Stimulus
The economy is in need of some big-time stimulus. What you want to hope is that with stimulus, wages and income (”main street”) can remain strong enough for long enough that the currently underway government interventions to fix the banking system (”wall street”) can work, and then private enterprise can get back to the business of taking out loans to fund new projects. What you fear is that the problems in the banking system will cause job and income losses so severe as to undermine the banking system faster than it can be fixed, leaving us God knows where. This probably means a bigger stimulus than what Democrats are currently proposing — something along the lines of a repeat of the earlier $152 billion package has a bit of a “bailing out the boat with a leaky cup” quality to it.
Brad DeLong says “I would say $300-$400 billion, aimed at least half at infrastructure and state budgets, all to be recouped in the out-years.”
Meanwhile, Roy Blunt is on a crusade to destroy the economy:
Rep. Roy Blunt, the Missouri Republican who serves as House minority leader, said he would support a stimulus plan if it did not include massive public works spending and budget bailouts for states that overspent on health care and other social programs.
“A stimulus plan that makes sense is something that I’ll be helpful with,” Blunt said, also on ABC television.
In other words, he would support a stimulus package that doesn’t include the most valuable stimulus measures. Beware any talk of “budget bailouts for states that overspent on health care and other social programs.” What’s happening to states is that when the economy slides into recession, tax revenues fall. At the same time, the demand for Medicaid and other safety net services rises. This creates budget deficits. Deficits that states are not allowed to run. So state government responds to downturns by cutting back spending, which makes the downturns worse. This is a bad feature of American federalism, and it would be good for some clever person to devise a means of forcing states to build up large “rainy day” reserves during the happy times in order to avoid this problem.
But the time to do that is before the downturn, not amidst one. Meanwhile, the victims of Blunt’s refusal to “bail out” state governments will be not state government, but rather you, me, and the rest of the public. And what makes this especially puzzling is that a secondary victim of a refusal to pass a solid stimulus package will be incumbent Republican politicians who desperately need some sign of economic improvement by Election Day in order to hang on to their seats.
38 Responses to “Stimulus”
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October 13th, 2008 at 3:05 pm
Also, a correction for Reuters: Roy Blunt is not the House minority leader — he’s the Republican whip. John “Crybaby” Boehner is minority leader.
October 13th, 2008 at 3:07 pm
Re “what makes this especially puzzling is that a secondary victim of a refusal to pass a solid stimulus package will be incumbent Republican politicians who desperately need some sign of economic improvement by Election Day in order to hang on to their seats ”
—————-
Nah. The constituents of those Republicans are some of the dumbest motherfuckers in the country. Trying to explain basic economics to them is like discussing Euclidean Geometry with a Jack Russell Terrier.
October 13th, 2008 at 3:08 pm
Er.. my sincere apologies to Jack Russell Terriers everywhere for the unfair comparison.
October 13th, 2008 at 3:15 pm
a secondary victim of a refusal to pass a solid stimulus package will be incumbent Republican politicians who desperately need some sign of economic improvement by Election Day in order to hang on to their seats.
On what planet will a stimulus package provide any sign of economic improvement before election day?
Also, the fact that we have politicians on the verge of proposing the government send checks to voters just before Election Day should be a wee bit troublesome, no matter what your political leanings.
October 13th, 2008 at 3:24 pm
Also, the fact that we have politicians on the verge of proposing the government send checks to voters just before Election Day should be a wee bit troublesome, no matter what your political leanings.
It’s not a new tactic. In ancient Rome, emperors who wanted to boost their popularity would send a wagon to drive through the city, with servants on the back tossing handfuls of gold coins to the assembled populace.
(Edward Gibbon uses the term “golden shower” to describe the practice, which made me giggle when I read it.)
October 13th, 2008 at 3:27 pm
Hopefully, Missourans will kick Blunt out in favor of Richard Monroe and we won’t ever hear from this clown again.
October 13th, 2008 at 3:51 pm
Roy Blunt is Cockney rhyming slang, right?
October 13th, 2008 at 3:51 pm
Matt:
The economy is in need of some big-time stimulus.
Or to put it in layman’s terms, the economy is like a giant clitoris.
Hopefully, Missourans will kick Blunt out in favor of Richard Monroe and we won’t ever hear from this clown again.
Yeah, hopefully. It’s still amazing to me Bush picked Bernanke as Fed Chair. Or that Paulson will be following the Gordon Brown plan.
Maybe Bush – who said Wall Street got drunk – remembered how Tony Blair backed him over Iraq and hence listened to Bernanke’s advice about following Brit Brown’s lead, thereby overruling Paulson? Maybe we have Blair to thank for not falling into the abyss?
October 13th, 2008 at 4:03 pm
Having the government borrow money from who knows where so that general contractors can hire illegal aliens to build things that leads to the illegal aliens either sending the money to Mexico or purchasing consumer items built in China is going to help the economy how?
Just like the conventional wisdom goes that you cannot have open borders and a welfare states, I doubt that the U.S. can sustain open borders and unlimited immigration along with make work government funded construction projects. And no, giving the illegals a piece of government issue paper like Senator Obama proposes will not help the economy any more.
I guess you can call this the double down theory of economic stimulus. The first one did not work, so lets try it again but even bigger this time.
I also wonder how a Depression era make work program is representative of change. Is this the best that the best and brightest in the Democratic Party can think of?
October 13th, 2008 at 4:09 pm
There has been a lot of debate about a “rainy day fund” here in Washington state. Some people have argued that the budget must be balanced every year meaning no surplus and no deficit. In 2007 Washington passed legislation which allows a rainy day fund to be created. Now, Washington is in a position to tap into the rainy day fund to help balance the 2009 budget. Yay. Although, I would argue that Washington should not be penalized for some budget planning by only providing funds to those states that are going bankrupt.
October 13th, 2008 at 4:16 pm
Why can’t states simply repeal their balanced-budget rules or permit them to be waived by a 3/5 vote in the legislature or during a recession?
October 13th, 2008 at 4:17 pm
One thing that may help: firms did not go on a hiring binge during the brief expansion that preceded this (other than construction and the mortgage industry and most of those excess jobs are already gone). Many companies stayed very lean, hence the long jobless recovery, with the result they don’t have a lot of positions they can cut now.
October 13th, 2008 at 4:41 pm
Now, Washington is in a position to tap into the rainy day fund to help balance the 2009 budget.
Well, I hope they invested it wisely. One of the scary consequences of Icelandic banks going tits-up is that it revealed the number of British local authorities, charities and NHS trusts who had their rainy-day money stashed in the Bank of Björk.
October 13th, 2008 at 5:37 pm
Matt Y.,
The rainy day fund idea you endorse was at the heart of the budget battle in California this summer. Schwarzenegger was insisting on the idea while the Democrats didn’t want it. Glad to see you standing up for common sense fiscal policy!
October 13th, 2008 at 5:49 pm
maybe the governor of missouri shd get on the phone and straighten this blunt fellow out
October 13th, 2008 at 6:09 pm
Well, actually (and this is speaking as someone who got laid off on Friday from a construction company working on a government project), any companies that work on government projects (at least in every city I know of) have really strict certified payroll requirements and here in Chicago very strict union-membership requirements (as well as MBE/WBE/DBE requirements and in our case requirements to employ people in the community). This statement is insulting to me personally, because you know who this sort of thing actually would keep employed? Me. And everyone I work with on site (mostly project managers making good salaries). And all the union-card-carrying guys who come to my job site every day looking for work. And all the architects our firm no longer employs. And the half of our accounting department that’s gone. And on and on. Productive, competent people in a whole bunch of fields, not only people who physically build things. It would keep my company open, a company that regularly contributes to the community and is incredibly good to the people that work here. So, you know. Fuck you superdestroyer. If you want to say that the government shouldn’t be sticking their fingers into the economy and creating work in general that’s one thing, but painting the construction industry as one that doesn’t deserve support because ‘they hire illegals’ is ridiculous. I’m a secretary, and a pretty good one, so I don’t think I’ll have a lot of trouble finding work. But our project managers and superintendents (and a lot of the architects too) are screwed, because every other company in the field is also laying people off. Is it good for our economy to have skilled people doing nothing? No. It is not. Especially not when we have legitimate problems with our infrastructure they could be working on.
October 13th, 2008 at 6:26 pm
Blunt hardly got his job and keeps his job based on his grasp on counter-cyclical economic theory. In fact, since he’s an R, it can be fairly said that he got his job and keeps his job based on the skill with which he holds off acquiring a grasp on counter-cyclical economic theory.
October 13th, 2008 at 7:04 pm
Rabbit,
Look at and you will see that illegal aliens have been caught working on a variety of government contracting jobs.
What why should some other company have to pay higher taxes and lay workers off so that your company can keep paying full union wages that are usually well above market rates.
As usual, the government make work projects are more about picking winners and losers than about actually helping people.
October 13th, 2008 at 7:13 pm
Most states already have Rainy Day Funds with varying requirements and/or targets for funding them. The problem is that in a recession, no Rainy Day Fund is going to be enough to get the state budget through without spending cuts and tax increases. Going to a Rainy Day Fund is a one shot deal and if the economy doesn’t pick up quickly, that’s it, you have to move on to other actions. Also there are real opportunity costs to socking away hundreds of millions of dollars in a Rainy Day Fund
October 13th, 2008 at 8:24 pm
Oh, yea, totally. Because sometimes people get away with shit they’re not supposed to, we should put absolutely no resources in to preventing an entire sector of our economy from becoming unemployed. That is excellent logic, thanks.
October 13th, 2008 at 9:28 pm
Actually, there is an alternative to compelling states to adopt “rainy day funds.” The Canadian Federal Government subsidizes all but its two wealthiest provinces. Michigan subsidies local governments and school districts. The US Government, with its superior taxing powers, easily could subsidize the poorer states.
October 13th, 2008 at 10:57 pm
Roy Blunt and Republicans can’t lose enough power, or lose it fast enough, if that’s how he thinks we should deal with the economic situation.
October 14th, 2008 at 2:12 pm
Superduperdummy, what’s your great idea for helping get people back to work? Insulting more honest working americans, spewing right-wing talking points, and tax-cuts for the filthy rich? Just asking. Hey, howz that trickle-down theory working out, anyway? Free Markets? Deregulation? Oh and that link to the ICE website, notice how most of the raids occurred at Military installations, just another symptom of Bush Admin. lack of oversight in Military contracting.
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