Can someone help me come up with an argument for why the Obama stimulus plan isn’t turning out to be a painful joke?
Thanks in advance.
(ed.note: I might even be serious. Not sure yet.)
(ed.note: Curious to hear what Krugman makes of this news.)
(ed.note: And now we have our answer. Krugman thinks it sounds pretty bad too.)
Here’s a post on the WSJ’s econ blog that you’ll want to read just to get a better sense of the backstory and scope of the mess we’re in.
Al Franken’s big recount win becomes official today — but a quirk of Minnesota law means his victory can’t be certified just yet. That and the day’s other news in the TPM Election Central Morning Roundup.
With the 9th day of the Israel-Gaza conflict done, there is little prospect for a cessation of the violence any time soon. And the Sunday morning talk shows had far more questions to offer than solutions to the crisis …
Full-size video at TPMtv.com.
Since my earlier post was more arch and cryptic, I wanted to expand on what seems to be the problem with the Obama stimulus plan, as revealed in the current round of leaks. I would point to three key issues. And I’m going to base these three on the premise — which is by no means clear — that the business tax cuts included in the bill aren’t particularly egregious on their own terms but rather ones that make some economic sense in the situation we find ourselves in.
So with that, the three.
First, there seems to be a decent consensus that the tax rebates from last year had little stimulative effect on the economy. So while it’s a good thing for families on the margin to get another $500 or $1,000, it’s not clear how much bang for the buck you’ll get for the money spent in terms of creating demand/consumer spending in the economy.
Second, the amount of the bill that comes in tax cuts leaves the spending side of the bill really small — judged by the standards of what most economists seem to think is necessary, like $400 billion over two years. So it’s not just the logic of the tax cuts on their own merits but the degree they’re beggaring the spending side of the ledger. (A lot of this just comes down to whether or not you buy into the Keynesian premise of the whole exercise, of course. But let me note for the record that there does seem to be a decent rationale for significant tax cuts in year one of the bill, since you need to get money into the economy rapidly and there may not be enough projects that can be started quickly. That leaves the question of why so much of it is also included in year two. I fear that may be the ‘tell’.)
Third, and in some ways this is the most troubling. It would be far better on many counts to bring in substantial Republican support for this bill. And I don’t just mean that in the BS sense in which President Bush usually meant it, which was to say essentially, ‘Of course we’d like you to vote for exactly what we want. More the merrier. But if you don’t want to vote for our ideal bill, tough luck.’ No, I think there’s a real logic in not going the 51 votes model President Bush followed. But Obama seems to be telegraphing that to a significant degree the fundamental structure of the legislation is being built around accommodating the concerns of Republicans — members of a political party that are about as unpopular and weak as you can get at the moment. And that sounds a lot like he’s negotiating with himself, something that will embolden opposition and invite Republicans to up the ante even further.
These are just leaks. We don’t have details. Some are speculating that this is part of some global head fake by the Obama folks. I hope so. But put me down as very skeptical.
Bob Reich was just on MSNBC commenting on the latest stories about the outlines of the Obama stimulus plan. Bob prefaces every statement, as he must, by saying he’s speaking for himself not the administration or transition team. Inevitably, though, he is part of the transition team and occupies a space to the left/Keynesian (though I’m not sure either is the best descriptor of the spectrum) part of the spectrum for the incoming administration. He was very positive on the tax cuts, which is a key tell:
TPM Reader CP checks in on the checks …
You assume that economic stimulus — i.e., short-term personal spending — is the goal of the $300 billion tax cut Obama is reportedly planning. But I suspect Obama intends to use tax relief as a fast safety net for those in the middle class falling closer to the blades of the financial reaper. Unfortunately, haven’t heard anything yet about help for the poorest of the poor, folks like me who are disabled and don’t pay any taxes because we don’t have any income.
I wanted to be clear in the earlier post and clarify if I wasn’t sufficiently clear that these checks can be very important for families and individuals. And that’s a big deal in itself. But we need both — help for individuals and families and also macro-economic stimulus. And to the extent that these tax cuts accomplish one and not the other (which I concede is very debatable proposition) my concern is that we may be shortchanging the second because the whole pie appears to be on the low side of what we’d expected and the size of the tax cut slice is pretty big.
As you’d expect, the Journal editorial page is already coming up with a string of bogus insinuations about the Minnesota recount, all suggesting that the process has somehow been rigged in favor of Al Franken or even that there’s some more Republican fantasy voter fraud involved. One point they don’t mention though: the canvassing board, the outfit making all the key decisions has at least as many Republicans as Democrats, and may actually have more Republicans than Democrats. What’s more almost every key decision has been made unanimously.
Secretary of State Mark Ritchie is an elected Democrat. He serves on the canvassing board automatically. For the rest he picked two Republican state Supreme Court Justices (justices appointed by Gov. Pawlenty (R)), one Independent judge appointed to the bench by former Gov. Jesse Ventura, and a fourth county judge who may be a Democrat or an Independent (we don’t know because it was a non-partisan election).
Needless to say, the Journal doesn’t mention this, but hints at it in this feeble excuse, claiming that the rest of the canvassing board has been “meek” in the face of Ritchie’s “machinations.”
Pretty pitiful, but standard fare from the Journal oped page.