Friday, February 13, 2009

Is the stimulus bill good enough?

By Michael J.W. Stickings

Krugman says no:

By any normal political standards, this week's Congressional agreement on an economic stimulus package was a great victory for President Obama. He got more or less what he asked for: almost $800 billion to rescue the economy, with most of the money allocated to spending rather than tax cuts. Break out the Champagne!

Or maybe not. These aren’t normal times, so normal political standards don't apply: Mr. Obama's victory feels more than a bit like defeat. The stimulus bill looks helpful but inadequate, especially when combined with a disappointing plan for rescuing the banks. And the politics of the stimulus fight have made nonsense of Mr. Obama's postpartisan dreams.

I agree, and I recommend Steve Benen's excellent post responding to John Cole's assertion that a larger bill just wasn't politically "feasible":

[W]hat if the president had started with a much more ambitious proposal, along the lines of Krugman's recommendation...

Let's say the president launched this endeavor by emphasizing the projections of a three-year economic gap of $2.9 trillion, and against this backdrop, unveiled a $1.2 trillion plan that emphasized the most stimulative measures (infrastructure, low-income aid, and states), while de-emphasizing less stimulative measures (tax cuts).

Now, I understand the argument -- if Collins/Snowe/Specter weren't comfortable with a $900 billion package, they certainly wouldn't go for a $1.2 trillion package. But I'm not sure. These three took a surprisingly arbitrary and haphazard approach to the negotiations. They wanted a smaller number, just so they could say it was smaller. They eyed $100 billion in cuts, because $100 billion had a nice ring to it. They were thrilled to fall under an $800 billion ceiling, not for any policy goal, but because it sounded "reasonable."

It seems more than plausible to me that if the House passed a $1.2 trillion plan, Collins/Snowe/Specter would start talking about the virtues of $1.1 trillion, or possibly just rounding it down to $1 trillion. And if so, and Krugman's right about the need for a more ambitious policy, it suggests we would have ended up with a bigger stimulus if we'd started with a bigger stimulus.

I think that's right. Obama should have pushed for a larger package from the outset and the Democrats should have been willing to let the Republicans filibuster (and express their opposition to helping the American people through this difficult time). I realize that would have been risky -- the risks being: no bill at all, or a lengthy delay, or perhaps ultimately a smaller package -- but the centrist gang likely would have agreed to a larger package if the starting point had been higher.

As it is, the bill is much, much better than nothing -- I'm really trying to be glass-half-full sort of guy here -- but there is legitimate concern that it won't stimulate the economy nearly enough.

And so some of the blame must fall on Obama and his post-partisan efforts. It's fine to reach across the aisle in hopes of securing bipartisan support, and hence broad political legitimacy, but at what cost? In this case, it may be at the cost of failing to do enough to pull the country out of economic crisis.

"There's still time to turn this around," concludes Krugman, "[b]ut Mr. Obama has to be stronger looking forward. Otherwise, the verdict on this crisis might be that no, we can't."

And the American people can't afford for failure to be an option.

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