Tonight President Obama is scheduled to give a speech before a joint session of Congress, something of a rarity other than for a State of the Union message or national emergency. Is there something he could say that I’d support? Or, at least, not kvetch about?
I’ve made no secret of my skepticism about the effectiveness of Keynesian stimulus, largely on pragmatic grounds. Among the reasons for my skepticism are those of timing, effect, and the likelihood that large spending bills will be used to cultivate political goals rather than to maximize their economic impact. Nonetheless, I think it’s only fair if I outlined the general characteristics that I think an acceptable bill should have.
Actually, it’s pretty simple. I think that any acceptable additional fiscal stimulus should be large enough to matter, highly targeted, should not put us in primary default, and should optimize inputs and outputs. That’s essentially the opposite of the 2009 stimulus bill which was too small and diffuse to produce the results its economic proponents predicted, produced too much debt relative to its impact, apparently concentrated mainly on maximizing inputs, and ended up as a Congressional Christmas list.
What we’re likely to get, if early hints are any indication, is a bill that’s absurdly small relative to the theoretical requirements, is another grab bag, and functions mainly as a red cape to wave in front of the deficit hawk Republicans in Congress. Leveling the charge of doing nothing when the fate of the nation is at risk (when the alternative you’re presenting is doing something fatuous) is a good trick if you can make it stick.
This doesn’t fit well with your narrative from the post following this one. More stimulus means more borrowing, not less. So American taxpayers are deleveraging all the while the government is borrowing in the name of American taxpayers. Yeah, yeah right now interest rates are low…right now. If we have a fiscal crisis…lol.
As I noted in the comments of the post above, they’re not incompatible. However, you’ve got to increase taxes in a way that decreases economic activity less than the stimulus you’re enacting increases it. Alternatively, you can reduce spending in ways that are less productive while increasing spending in ways that are more productive.
Note, too, that I’m not enthusiastic about fiscal stimulus. I merely look upon it as politically inevitable and what I’m trying to do here is outline the parameters of damage control.
I hate to be that guy . . . but the President speaks tomorrow night before Congress or the Green Bay Packers, I forget which.
Tonight, the key points of the speech will be discussed by the pundits on the receiving end of leaks.
Pension obligation buyouts of state and local governments in exchange for them switching all new employees to defined contribution plans is a federal stimulus I could get behind.
I haven’t mentioned this recently but I used to be an antiques dealer. Something that was forcibly impressed on me during that period (and which should be obvious to any student of economics) is that the price of something is largely determined by two factors: how desireable it is and how much of it there is (condition is another factor but that’s part of a different story).
I think that President Obama has the defect that most presidents do: he thinks there’s an infinite appetite for the sound of his voice. Nearly the opposite is the case. I don’t think that most people look forward to presidential speeches much and the more of them he gives the less valuable each successive speech becomes.
I think that “large enough to matter,” if you believe in the pseudo-Keynesian ideas about stimulus, and “should not put us in primary default” are fundamentally incompatible at this point. It does not appear that we can sustain the level of debt we have now (Federal or most states), and that debt level is rising rather than falling. If we could freeze spending in place in constant dollars, we’d grow our way out of the hole shortly. The problem is that the baseline to which the government is budgeting is predicated on constantly rising spending in constant dollars. Net result: primary default or hyperinflation.
If we cannot fundamentally reform the government’s power to spend and regulate, and if we aren’t suddenly overrun by angels who don’t realize the opportunities for personal enrichment offered by government service, I don’t see a third option. The current levels of government regulation produce such a deadweight loss on the economy as to preclude growing our way out of the problem. That’s getting worse, not better.
That’s my position in a nutshell, Jeff. I also think that while possible constructing an effective stimulus is very, very difficult and, consequently, very, very unlikely.
There is a saying, at least in my line of business, ‘I could have made it shorter, but I didn’t have the time.’ That applies to what I expect of Obama’s speech — it could be much better and punchier, if he had the time and confidence to execute it. (Not a criticism specific to any politician in particular).
But it also applies to regulations, we could make them simpler and less of a drag, but we don’t want to expend the resources and the risk of doing so.
There is a saying, at least in my line of business, ‘I could have made it shorter, but I didn’t have the time.’ That applies to what I expect of Obama’s speech — it could be much better and punchier, if he had the time and confidence to execute it.
I could write his speech for him. It would be simple and truthful. Here’s the entirety of the text:
“I got nothin’.”
Instead we will get at least thirty minutes of BS about extending or exhuming programs that already didn’t work, and won’t work now. At least the Republicans are going to spare us a response full of their brand of crap. Thank God for small blessings, and Go Pack!