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Hullabaloo


Monday, January 05, 2009

 
Stimulating Debate

by digby

The Democrats are floating the idea that they will spend 40% of the proposed 700 billion dollar stimulus package on tax cuts. I certainly hope they really believe that it will work to create jobs and stimulate investment because if they are doing this as a political move to appease the Republicans they will not only create a stimulus that is highly unlikely to work, but the Republicans will not reward them for it. Sure, they may get a few more to sign on to the plan, but if it doesn't get the job done the conservatives will soon swarm them like a school of starving piranhas, no matter who voted for it.

I actually suspect this unfortunately isn't about Republicans, but rather about a bunch of Blue Dog Democrats who are so incredibly stupid that they can't tell the difference between fiscal responsibility for a family of four and trying to stave off another Great Depression. (Yes, they really are that thick.)

I will withhold judgment until I learn more. It's possible that this thin article doesn't really reflect their thinking. And I'll look forward to reading what the smart economists have to say, because maybe I'm just being reflexively anti-tax cut and failing to see this for the brilliant economic mix that it is. But if this is really about politics and a 40% of the stimulus in tax cuts is the opening bid then I would guess they are at least testing the idea of not rocking the tax cut boat and are hoping that an extra few hundred bucks will get people buying a bunch of garbage at the malls again this time. Maybe it will. But with Paul Krugman saying things like this, (before the article I linked was published) I'm skeptical that a 400 billion dollar infrastructure stimulus combined with more ineffectual tax cuts and a lot of happy talk about "waste fraud and abuse" will get the job done:

News reports say that Democrats hope to pass an economic plan with broad bipartisan support. Good luck with that.

In reality, the political posturing has already started, with Republican leaders setting up roadblocks to stimulus legislation while posing as the champions of careful Congressional deliberation — which is pretty rich considering their party’s behavior over the past eight years.

More broadly, after decades of declaring that government is the problem, not the solution, not to mention reviling both Keynesian economics and the New Deal, most Republicans aren’t going to accept the need for a big-spending, F.D.R.-type solution to the economic crisis.

The biggest problem facing the Obama plan, however, is likely to be the demand of many politicians for proof that the benefits of the proposed public spending justify its costs — a burden of proof never imposed on proposals for tax cuts.

This is a problem with which Keynes was familiar: giving money away, he pointed out, tends to be met with fewer objections than plans for public investment “which, because they are not wholly wasteful, tend to be judged on strict ‘business’ principles.” What gets lost in such discussions is the key argument for economic stimulus — namely, that under current conditions, a surge in public spending would employ Americans who would otherwise be unemployed and money that would otherwise be sitting idle, and put both to work producing something useful.

All of this leaves me concerned about the prospects for the Obama plan. I’m sure that Congress will pass a stimulus plan, but I worry that the plan may be delayed and/or downsized. And Mr. Obama is right: We really do need swift, bold action.

Here’s my nightmare scenario: It takes Congress months to pass a stimulus plan, and the legislation that actually emerges is too cautious. As a result, the economy plunges for most of 2009, and when the plan finally starts to kick in, it’s only enough to slow the descent, not stop it. Meanwhile, deflation is setting in, while businesses and consumers start to base their spending plans on the expectation of a permanently depressed economy — well, you can see where this is going


Stay tuned. There are a lot of trial balloons being floated and we have no idea what's real and what isn't. But I really hope that something this important isn't being dealt away in the vain hope that "bipartisan support" will help insure success. Success will ensure success and it's far more important to properly fix the economy than change the tone in Washington, which doesn't matter a damn to the average American if he's lost his home and he's out of a job. I would guess that a majority of Republican politicians don't care about anything but making a comeback, but there are probably a handfullwho will give Obama the bipartisan cover he feels he needs without sacrificing the efficacy of the plan. There's a reason for having a real majority and it's for times like this.


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