On Stimulating the Economy and the Stimulus Bill 
Tuesday, February 3, 2009, 09:47 PM
... and why the two really aren't the same thing.

Maureen Dowd, the razor tongued liberal columnist for the New York Times, pens:
It took Daschle’s resignation to shake the president out of his arrogant attitude that his charmed circle doesn’t have to abide by the lofty standards he lectured the rest of us about for two years.

Before he recanted, his hand forced by a cascade of appointees who “forgot” to pay taxes, his reasoning was creeping perilously close to that of the outgoing leaders he denounced in his Inaugural Address: that elitist mentality of “we know best,” we know we’re doing the “right” thing for the country, so we can twist the rules.

Mr. Obama’s errors on the helter-skelter stimulus package were also self-induced.

...

Mr. Obama should have taken a red pencil to the $819 billion stimulus bill and slashed all the provisions that looked like caricatures of Democratic drunken-sailor spending.

As Senator Kit Bond, a Republican, put it, there were so many good targets that he felt “like a mosquito in a nudist colony.” He was especially worried about the provision requiring the steel and iron for infrastructure construction to be American-made, and by the time the chastened president talked to Chris Wallace on Fox Tuesday, he agreed that “we can’t send a protectionist message.”


The macro economist Arnold Kling writes:
1. Most certified macroeconomists support a large stimulus. A smaller number are opposed to any stimulus. An even smaller number support a small stimulus.

2. The main reason for supporting large stimulus rather than small stimulus is that small stimulus efforts have a track record of failure. That's the logic that gave us the Somme Offensive.

3. You can support a large stimulus but still have strong reservations about this bill. Certified economists I would put in this category include Larry Summers (no longer free to say so in public), Alice Rivlin, Martin Feldstein, and Jeff Sachs.

4. The bill serves two purposes. stimulus; and Radical Reconstruction. It's not mostly stimulus, with a little bit of other stuff thrown in. It's mostly other stuff, with a little bit of stimulus thrown in. That means a ginormous amount of other stuff.


I'm far over my head here when it comes to whether or not the Keynesian theory regarding the merits of a large stimulus in times of economic depression hold, but it's hard to ignore when Nobel prize winning economics like Paul Krugman come out strongly in favor of such a plan. Even I, however, can understand that the portions of the bill that are destined for entitlement programs, education, health care, and other Democratic Party wish list items, aren't going to stimulate the economy.

That isn't to say that education or health care aren't important issues that perhaps deserve federal funding (as opposed to state funding), but the abridged timetable we're working on is not the best way to accomplish much needed reforms in these areas. Education and health care are complicated subjects that we've been debating for years. We're not going to solve those problems in a three week time span simply by blowing large amounts of money in their direction, and jamming through spending in those categories certainly isn't going to help the economy.
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