Eighteen months ago, many were begging for a larger stimulus package. I know because I was one of them. I came to that conclusion not because I’m the single most brilliant mind in the universe but because I make a habit out of doing the kind of a research that would make a PhD candidate collapse and I listen, intently, to people far smarter than myself (and there are tons of them). I also listen to the opposition, at least until I realize that what they say doesn’t jive with reality.
That was the case with the stimulus spending in the winter of 2009. I thought it was WAY too small and didn’t fully recognize the magnitude of the collapse in the economy. Further, I thought that package was far too heavy on tax cuts which have a marginal impact in times of economic stress (like a recession or depression). My idea was to spend an assload of money on transportation infrastructure because it provides millions of quick jobs and leaves us with an asset we desperately need for the next leg of economic growth.
Certain people, like Kevin Hassett and Niall Ferguson took the opposite view. Niall even went so far as to deride the ideas of his intellectual superiors like Paul Krugman and Brad Delong, both of whom advocated for larger stimulus packages in 2009, something he’s still doing today. DeLong wrote this piece today which should be required reading for everyone in the US since it’s time to get everyone on the same page…
The reassuring thought was that the ARRA was just one — and not necessarily the biggest — of stimulative measures available beyond the standard Federal Reserve framework of using open market operations to reduce short-term Treasury rates. In fact, a Rooseveltian amplitude of acronyms — TARP, PPIP, MMIFL, TALF, CPLF, TAC, HAMP – are at policy makers’ disposal.
But Congress is balking. Republican legislators from states with double-digit unemployment have put party above country. Blue Dog Democrats, who think that they can marginally improve their chance of gaining more terms in office if they publicly worry about the deficit to the exclusion of all else, have put self above country and party. And, significantly, the Obama Administration has never offered a grand bargain for tax increases and entitlement caps in the future in return for more spending now to restore full employment.
Professor DeLong is absolutely right about the Republicans and blue dogs playing politics with the economic well being of this country. All you need to do is look at one thing to realize these people are either criminally stupid, on a political bender, insane or some combo of all three : HOOVER DID EVERYTHING YOU SUGGEST AND IT MADE THE DEPRESSION WORSE. Until old Niall and Kevin can explain to me why they are advocating the same positions taken on by the worst President in the history of this country, I really wish they’d just shut up. If not, I wish anyone near them would actively heckle them.
Krugman says we’re heading for a third depression… Personally, I think he’s right. He also thinks that business investment isn’t being held up because of the government, it’s being held up because of the lack of demand. Krugman, just FYI, is right and it’s super, super simple… BUSINESSES DON’T HIRE UNLESS THERE IS A DEMAND FOR THE GOOD AND/OR SERVICE IT PRODUCES. Taxes are irrelevant. Deficits are irrelevant. A black man in the White House is irrelevant. A bunch of white boomers marching in the street are irrelevant.
Here again, it’s all about demand and that’s something a historian like Ferguson is never going to understand.