Saturday, January 10, 2009

Size Does Matter

As info continues to trickle out and be pieced together about the forthcoming stimulus bill and plan some notable economists and other commenters are worried that the plan offered by the Obama administration simply won't be big enough.

Folks are also concerned with the amount of the plan devoted to tax cuts which could make up nearly half of the stimulus package.

Obama did say the other day that the plan was a work in progress and that they would be listening to critics and suggestions etc.

Hopefully we'll end up with a stimulus that does work.

Concerns come from, among others:

Paul Krugman, who says:

But Mr. Obama’s prescription doesn’t live up to his diagnosis. The economic plan he’s offering isn’t as strong as his language about the economic threat. In fact, it falls well short of what’s needed.
(see also a string of recent blog posts)

John Judis (via TPM):
There's much to like in Obama's plan. But there are two important ways he may have to go further. Most economists agree that what finally pulled the U.S. out of the Great Depression was military spending for World War II. Some liberals argue that if the Roosevelt administration had not abandoned a Keynesian stimulus strategy in 1937-38, the U.S. might have gotten out of the depression without a war. But in 1936, unemployment was still at 16.9 percent; by 1942, after two years of war spending, it was 4.7 percent, strongly indicating that it was war spending that did it. I am not suggesting that the United States start a world war in order to solve the world's economic problem. But I am suggesting a strategy that could be called the fiscal equivalent of war.
Andrew Leonard, offers a bit of political prospective and urges patience:

It's a good thing that the likes of Krugman and Stiglitz and Judis are pushing Obama to be more ambitious. Constant pressure should be applied. But expecting Obama to achieve all things at once, or accusing him, as Judis did, of "underestimating the problem he and the country faces" because he's not incorporating an utterly unrealistic transformational agenda in his first act of governance is unfair. Getting the country out of the mess it is in right now, and getting traction on some of the truly immense problems that the U.S. and the world face, will not be achieved this year, or even, as Obama has acknowledged, in "many years." With his eye to the long term, Obama apparently has decided not to engage in all-out political warfare in his first skirmish. We won't know if he's being too cautious, or laying the groundwork for a string of successes that build on each other, for quite some time to come. But I, for one, am not yet ready to be disappointed. I'll wait to Jan. 21 before I abandon ship.

Joe Stiglitz is worried about the appreciation of the underlying problems and the Fed's meandering thus far.

Some Senate Democrats met with Larry Summers and say the current plan looks a bit trickle downish.

As I mentioned above Obama has said that his team will be receptive to all concerns and that they want to hear if anyone has good ideas. Which is all well and good but as Ezra Klein pointed out what exactly does that mean and when will the incoming administration show us?

(HuffPo has the text of Obama's recent Econ speech and EK has video of the press conference where Obama answered questions about the criticism of the plan)

This post ended up being a bit link heavy and content light, my apologies. The bottom line is I'm worried that in an effort to get the stimulus package to pass with bipartisan support Obama is making it too small and relying too heavily on tax cuts. If it doesn't work, or even if just doesn't instantly make things better (which is pretty much garunteed, we're talking about allievating the recession here not insantly making everything tip top again) the Republicans are going to blame Obama regardless of whether he got some of them to vote for the package in the first place. Weaking the stimulus looks like it will fail on both fronts to me.

We'll see what happens...

Here is another NYT piece on the stimulus.

No comments:

Post a Comment