Economic Stimulus


I’ve been a Republican all of my life.  While still registered as such, it is clear I have ceased to belong in the party.  Once a party I respected deeply for it’s common sense on economic, energy, labor, foreign policy and national defense issues, it is now the party of make believe, especially when it comes to tax and economic issues.  The “compromise” it forced over the weekend was no compromise, it was “our way or we destroy the economy”.  Unfortunately, it looks like the bill that finally passed will do great damage to the economy anyway — the compromise being about as non stimulatory as it could possible have been to an economy teetering on the edge of another recession.  Congratulations GOP.  I personally hope you see a loss in November of 2012 of stunning proportions.  You deserve it.  You deserve it badly.  I will work hard to make it happen.

Also, for those of you on Facebook, please consider “liking” both my “What Should Be” page and my “Just Say No to Republicans” page.

This Brooks-Shields piece from the Lehrer NewHour last night is well worth watching.  David Brooks’ comments are particularly insightful.

There are two additional two Op-Eds today that are well worth reading, both of which appeared in today’s New York Times.  They concern, respectively, two issues that have been much discussed on the campaign trail this year.  Specifically they concern two government programs upon which it now seems almost all candidates, incumbent and otherwise, believe were dreadful mistakes.  I am referring to the Troubled Asset Relief Program of 2008 (the “bailout”) and the fiscal stimulus bill.

The first article, concerning the “bailout” bill is authored by Ross Douthat and is entitled The Great Bailout Backlash.  The second, by Paul Krugman and concerning the stimulus bill, is called Falling Into the Chasm.  Both offer important perspectives on these important issues that have been grossly misunderstood it seems by a majority of the electorate.

I regard both the “bailout” bill and fiscal stimulus as having been essential to the country’s economic welfare.  The problem is that the first was badly executed and explained and the latter poorly crafted so as to result in far less in economic stimulus than could almost certainly have been achieved with a better designed (less political) bill.

Unfortunately, we are going to have a lot of Congressmen and Senators elected next week who wouldn’t voted for the TARP bill or any economic stimulus.  This is frightening, very frightening, and it doesn’t bode well for the ability of the incoming Congress to tackle future economic crises.  Let’s hope some sense yet creeps into the public debate in advance of next week’s election.

According to a story on Bloomberg.com yesterday, “[t]he U.S. government and the Federal Reserve have spent, lent or committed $12.8 trillion, an amount that approaches the value of everything produced in the country last year, to stem the longest recession since the 1930s.  Astounding.  This kind of comparison begins to put some meaning behind the very significant numbers. 

Also valuable yesterday was a graphic in the New York Times, entitled Schott’s Stimulus Simulator, copied below.  Gee, trillions is a lot.  

 

In my post on this blog yesterday I noted the growing chorus of political commentators who believe that this country and its leadership is not taking our country’s present economic crisis seriously enough.  Add one more commentator to the list.  Today in the Washington Post, David Ignatius joins the chorus with his piece A ‘Phony War’ On the Crisis

In his column, Ignatius likens our response to the present “crisis” to the time in history when Neville Chamberlain was still Prime Minister of Great Britain and acting as if the problem with Germany could be dealt with short of war.  It couldn’t then and it probably can’t now.  

This is no ordinary recession.  I have lived through a few and am startled when I read that current unemployment is about the same as it was during the early 1980s.  I was just out of graduate school in the early 1980s and the times had a completely different feel to the times today.  Today, it is as if much of our economy has ground to a standstill.  I talk to friends looking for employment and they are reporting that jobs have almost completely dried up.  And it is going to get worse, a lot worse, before it gets better. 

Ignatius’ perspective on our lack of real action in dealing with this crisis is most valuable.  He faults the President for, in a time of economic crisis, putting together a cabinet with almost no real-world business experience.  Here’s what he has to say about our Republican and Democratic Congressional leadership:

Republicans and Democrats are sticking to party-line votes on many key issues. The Democrats were egregious in packing the stimulus bill with pet projects that won’t stimulate much except campaign contributions and in sticking with earmarks — a symbolic outrage that Obama promised during the campaign he would eliminate. But the Republicans have been even worse in their strategy of opposing recovery plans, which has given a legislative face to Rush Limbaugh’s “I hope he fails.”     

Unlike the country’s reaction to the September 11 terrorist-inspired crisis, there is no sense that the country’s leadership perceives the degree of the risk that the country faces, or that we are indeed even in “crisis”.  And, while as a country we perhaps overreacted to the crisis of September 11, it is clear we are not treating our present economic crisis with the respect it deserves.  What it deserves is the putting aside partisan politics and ideological agendas in favor of unified action in the national interest.

One thing the country may need to do is spend additional money, both in supplementing the funds already committed to the banking industry and perhaps in additional stimulus funding.  If it comes to the latter, this time around we need to do it right with clear criteria, developed with leadership from both parties, aimed at maximizing short-term economic impact.

Having said this, however, I fear our political leadership will not act until things get a lot worse.  Let’s just hope that by then it is not too late.     

There’s another great piece by David Brooks in the New York Times today.  It’s entitled Taking a Depression Seriously.  He makes a number of dynamite points.  I will note two.  The first is that the Republican approach to the economy has been completely wrong and as a result has amounted to a mere “no” when so much more is needed.  The other is that Democrats, facing the biggest economic crisis in decades, appear to be doing too much else.  Here’s how Brooks puts this latter point:

Democrats apparently think that dealing with the crisis is a part-time job, which leaves the afternoons free to work on long-range plans to reform education, health care, energy and a dozen smaller things.

I agree as I most often do with Brooks.  It is further evidence to me of a broken political system.  On one hand we have Republicans that are so tied into an ideology where’s there is but one solution to everything economic–lowering taxes–that they can’t mount an effective and rational opposition to the Democratic plan.  On the other hand, we have a Democratic Party that has bungled the stimulus by reducing its effectiveness with an liberal Democratic wish list and doesn’t seem to understand that our country has one very major problem–the economy–that needs solving before anything else is tackled.   

We need something in this country to move us off of our present deadlocked course.  I believe what we need is a viable third party or at least a third force, of independents, who could advocate for the rational without concern for party identification or special interests.  I have concluded that it’s the only path forward.  For now, we will muddle along.  Muddling along, however, might just fail us this time.

We’re getting used to talking about money in the trillions of dollars.  How much is a trillion anyway?  Here’s an excerpt from Kathleen Parker’s column in today’s Washington Post (A Cool Look At Those Trillions) to give us some context:

Chris Martenson’s online “Crash Course” in economics explains a trillion this way: First, picture a million dollars as a four-inch stack of thousand-dollar bills. A comparable billion-dollar stack is 358 feet tall. A trillion-dollar stack of thousand-dollar bills stands 67.9 miles high.

It’s a bit mind-boggling and, indeed, a whole lot of money.  Yet Kathleen Parker’s column today and a superb column by Steven Pearlstein in Wednesday’s Post (Debt Doesn’t Have to Be A Burden) explain why, as large as trillions of dollars are, these sums aren’t as frightening as they might first seem.  Of course, we can’t go on doing this forever, but for now, they are probably necessary and manageable.  I recommend both articles.

Another worthwhile-read from last week if you have the time is Obama’s Ball and Chain by the New York Times’ Thomas L. Friedman.

Apologies for being ‘off the air’ late this last week, but the organization for which I work was meeting in Washington, DC and I was completely consumed by it.  Hopefully, this week will be back to normal. 

David S. Broder’s column in today’s Washington Post adds an adjective to the ones I’ve seen most often attached to President Obama’s speech on Tuesday night.  In addition to ambitious and audacious Mr. Broder would have us add “risky”.  I’d go one step further and say “dangerous” as well.  Here’s an excerpt from the column entitled Obama Rolls the Dice:

The size of the gambles that President Obama is taking every day is simply staggering. What came through in his speech to a joint session of Congress and a national television audience Tuesday night was a dramatic reminder of the unbelievable stakes he has placed on the table in his first month in office, putting at risk the future well-being of the country and the Democratic Party’s control of Washington.

The country has come out of a rough 8 years of a presidency that did little of merit other than “keep us safe”.  I would add that I’m not even certain of the “keep of safe” yet.  It remains to be seen if seeds sown by the methods and tactics employed to keep us safe sprout and grow into even greater threats and dangers to the nation.  The point is that Bush left the country a much weaker one than the one he inherited.  It is into this scene that Barack Obama steps onto the national stage with a clear mandate to change direction – to address our ills and get us back on our feet.  And this he is telling us he intends to do, but much more as well.

It is the “much more” that’s concerning people.  Wouldn’t it be enough to simply right our economic boat?  Wouldn’t he be a great President if he just accomplished that well while he begins to lay the foundation for most of the “other” in a second term?    

I am concerned that the agenda is so expansive that it and therefore the President can’t help but fail.  The first and most likely failure is political.  Too ambitious and bold and Obama risks not getting the critical 2-3 Republican votes he needs in the Senate, let alone carrying all Democrats.  Political failure is dangerous.  It has the potential to weaken our government and diminish our standing in the world.  I am also concerned that with so much on the table that deliberation will be rushed.  We will not be able to address issues as carefully and as rationally as they need to be addressed.  They will be imperfect, if not deeply flawed, just as the stimulus was rushed and deeply flawed.  That risks another failure–failure of the policy to accomplish its desired objectives.  The verdict will be out for a while on whether the stimulus bill is going to work.  Are we ready to rush into so much else as well.

I conflicted in the sense that I agree there is much that needs to be addressed.  It is just that I’m uncomfortable in moving so fast.  I’m also uncomfortable with the Democratic Party having sole control of this process.  I’ll be frank in admitting that I do not see the liberal experiments of the New Deal or Great Society as being resounding successes.  Yet this is that and more.  Yes, we need to address a host of issues but we need to take great care before we create new government programs to address them.  We can’t afford new entitlements when the ones we have are out of control. 

Read the David Broder column in its entirety.  He ends by noting the dangers of the world in which we live.  Taking risks at home may leave us less able to address those risks in the world at large.  There is indeed danger in the President’s expansive call to action. 

Another useful perspective on this is offered today by William Kristol, now of the Washington Post.  His piece is entitled Republican’s Day of Reckoning.  I agree with him that what Republicans need to do is “[s]low down the policy train.  Insist on a real and lengthy debate.”  For me this is important, not to increase the Republicans’ political standing or the party’s chances of winning the next election, but to save the country from foolish, dangerous and ill-conceived public policy.  I don’t care if Republicans ever win the presidency or control of Congress again, so long as their opposition is able to accomplish two things:  First, check the excesses of the Democratic party and its liberal ideologues.  Second, slow down the process and allow a rational debate that increases the chances of solutions that can work.  That’s a tall order, I know, especially as both parties are most often less interested in solutions that work than in winning the next election.  

I remain concerned that the Stimulus Bill is going to live up to its title.  Weighing in on this today in the Washington Post is Robert J. Samuelson in piece entitled Obama’s Stunted Stimulus.  Among his criticisms of the bill is Samuelson’s view, echoing my own and previously expressed here, that the Alternative Minimum Tax fix that the Republican moderates managed to get inserted into the bill at a cost of $85 billion isn’t very stimulatory.  Samuelson additionally observes that Congress would have passed it anyway, as it does every year. 

Given that the country needs more real stimulus, how about the President and Congress taking some time and passing an $85 billion stimulus bill that actually stimulates the economy and upon which both Democrats and Republicans can agree.  It is entirely doable and most needed.

Another interesting idea, aimed at the banking crisis, was floated in an Op-ed in the Washington Post yesterday by Ricardo J. Caballero, the head of the Economics Department at MIT.  The piece is entitled How to Lift a Falling Economy.  He suggests:

The government pledges to buy up to twice the number of bank shares currently available, at twice some recent average price, in five years.

While the policy is about future (and unlikely) interventions, the immediate impact would be enormous. In particular, it would turn around the negative dynamics of stock markets, and it would allow banks to raise private capital.

It’s intriguing, and since nothing else is working, it might be worth a try.  It’s certainly better that the “nationalization” option so seemingly popular especially among liberals. 

So we are informed in a piece by Floyd Norris in today’s New York Times.  Whereas a $100 investment in a major stock index would now be worth $53, it would be worth $45 in Great Britain, $23 in Russia and $3 in Iceland.  Japan, by the way, beat the U.S. at $59.  The bottom line is that it is pretty bad everywhere.  It’s an interesting piece in that it puts the U.S. economic situation in a broader world perspective.

On the subject of the economy, there’s also a worthwhile Op-ed by Paul Krugman in the New York Times today.  It’s entitled Who’ll Stop The Pain.  It discusses the difficulty in breaking out of a recession such as the one the country is currently experiencing.

The difficulty for the individual consumer was brought home to me in a Michael Kinsley Op-ed in the Washington Post this morning entitled Upside-Down Economics.  Here’s the opening paragraph:

In January, Suze Orman, the blonde financial adviser who’s all over TV telling you to cut up your credit cards, went on “Oprah” to discuss how to cope with the recession. Orman recommended not eating in restaurants for a month. The appalled National Restaurant Association pointed out that if every “Oprah” watcher took this advice, it would cost 53,000 jobs.  

That’s the dilemma we face as consumers.  The more defensive we get, the worse we make it on others and the economy as a whole.  I’m sure not witnessing much of a slowdown in Washington, DC, however.  I met friends for lunch yesterday for “Restaurant Week” and there wasn’t an empty table and a line out the door when we left.  A friend told me that they couldn’t find a parking place at a shopping mall on Saturday.  I don’t think this is true out in America where the federal dollar looms less large.  Here, a huge part of the economy hums along nicely confident that the Federal government won’t be laying off or furlowing workers any time soon.  If anything the stimulus will mean even better times for the DC area.  It’s nice for us in DC, but not real.

 

 

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