They Can't Be Serious

by: David Sirota

Thu Jan 15, 2009 at 12:30


TAKE ACTION: Use this online tool to tell Congress to pass a bold stimulus package - not a watered-down half-measure.

The Washington Post reports that the economic recovery package Barack Obama and congressional Democrats are proposing includes a lot of good stuff - aid to cities and states, increased unemployment insurance and food stamps. But here's the really bad part: The Post says the package "includes about $85 billion worth of infrastructure spending, most for highway and bridge construction." That's it - $85 billion in an $850 billion bill.

$85 billion for infrastructure in a nation that now regularly sees bridge collapses, steam pipe explosions, sink holes, dam failures, levee breaks and blackouts.

$85 billion at a time when Obama is demanding another $350 billion blank check for Wall Street.

$85 billion when the American Society of Civil Engineers says we need $1.6 trillion.

$85 billion in the same package that could include hundreds of billions of dollars in corporate tax cuts - many for the banks that created the economic mess. This, at a time when U.S. News & World Report notes that a new poll shows 81 percent of Americans are ready to pay higher taxes to fund significant infrastructure investments.

$85 billion, we are told, is "serious" and "pragmatic" - in the face of overwhelming evidence that it is anything but. As Paul Krugman notes, there's plenty of worthy investments that need funding - and the "shovel-ready" limitations are nonsense:

Since unemployment is likely to remain high well beyond that two-year window, the plan should also include longer-term investment projects. And bear in mind that even a project that delivers its main punch in, say, 2011 can provide significant economic support in earlier years. If Mr. Obama drops the "jump-start" metaphor, if he accepts the reality that we need a multi-year program rather than a short burst of activity, he can create a lot more jobs through government investment, even in the near term.

Still, shouldn't Mr. Obama wait for proof that a bigger, longer-term plan is needed? No. Right now the investment portion of the Obama plan is limited by a shortage of "shovel ready" projects, projects ready to go on short notice. A lot more investment can be under way by late 2010 or 2011 if Mr. Obama gives the go-ahead now - but if he waits too long before deciding, that window of opportunity will be gone.

So considering that, let's hope $85 billion is just a starting point. Otherwise, it's not a serious proposal - not even close.
David Sirota :: They Can't Be Serious

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They Can't Be Serious | 45 comments
What happened to spending on rail? (4.00 / 3)
Or is an industry that would provide greener transportation and +200,000 new jobs not important enough anymore?

"Never be afraid to stand with the minority when the minority is right, for the minority which is right will one day be the majority." -William Jennings Bryan
I am wondering that too (4.00 / 3)
We get so much long-term bang for the buck investing in national and regional rail networks.

Compared to the European countries and their rail systems, ours is like a relic of the 19th century.

[ Parent ]
Only $10 billion right now (4.00 / 2)
According to reports, only $10 billion is allotted towards rail right now. That is a joke. The number should be at least $100 billion. In fact, they should get rid of half the tax cuts and put that money towards infrastructure.

Rail projects help take dirty trucks off the road, reduce traffic, provide jobs, promote a green economy, ease tension on our transportation networks. It's really a no-brainer, but apparently the train lobbies are weaker than we imagined.

Hopefully someone gets Sen. Kerry or VP-elect Biden to fix this.

[ Parent ]
You have to do it too (4.00 / 1)
we all need to contact our representatives and senators and tell them we want the rail money in the stimulus package at least doubled to 20 billion.
[ Parent ]
local (city & suburb-connecting) rail and subways are needed most (0.00 / 0)
to transform American life in a green and economical direction.

National rail is boondoggle territory, frankly. It just can't compete with airlines; pretty sure Japanese transport experts would agree. But wouldn't it be awesome if we had half the urban/suburban rail systems they have?

[ Parent ]
oil at less than $40 per barrel (4.00 / 1)
Suddenly, it doesn't seem so expedient.

"It sounds wrong...
     ...but its right."
[ Parent ]
How much is needed for infrastructure? (0.00 / 0)
Is the objection that $85 billion is too small a percentage of the stimulus bill, or too small an absolute number to do much good?

If it's the latter, then how much actually is needed? Has anyone come up with a desired number?

1.6 Trillion (4.00 / 1)
Over five years, estimated by American Society of Civil Engineers
[ Parent ]
well (4.00 / 1)
Now we can make that 1.515 trillion.  Why this practically closes the matter!
[ Parent ]
Says in the stimulus package itself (4.00 / 1)
that there's about 80 billion dollars worth of ready to go projects just for rail. And yet this bill has only 10 billion for it.  
[ Parent ]
could most of the state money be going to infra? (4.00 / 1)
but heck much it may have to be unemployment insurance & food stamps.
I had the same question (0.00 / 0)
Clearly most state/local aid will go to pay for regular budget items at risk due to falling tax revenues. Nevertheless, they may be significant infrastructure spending as well.

Regardless, in terms of stimulus, getting the money into the economy as quickly as possible is critical. A brick in front of the recession snowball today will likely be more effective that a wall tomorrow when the snowball will be much bigger.

[ Parent ]
here in CA (0.00 / 0)
most of the budget shortfall is causing cuts in education, but there are also some transportation projects at risk.

That said, we need a major investment in top-down infrastructure spending that has nothing to do with particular state budget problems. That means money dedicated solely to high speed rail and mass transit.

[ Parent ]
Shovel Ready (0.00 / 0)
I remember Obama being most interested in projects that were "shovel ready". There may not be that many projects that are that far along.
It Only Takes Two Clicks to Get the Details (4.00 / 2)
I guess that's too much work for some people. From TPM, the projects are described as "ready-to-go", "pre-approved", etc.:

Highway Infrastructure: $30 billion for highway and bridge construction projects. It is estimated that states have over 5,100 projects totaling over $64 billion that could be awarded within 180 days. These projects create jobs in the short term while saving commuters time and money in the long term. In 2006, the Department of Transportation estimated $8.5 billion was needed to maintain current systems and $61.4 billion was needed to improve highways and bridges.

Transit: Public transportation saves Americans time and money, saving as much as 4.2 billion gallons of gasoline and reducing carbon emissions by 37 million metric tons each year.

· New Construction: $1 billion for Capital Investment Grants for new commuter rail or other light rail systems to increase public use of mass transit and to speed projects already in construction. The Federal Transit Administration has $2.4 billion in pre-approved projects.

· Upgrades and Repair: $2 billion to modernize existing transit systems, including renovations to stations, security systems, computers, equipment, structures, signals, and communications. Funds will be distributed through the existing formula. The repair backlog is nearly $50 billion.

· Transit Capital Assistance: $6 billion to purchase buses and equipment needed to increase public transportation and improve intermodal and transit facilities. The Department of Transportation estimates a $3.2 billion maintenance backlog and $9.2 billion in needed improvements. The American Public Transportation Association identified 787 ready-to-go transit projects totaling $15.5 billion. Funds will be distributed through the existing formulas.

Amtrak and Intercity Passenger Rail Construction Grants: $1.1 billion to improve the speed and capacity of intercity passenger rail service. The Department of Transportation's Inspector General estimates the North East Corridor alone has a backlog of over $10 billion.

Airport Improvement Grants: $3 billion for airport improvement projects that will improve safety and reduce congestion. An estimated $41 billion in eligible airport infrastructure projects are needed between 2007-2011.

Transportation Security Administration Explosive Detection Systems: $500 million to install Aviation Explosive Detection Systems in the nation's airports, improving security, and making life easier on travelers by speeding security lines. Funds are competitively awarded based on security risk.

Coast Guard Bridges: $150 million for ready-to-go investments to repair or remove bridges deemed hazardous to marine navigation, thereby removing obstructions and improving the safety of marine navigation.

Remember: This is a stimulus package for one year, not a long-term infrastructure rebuilding plan.

[ Parent ]
I would wait a bit before panicking... (0.00 / 0)
...the Post's numbers don't add up right... There may be a lot more infrastructure spending in the state numbers which are not being reported.  Much of the nation's infrastructure is handled by the states, so I want to see some more confirmation from other sources...

REID: Voting against us was never part of our arrangement!
SPECTER: I am altering the deal! Pray I don't alter it any further!
REID: This deal keeps getting worse all the time!
There's Certain To Be SOME State Infrastrcuture Spending (4.00 / 3)
In California, for example, state infrastructure spening has been shut down.  Totally ludicrous. But, then, our governor thinks in one-liners, and our media adores him.

However, none of that is the sort of future-oriented green infrastructure spending that ought to be a major component of the package, for maximum synergy in addressing multiple problems at once.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3

[ Parent ]
Good News, Bad News, And Yeah, Ugly News (4.00 / 4)
The good news, as I see it, is that a lot of money is going to state governments--with expected pass-through to local governments--which is sorely needed, and has not gotten enough emphasis or full-throated support in earlier discussions.  (The figure I got from the National Conference of State Legislatures is a $200 billion shortfall over the next 2 years.)

The bad news is not just the paltry infrastructure figure, but the fact that none of it seems to be directed toward green infrastructure of the future.  I'm reasonably sure this is not the case.  But whatever is in there to this effect, it's not large enough to make a noticeable dent large enough for the WP to take note of it.  

And, of course, the ugly news is the comparison of this package with TARP, phase II.

I've said this before, and will doubtless say it again: what we need is a totally different conception of how the problems and solutions are linked to one another.  Money for the auto industry should be linked to diversification that feeds into green transportation alternatives (full spectrum from bikes to high-speed rail), and alternative energy generation/infrastructure.  We should be taking care of (1) short-term economic stimulus needs, (2) mid-to-long-term industrial revitalization needs, and (3) long-to-super-long-term industrial/ecological development needs all at once, in an integrated fashion.


"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3

David, I'm (4.00 / 2)
sorry to tell you, but I think we can pretty well conclude that whatever changes in this bill from here on out will be relatively minor tweaks. It's pretty unthinkable that the $85B is going to be adjusted up by a factor of 4 or 3 or even 2. Maybe 30% if we're lucky?

I see that the overall size of the package has not materially changed from what Obama proposed. Again, once the size of the package came down the chute from the Obama team, it was basically a done deal that it wasn't going to be adjusted up by any but the smallest fraction. Why should Congressional Democrats take the heat for a much larger package, especially one that might easily break the headline grabbing one trillion dollar mark?

This shows, of course, how absurdly delusional was Nathan's Silver's "analysis", in which he acted as though Obama's suggestion was just a "lowball" to get things moving, and that it might be revised up even to $1.3 trillion.

And let us remember: the Republicans have not yet come up with their counterproposal or their political attacks. I think we can safely conclude that this will only be revised downward.

And if Krugman is right that the package appeared to be already too small by a factor of 2 or even 3, then we are likely to be pretty much well and truly screwed. If indeed Krugman's worry about a deflationary trap coming our way proves out, then we are beyond screwed, whereever that desperate place may be.

Let's all hope that Krugman is miles away from being right.

If that 30% is directed completely to rail and transit (0.00 / 0)
then that wouldn't be too bad.
[ Parent ]
I don't think Nate was delusional or that Krugman is (4.00 / 1)
off the mark.  I think the Obama team has a very keen sense of what can be swiftly moved on by Congress and the Administration, so I think there Nate is correct.  Similarly, I know that Krugman believes this will in actuality need to be Phase I Recovery Plan, and that consensus will need to be built for a Phase II that would overcome what I call the systemic entropy we're experiencing and carry positive impact well past 2011.

Not Ideas About The Thing, But The Thing Itself -- Wallace Stevens
[ Parent ]
If Krugman has said anything about (0.00 / 0)
a Phase II for this plan, it has escaped my notice. My expectation is that, if he did, at most he may be acknowledging that he has/had little hope that the current plan would be expanded to anything like the size required to deal with the economic problem, and so at least hoped there might be a second phase.

But a staggered plan with a second phase is already inept. The single most important thing to do is to get money into the economy as fast as we can, and finding things that can done that achieve that effect (such as "shovel ready" projects) is not easy -- many such things don't have an impact until later down the road. The effect of staggering the stimulus is to delay still further the stimulus created by these items -- perhaps past the point that they could prevent a serious recession/depression and/or a deflationary trap.

And none of that addresses the political difficulty of going back to the well at a later date when there has already been a great struggle even over the first phase -- and that first phase looks to have failed (why else a second phase?)

And, I'm sorry, Nathan Silver was obviously delusional when he said, among other things:

Now consider what Obama told CNBC the other day:
   
Obama also confirmed that he plans to lay out a roughly $775 billion economic stimulus plan on Thursday but indicated that the amount could grow once it gets taken up by Congress.

   "We've seen ranges from $800 (billion) to $1.3 trillion," he said. "And our attitude was that given the legislative process, if we start towards the low end of that, we'll see how it develops."

Obama isn't picking these numbers out on accident. This range -- $800 billion to $1.3 trillion -- is most likely the range of outcomes that his administration considers acceptable. He says that "given the legislative process", he's deliberately chosen a number on the lower end of that range.

What does this mean? It means he wants the Senate Democrats to do his dirty work for him. All of the sudden, the administration, which is about to spend at least $800 billion, gets to play the role of the fiscally prudent tightwads, negotiating against the Senate Democrats. This has at least two benefits. One, it requires less of the administration's political capital to sell the package. And two, it completely co-opts the conservative opposition. Unless you're Paul Krugman or Greg Mankiw, you probably don't really have any idea whether $300 billion or $800 billion or $1.2 trillion is the right amount to spend; the numbers are too large, the scope of the stimulus too unprecedented, to provide for any absolute frame of reference. So the frame of reference is relative rather than absolute. If you're Mitch McConnell or Mary Landireu or Bob Corker and you see that John Kerry thinks that $800 billion is too little -- well then, 'gal darn it, this Obama fella must be doing something right.

Imagine instead that Obama had started out at $1.3 trillion, assuming that the conservatives in the Senate would negotiate him down. Then we have some big, old-fashioned brouhaha about economic philosophy, with Obama and the Senate Democrats lining up against the Blue Dogs and the Republicans. This strikes me as a considerably more dangerous negotiation, because while the Senate Democrats can set the ceiling if Obama starts too low, there is nobody really there to set the floor if he starts too high -- the Republicans have no real imperative to compromise on any stimulus. Public sentiment, moreover, which now favors the stimulus, might easily have turned against it if there was some sticker shock on the initial price tag, and once public sentiment turns against something like this, it can be hard to put back into the bottle.

[bolding mine]

I ask you, how much of an increment above $800B is $825B? How successful was this supposed strategy? How much work have the Congressional Democrats done for him? How much of a "fiscally prudent tightwad" does he seem?

Every day I find myself wondering what Nathan Silver's reputation as a pundit is based on. He can aggregate polls into something meaningful. Of course, so can other people. When he deviates from this narrow skill, he sounds like an ignoramus and, sorry to say, a hack.

[ Parent ]
Oh, and what is the real Republican response (0.00 / 0)
to this $825B plan (so much bigger than the $775B Obama originally proposed!)?

Oh. My. God.

And so the real politicking begins -- with the Republicans ready to pare it down every which way they can, unless it involves one of their favorite, rich friendly tax cuts, of course!

[ Parent ]
you're right, Krugman never said anything about Phase II (0.00 / 0)
that was my connotation.  But I think he would look toward a "Phase II" as I described, which could be proposed early in 2010.  As the the Nate matter -- frankly, Frankly0, nothing you added above seems to have changed my evaluation of Nate's assessment.

Not Ideas About The Thing, But The Thing Itself -- Wallace Stevens
[ Parent ]
For 8 Long Years (4.00 / 2)
...Bush and the Republicans pushed the meme that "Tax cuts create jobs". Judging by the last 8 years the "Tax cuts create jobs" is just hog wash.

Has anyone pointed that out to Obama or the rest of the Dem leadership?

well (4.00 / 2)
My head hurt the first 30 times I banged it against the wall, but I think I'll give it a few more tries to see if it produces that magic pony I want.  
[ Parent ]
The Enemy of your Enemy is not always your Friend (4.00 / 1)
That Bush said it does not make it false.  If you reject the idea that tax cuts stimulate the economy you are rejecting a foundational principle in Keynesian economics.  I said Keynesian.  As is the sane school of economics that hasn't had its theoretical predications repeatedly proven wrong.  The point at which to fight conservatives isn't on the point that tax cuts stimulate the economy (and thereby would lead to the creation of some kind of jobs).  The point at which to fight them is about whether tax cuts or spending increases are better ways to go about creating jobs.  The point at which to fight them is what kind of tax cuts lead to what kind of jobs.  

The evidence is pretty clear that tax cuts of the kind that Reagan and Bush supported, while they lead to job growth, don't lead to robust job growth (i.e. the kind of job growth the country experienced in the 50's, 60's and 90's), and that they don't lead to the creation of good jobs.  But middle class tax cuts are quite different from tax cuts for the rich.  Cut a rich man's taxes and that money will likely go towards investments that don't create many jobs, and don't create them very quickly (like investments outside of the country, in hedge funds, etc.)  Cut a poor or middle class person's taxes and that money will typically get spent or, if invested, will at least be productive investments (i.e. saving for a house or for college).  The stores where they spend the money will hire new employees, the suppliers of the stores will eventually expand production.

But there is also plenty of good evidence that robust government spending in areas where the private sector can't or won't make the necessary investments does a better job stimulating the economy than tax cuts do.  They lead to jobs faster (because private corporations don't have to do the kind of guesswork about whether a spike in consumer spending is the beginning of a recovery or not, they will be able to look at the new contract they just got from the government), they lead to better jobs, and the improve productivity in a way that the market won't do on its own.

So there is plenty of reason to critisize this bill.  Corporate tax breaks are a waste.  They will help a very little bit.  But more middle class tax breaks would help more.  And more spending on vital large scale projects (like greening the economy and repairing infrastructure) will help most.  Obama is just wrong about the way the economy works, and his stimulus is more comparable to Hoover in his last days than it is to the New Deal.

All that criticism is fine and good.  But I worry that the center-left is falling into the same kind of mistake that the center-right fell into during the 1970's.  They saw rampant inflation and several decades of 'full employment' policies and decided that 'full employment = hyperinflation', when what they should have decided was 'full employment plus two oil shocks, plus a defense budget making up 10% of the federal budget, plus manipulation of the Fed funds rate for crass political purposes=higher than acceptable inflation.'  They oversimplified the issue, and that led the center-right to accept what had for several decades been a small minority both politically and academically who resolutely refused to recognize the success of Keynesian economics.  And we have been dealing with the fallout for 30 years.  Adopting an approach to economics as simplistic as 'this general policy was tried during the same years things did not go well, so this general policy is bad' leads to mistakes.  Middle class tax cuts are not our enemy.  Things like the EITC are certainly not the enemy (though they are not ideal).

To be clear I want to raise taxes on the rich.  I want to put a tax on every stock trade the US government can tax.  I want a spike in capital gains taxes.  I want lots of tax increases.  I don't want to raise taxes on cops and teachers, even if they are patriotic enough to sacrifice that money for their country.

[ Parent ]
I'd like to see a big committment to green energy (0.00 / 0)
For example, solar power like this.

It can generate enough power for 70,000 homes at it's peak, and according to this article a plant like this would create about 1,500 permanent jobs.

Not a bad way to spend a billion dollars - create green energy, create jobs, and stimulate manufacturing ie produce the components here in the US.

I'm hoping (4.00 / 2)
I hope that Post article is not accurate, but it sounds pretty accurate to me.

I'm really more outraged by the allocation of the tax cuts than the spending, to be honest. If they only have $85 billion worth of ready-to-go infrastructure projects, that's fine. Although I'm skeptical that's really the case, if they choose to instead spend the money on unemployment benefits, food stamps, and aid to state governments, that's just about as good from a stimulus point of view.

What's not OK is the two tax cut measures mentioned in the Post article: $70 billion to fix the AMT and $10 billion for a tuition tax credit (no idea if it's refundable). Neither of these tax cuts is stimulative. The AMT fix is particularly egregious because everyone knows they were going to do it anyway. Sticking it in the stimulus just saves them the annual song and dance of figuring out how to pay for it. Moreover, the benefit of the AMT fix goes to relatively affluent (middle class, really mostly upper-middle class) taxpayers whose marginal propensity to consume is not that high. So, it's permanent, it was already fully anticipated, and it won't be spent. Perfect, if the goal is to have zero stimulative effect.

I had been encouraged that they were kicking out the two stupid business tax cuts (the per-worker credit and the ability to apply losses to past profits), but they're just replacing them with tax cuts to individuals that have no stimulus benefit. Awesome.

Right on, David (4.00 / 1)
One thing about roads, bridges, and schools is that they are a permanent reminder that Democrats build this country; Republicans destroy it with their greed.
America and The Lineaments of Gratified Desire (0.00 / 0)
Useful metaphors for the future:

1) The Permanent Banana Republic

2) A Third-World Country with Rockets

3) Götterdämmerung (Apocalypse, if you prefer English)

4) An Overthrow of Noble Minds

5) Capitalism and the Logic of the Cancer Cell

6) The Immigrant's Gladness Comes to Pass

7) Greenspanvilles (Paulsonvilles, Geithnervilles, maybe even Obamavilles)

To be sure, metaphors are usually disdained in political discourse, being generally considered a sign of nonseriousness. There are occasions, though, when they describe the otherwise indescribable. This seems to be one of those occasions.

Your criticism is ill-founded. (0.00 / 0)
To lift the economy there needs to be a balanced plan that will encompass a variety of different spending options, tax cuts, etc.

We can't (and shouldn't) spend as much as possible now. Despite historical trends, opinions from a variety of sources, etc. etc. we really do not know what will work. I remember a time when Alan Greenspan was one of the most respected voices of the economy. How long ago ...

Obama's team has the right approach. Tax cuts in certain areas of the economy that can perform the most good and spending in critican areas. Sure, we would like to spend more. But think about what you are asking. We are entering a new Administration with a trillion dollar deficit already; adding this bill (even with the current $850 billion dollar tag) will push the deficit close to $2 trillion. We don't know what other challenges will face America a year or two from now.

Why spend all of your money and use all of your political capital now? By using the "price is right" strategy (as other posters have noted) Obama is setting up for success now as well as in the future.

Also, in response to this:

$85 billion at a time when Obama is demanding another $350 billion blank check for Wall Street.

I feel it is ill-founded to say that Obama is using a blank check - the funds have already been approved and the banks are not lending. We need to get the private industry moving as well. I am 100% for the rights of the people but just focusing on one aspect of the economy (government spending) instead of all of the areas that affects regular people is a poor ideology that will not move America foward.

Tax cuts? (0.00 / 0)
Please tell me you did not really put that in there.

Tax cuts are not going to create jobs.

Tac cuts are not going to get businesses to spend when there is no one willing to buy their products and services.

Tax cuts won't make me as a consumer spend more.

[ Parent ]
Yeah they do (0.00 / 0)
Especially if the tax cuts show up all at once as a rebate check.  That is exactly the kind of thing that leads to more spending.  The problem is you have to wait for it, and not all the tax cuts show up as bigger rebate checks.  A lot of the money shows up as reduced tax burden and that doesn't have nearly the psychological effects getting a nice big check does.

I think you are going much further than you have to for your point, and further than the facts support.

Tax cuts create jobs, they just don't create jobs nearly as well as direct spending by the government.  Tax cuts will lead to more consumer spending, but not nearly as much as a fall in unemployment would help stimulate consumer spending (and again direct spending by the government is the best way to lower unemployment).

You don't need to say tax cuts don't work at all, just that there are things that work better.  And the times are too bad to settle for strategies that kinda work a little, just so you can get to 80 votes in the Senate (that goal, if it is, or was, a real goal of the Administration does more to shake my faith in Obama's intelligence than anything I have seen yet.  Polishing the brass on the Titanic.)

[ Parent ]
Backwards (0.00 / 0)
Especially if the tax cuts show up all at once as a rebate check.  That is exactly the kind of thing that leads to more spending.  The problem is you have to wait for it, and not all the tax cuts show up as bigger rebate checks.

That is exactly backwards.  When people receive large checks they are far more likely to pay off the credit card or make a house payment rather than just spend it.  When you distribute the money into each paycheck, then the money is more likely to be spent as most live pay-check to pay-check, watching only the money that is left, not how much is spent.

[ Parent ]
You are right, but where am I disagreeing? (0.00 / 0)
That getting more money across time is better than getting it all upfront (for purposes of stimulation) is something I accept (but I accept it mostly on hearsay, if you have a citation handy it would be appreciated) But that wasn't the comparison I was making.  I made two claims:

1.  People do spend money they receive in tax cuts.  That they would spend more of it if that same amount of money was given to them as a wage increase doesn't change the fact that there is some stimulative value to tax cuts.  Just that increasing wages would be a better stimulative move.  That is something I agree with, and agree with in the comment (when I talk about lower unemployment leading to increased consumer spending.  Not just from the people who now have jobs, but also from the increase in wages that usually accompanies lower unemployment).

2.  People are more likely to spend X dollars that comes in the form of a rebate check than they are likely to spend X dollars that shows up as reduced expected tax burden.  Realizing you will have to pay less in April, while still having to pay some out, is not going to lead you to spend.  Your point about an small increase in money over time being more stimulative than a big check all at once does not strike me as relevant to this comparison.  After knowing you are going to take a smaller loss is not the same thing as knowing you are going to be getting a little more money each week (or two weeks, or month)

[ Parent ]
What? (4.00 / 1)
We can't (and shouldn't) spend as much as possible now. Despite historical trends, opinions from a variety of sources, etc. etc. we really do not know what will work. I remember a time when Alan Greenspan was one of the most respected voices of the economy. How long ago ...

Your argument against demand side stimulation of the economy is that people once thought Greenspan was smart?  Are you serious?  Is this some kind of parody?  Are you Stephen Colbert?

The fact is there are plenty of things that we know about how the economy works.  The fact is that we know that increased spending is going to stimulate the economy and lead to the creation of jobs.  The fact is that in a situation like this we know that other strategies for stimulation, like lowering interest rates (didn't work for Japan in similar circumstances), and lowering taxes on corporations (has never worked that I know of to end a recession), don't work nearly as well as direct government spending does.  This doesn't mean there aren't costs to doing so.  But there is also no reason to think that the costs of government spending outweigh the cost of deflation and higher unemployment.  Deficits are better than Depressions.

Why spend all of your money and use all of your political capital now? By using the "price is right" strategy (as other posters have noted) Obama is setting up for success now as well as in the future.

You know what really strips a politician of political capital?  When millions of Americans see their jobs disappear while their tax money is going to pay bonus checks to people who ripped them off.  If this plan was reasonably suited to the problem, then considerations of political capital could then be taken into account.  But it isn't.  And Obama will have no political capital if he doesn't fix the economy.

[ Parent ]
This got put in the wrong place (0.00 / 0)
I hope it is clear this is not a reply to Jon, but was meant as a reply to cko
[ Parent ]
You have part of my critique in correct ... (0.00 / 0)

Your argument against demand side stimulation of the economy is that people once thought Greenspan was smart?  Are you serious?  Is this some kind of parody?  Are you Stephen Colbert?

The point I made with Alan Greenspan was that we were influenced by free-market philosophy at the time (the 1990's).

We need a balanced approach. What happens when government spending stops? If the current plan of action has primarily spending in place without anything for small business, then how can we reasonably say that the cyclical process of the economy will get started again when the primary source of money ends?


You know what really strips a politician of political capital?  When millions of Americans see their jobs disappear while their tax money is going to pay bonus checks to people who ripped them off.  If this plan was reasonably suited to the problem, then considerations of political capital could then be taken into account.  But it isn't.  And Obama will have no political capital if he doesn't fix the economy.

I am in agreement with your core point here. However, I am also making the point that we cannot see the future. I am convinced that there will be more oversight on the extra $350 Billion in TARP money, the economy cannot function if the banks are  not lending and just shoring up assets. To that end, there will be a greater effort to get banks lending. I know people here may not necessarily like everything about private enterprises but parts of the free-market are needed to make the economy function. Banks are one of them.

Also, there needs to be a sustained approach from the government to the economy. If Obama (or any politician for that matter) stands in the bully pulpit and pounds the public and Congress for a large amount of money then he/she may get it but then will find it much harder to ask for more, regardless if the reason for the money is sound.

You should set yourself and the country for sustained success.

[ Parent ]
TPM has more detailed breakdown, ~$180 billion on infrastructure projects (4.00 / 2)
While I'm certainly not going to dispute that the size of the stimulus, per Krugman, is as much as a factor of 2 too small, I think there is actually quite a bit of infrastructure spending in there that is not, for whatever reason, included in the "infrastructure" category.  From TPM:

--$32 billion to fund a so-called "smart electricity grid" to reduce waste
--$6 billion to weatherize modest-income homes
--$10 billion for science facilities
--$6 billion to bring high-speed Internet access to rural and underserved areas
--$32 billion for transportation projects
--$31 billion to build and repair federal buildings and other public infrastructure
--$19 billion in water projects
--$10 billion in rail and mass transit projects
--$21 billion for school modernization
--$13 billion to repair and make more energy efficient public housing projects, allow communities to buy and repair foreclosed homes, and help the homeless

Total of $180 billion in infrastructure, which is much closer to my recollection of early reports. Also $20 to modernize health information technology systems, which might be considered "infrastructure" of a kind.

I'd like to see the $10 billion for rail and mass transit triple or quadruple (it would be nice if spending on rail/mass transit at least equaled the $32 billion on non-rail transportation projects). But I'm pleased to see modernizing the electric grid as one of the biggest budget items, as well as substantial funds devoted to making buildings more energy efficient.

Krugman is right... (0.00 / 0)
but I want to point out something... polls show 60% of Americans saying they are concerned about the cost of the package...  I'm betting that has something to do with it... maybe the 1.6 trillion is too much for one bill and much like Bush did with Iraq, we will see a couple of different bills.
[ Parent ]
Shovel ready (0.00 / 0)
While the details don't look as bad as what Dave quotes from the Post, I agree the size of this should basically double on the investment side.  In fact, I'd look at all the shovel-ready projects out there and assuming the total doesn't go much over a trillion or so, pay for all of them.

Then more money, not necessarily in this bill, should be spent preparing projects for the next few years, so they will be shovel ready as these jobs complete.

krugman today is eerily silent (0.00 / 0)
with no new post on his blog.  I would venture to say he will applaud some spending increases and the removal of some business tax cuts, but will -- I hope -- show that an additional $300-$500 billion for longer-term infrastructure, energy, health and education investment will be needed to overcome the systemic entropy the current set of conditions has created.

Not Ideas About The Thing, But The Thing Itself -- Wallace Stevens
Wow, Dave flying off the handle? (0.00 / 0)
Based on a Wash Post story, journalistically impeccable as it must be?  I am thoroughly shocked.  He wrote a few posts bashing Republicans yesterday and must have gotten the shakes.  Glad to see you're feeling better, Dave.  
Yeah... (0.00 / 0)
I was surprised by the lack of infrastructure spending in this bill.

I was wondering a few things...

1) Maybe it was intentionally left low so that it can be beefed up in amendments... so individual senators and congressmen can get the glory.

2) Maybe another bill focused on infrastructure later on.  

They Can't Be Serious | 45 comments
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