I imagine you all have heard about this stimulus bill thingy that’s been bouncing around Capitol Hill for the last couple weeks.
There has been a great deal of talking, but not a whole lot being said.
For example, where is the White House explaining why direct government spending is an appropriate course of action? Everyone seems to agree that a stimulus bill is appropriate, or at least, everyone is talking as though a stimulus is appropriate.
The Republicans have brought their one trick pony, tax cuts, and are touting it as the answer to all our ills. Despite the fact that evidence shows that tax cuts are highly ineffectual as a stimulus, the Democrats have willingly accepted them into the bill rather than highlighting the inadequacy of the sole Republican solution.
Ironically, Republicans are objecting to some of the spending because it might go on longer than a couple years while suggesting that their proposed tax cuts be permanent.
Anyway, this all amounts to politics as usual, it seems. Still, I wanted to highlight some important things.
First, to answer the “why we must spend” question is Paul Krugman:
But looking forward, the Taylor rule says that the Fed should cut rates a lot from here — in fact, to negative 6%. That’s not surprising: we’re clearly opening up a huge output gap, inflation is turning into deflation.
This is why we need a huge fiscal stimulus, unconventional monetary policy, and anything else you can think of to fight this slump. Quite literally, the usual rules no longer apply.
When faced with a nearly unprecedented situation, the idea that the same solution as last year (which didn’t work) or 6 years ago (which also didn’t work) is adequate is borderline farcical, and to allow the Republicans to claim it isn’t in the name of bipartisanship is equally so.
Next, this obsession with the duration of some of the stimulus programs seems more than a little misplaced. Matt Yglesias is kind enough to provide this graph, which I believe came from the White House:
Both Yglesias and Krugman (and just about anyone looking at this, I expect) wonder “why not try for more?” I don’t have that answer, but I’m sure that the obstruction we’ve seen on the Hill has something to do with it. The other question I have is, in looking at this graph, why in the world are we concerned about whether a stimulative measure extends into 2011? The economy is predicted to be headed in the right direction, but certainly not fully recovered. Why is it such a terrible thing to have stimulus funding run into the middle of 2011? Assuming all the standard caveats about spending the money as a stimulative investment, rather than just spending for the sake of spending, is a few extra month of government spending really worth getting all worked up over?
Along these same lines, take some time to watch this Rachel Maddow clip and the requisite skewering of a dissenting Republican Congressman.