A month into the Obama administration, who could it be that left-wing firebrand economist and New York Times columnist Paul Krugman is denouncing? Is it the dividers? Is is the extremists? Is it the old way of politics?
No, it’s moderates and centrists. And in a somewhat twisted sort of way, I think I may join Ross Douthat in agreeing with him.
Krugman is furious because he thinks the “stimulus” bill is too small and contains too many “centrist” measures like tax cuts and provisions to help home owners. He thinks the bill needs to spend much more money, and do it all in direct government spending and programs for “the afflicted”. (Personally, I’ve considered Krugman to be afflicted for many years, but I’m assuming that he doesn’t share my view and is thus not being self-interested.)
Ross points out that in a sense the “moderated” stimulus bill which our treasured moderates like Sen. Arlan Spector have negotiated for in the Senate achieves the worst of all possible worlds: According to hard core Keynsian progressives like Krugman the stimulus bill will not achieve the ends that they wanted it for. And for those of us who don’t think the stimulus bill will achieve anything positive by spending a whole bunch of money that we don’t have on projects that mostly won’t even take place until after the year is over, I can’t really convince myself that wasting 800 billion we don’t have is really that much better than wasting a trillion we don’t have.
I don’t think we should pass this stimulus bill. (And I’m increasingly thinking I was wrong to support the financial bailout back in September/October.) And given that, taking 20% off it hardly makes it much better. Plus now those who demanded it won’t even have to accept responsibility for it if it fails, since they can always say, “We were sabotaged. It wasn’t big enough.”
Sometimes moderation is overrated.
One of the best features of the original plan was aid to cash-strapped state governments, which would have provided a quick boost to the economy while preserving essential services. But the centrists insisted on a $40 billion cut in that spending.
This is the statement where I just gape. Either that, or call BS. Perhaps someone else can explain to me how giving money to the state governments that have run themselves into deficits will help stimulate the economy? Let’s see–the government employs people who will hopefully spend their paychecks and move the money back into the private sector, so I suppose that could have an indirect effect. But if that’s one of the hopes, you can accomplish the same thing with *gasp* tax cuts. But how are the state governments going to spend these handouts? If they’re running budget deficits, that money is just going to go to shore up the budget. How does that work back into the economy? How are the “essential services” going to help? And by essential services, we’re talking about government entitlement programs and government facilities like prisons. If we’re thinking that school upgrades and renovations are going to stimulate the economy, we must be counting on the economic pickup coming 5-10 years from now, when those students (assuming they receive a better education) will enter the workforce.
I just don’t understand. Every time I try to figure out how giving this money away is going to stimulate the economy, I keep coming back to people having more money to spend. And you can just as easily give people more money to spend by cutting taxes. Am I missing anything?
Ryan,
I think the argument runs as follows:
1) We are trying to spend money to stimulate the economy;
2) One of the difficulties with spending money is identifying worthwhile projects;
3) State governments have already identified a number of projects they feel are worthwhile (and probably would have been funded if the economy hadn’t tanked);
4) Ergo, if you’re going to hand out money, state governments would be a good place to start (and it would preserve existing services).
I hear you. Frankly, it’s beginning to strike me that the appeal of Keynsian economics is mainly that some people want to spent that money regardless, and Keynsianism essentially tells them, “Don’t worry. You can eat all those deserts and it’s good for you!”
The bit in Krugman’s column that really struck me was, “Even if the original Obama plan — around $800 billion in stimulus, with a substantial fraction of that total given over to ineffective tax cuts — had been enacted, it wouldn’t have been enough to fill the looming hole in the U.S. economy, which the Congressional Budget Office estimates will amount to $2.9 trillion over the next three years.”
It strikes me as fundamentally problematic to estimate that the downturn will result in a spending “hole” of 2.9 trillion and then turn around and simply borrow 2.9 trillion to spend thinking you’ll somehow “make it up”. Normally what that hole ought to do is result in getting rid of less efficient businesses and practices, thus eventually increasing productivity, creating wealth, and putting the economy back into growth. Simply pouring money out (and I’m not clear how borrowing in this way on the world scene is fundamentally different from printing more money) does nothing to sift out the bad and reward the good, it just slows the process down, so far as I can see.
John,
Okay, I think that’s somewhat of an adequate answer, especially as it seems to play with subsidiarity. At least direct the money to local governments, since they have a better idea where the money would be better spent.
Still, when you consider that Wyoming–because of its balanced budgets and reserve funds–doesn’t really need any of its portion of the stimulus bill (though apparently we’ll fight tooth and nail for our portion), and California–bankrupt because its poor budgetary practices–needs a sizable chunk of money just to balance their ledgers, it makes you wonder just how wisely even state governments will spend that money.
I quite concur with your line of reasoning, though not entirely with that of Krugman or Douthat.
Most disheartening (but, let us face it, hardly surprising) has been the lack of bipartisan craftsmanship on this towering chunk of gristle we’re about to be force-fed. There hasn’t even been a pretense of bipartisanship (again, no shock there), and I see any attempt to brand portions of this stimulus bill as “too centrist” to be gallingly disingenuous, particularly coming from Krugman.
I do like your line about moderation being, at times, overrated. How true. Especially the misconception of moderation, in Krugman’s case.
All irrelevant, as Porkapalooza bill passed 61-37 in Senate. Surprise surprise the GOP senators who joined the majority were my own Arlen Specter and the two Maine ladies. Now on to House-Senate conference committee for final round of sausage making. Will be interesting to see if final package includes provision for Ultimate Health Care Czar/Czarina. Great analysis on Bloomberg by former NY Lt. Gov. Betsy McCaughey on how this office will essentially set prices for any and all medical procedures. Surprise surprise out of hands of medical pros. So fans of Hope and Change don’t start crying if the real result of H&C is life-preserving surgery for Grandma. Coverage will get really really expensive for seasoned citizens. And my Spidey Sense tells me a bunch of Terri Schiavo cases around the bend. Thanks a bunch Obama voters. Hope you’re happy about this, Mr. Krugman.
Or lack of life-preserving surgery for Grandma. Maybe even the unborn. Could be a subtle form of FOCA. Stay on guard.
The Freedom of Choice Act is a way of energizing the base.
I think the idea is to pass FOCA bit by bit. There is no way FOCA in its form could pass through either the House or the Senate. It’s too extreme and opposition would almost ensure political suicide for the Democratic Party.
However, if you do it bit by bit, it hardly goes noticed. Why?
I really support the anti-FOCA campaign going across the United States parish to parish. But why wasn’t this happening, in say, October?
Not to mention, considering the improbable chances of FOCA which I believe many of us recognize, why did the pro-life movement not energize its efforts toward things that are likely: the Mexico City Policy being overturned and federal funding of embryonic stem cell research.
In a post advocating letter writing to Congress, I pointed out a bill in the House H.R. 34, there is a push to delay Bush’s executive order for conscience clauses to protect health care professionals from being forced to perform abortions. Why? When Obama finally gets a Secretary of Health and Human Services, they can reverse the conscience clause and put the consciences of many pro-life doctors and nurses at risk.
We’ve seen the fight over Title X funding which goes to health “clinics,” i.e. Planned Parenthood and public funding of contraceptives and abortifacents. If I’m not mistaken, Plan B is now an over the counter the bill.
Losing all these little fights actually amounts rather quickly. We’re writing about FOCA in our parishes and are opening ourselves to a host of losses. We’ll win in the long run, certainly. I’d like more strategy and less casualities.
I’d rather have it all-out as well; let’s see what the consequences of this insane (from my point of view anyways) policy decision really are – and let’s remember the lessons this time.
Frankly, it’s beginning to strike me that the appeal of Keynsian economics is mainly that some people want to spent that money regardless, and Keynsianism essentially tells them, “Don’t worry. You can eat all those deserts and it’s good for you!”
Well, Keynes did say “In the long run, we’re all dead.” (Keynes was homosexual and childless, and although it might be un-PC to say so, I imagine that influenced his outlook. I’m childless myself, and so I know you don’t immediately think in terms of future generations if you haven’t generated any yourself.) I’ve used that line of reasoning when I’m tempted by the dessert tray in a restaurant, but of course, you can get into trouble very quickly if you use it to justify eating chocolate cake for breakfast. This stimulus bill is chocolate cake for breakfast, lunch and dinner.
Mark Steyn pointed out the essential difficulty with Keynesian economics – all socialist welfare states will run off the rails eventually because you need to keep the birthrate high in order to sustain the state’s spending. Sweden seemed to have the right idea back in 1970, when there were still a lot of young Swedes. Now things aren’t looking so hot. Who is going to pay for those cradle-to-grave programs when more citizens are closer to the grave than the cradle? Sarkozy has had a heck of a time trying to even modestly scale back the French welfare system. It’s ironic that we are about to expand entitlement spending on a huge scale in this country just as some European leaders are belatedly realizing that their own entitlements are becoming unaffordable.
But hey, if you take the attitude that future generations can go to Hades and what’s important is “I’ve got mine, Jack,” than I suppose you can live with that.
I’ve heard speculation that the cost of this will start hitting at about the same time as it will start actually kicking in (1-2 years). The cost will be necessarily higher taxes, and higher inflation (stagflation). You can’t pump 1 trillion $ into a recessionary economy without incurring massive inflation.