion plan, with its $300 billion in counter-productive tax cuts, offers about 20 percent of what's needed.

John Judis at The New Republic pleads for a World-War-II-sized stimulus.

I am not suggesting that the United States start a world war in order to solve the world's economic problem. But I am suggesting a strategy that could be called the fiscal equivalent of war.

It would consist not merely of updating or repairing the nation's infrastructure, but in undertaking massive new investments that would expand the scope of American industry, and address other urgent problems in the process: global warming, over-reliance on petroleum, and the need to revive America's domestic manufacturing capabilities--not just to provide jobs, but also to provide tradeable goods that can reduce the country's current account deficit.

... Are we not at some point going to have to go beyond repairing roads and bridges in our conception of public spending and public works, and contemplate the kind of ambitious industrial expenditures that the country made on war production in 1941?

I still believe that Obama is playing a long and deep game, several steps ahead of Senate repugs. But I'm with Jane Hamsher who explains why Obama inspires confidence but the stimulus plan doesn't.

Go to and tell Obama that $2 trillion on real, job-creating stimulus is the bare minimum required.

And if he still insists on throwing a bone to irrelevant and undeserving repugs, he can say "You were right: deficits really don't matter."

Cross-posted at They Gave Us A Republic.