The whopping $787 billion dollar stimulus package has been passed by the Congress and is waiting for the president’s signature, which it almost certainly will get:
WASHINGTON — Congress on Friday approved a $787 billion economic stimulus measure, meeting the crushing mid-February deadline that Democrats had set for adopting the centerpiece of President Obama’s early agenda but without quelling partisan divisions in Washington. Not a single House Republican voted for the bill.
The House vote was 246 to 183, with just 7 Democrats joining all 176 Republicans in opposition. In the Senate, the vote, 60 to 38, was similarly partisan. Only 3 centrist Republicans joined 55 Democrats and 2 independents in favor.
The Senate finally adopted the bill at 10:47 p.m. after what appeared to be the longest Congressional vote in history. The peculiar 5-hour 17-minute process was required because Senator Sherrod Brown, Democrat of Ohio, had to return to Washington from his home state after attending a funeral home visitation for his mother, who died Feb. 2.
As I’ve tried to make clear here, I’m skeptical that the stimulus package will have as much effect on the problems of the greater economy as its supporters have claimed. It doesn’t deal with the structural problems in our economy, indeed, it attempts to prolong those problems.
We have enormously too much capacity in the financial sector, in construction, and in automobile manufacturing. TARP II, announced by Secretary of the Treasury Timothy Geithner earlier in the week, will almost undoubtedly continue to prop up something that needs to fall down. The loan guarantees to GM and Chrysler will prevent those companies from shrinking as fast as the market fundamentals dictate they should. The infrastructure components of the stimulus package is a subsidy to construction. And so on.
As a consequence the economic resources that should have been available to other sectors won’t be and we won’t have as much economic growth as we otherwise should have.
More than anything else this bill is a job security bill for politicians. By passing the largest fiscal stimulus package in history they can’t be accused of fiddling while Rome burns. When the economy inevitably recovers, they can take credit for the recovery. If the recovery is phlegmatic or takes longer, they can always declaim that the stimulus package should have been larger.
The next great question is how we’re going to finance all of the new spending. I’m betting that the Chinese and Japanese will continue to buy U. S. financial instruments whether they like it or not simply because the alternative is so much worse.
More than anything else this bill is a job security bill for politicians. By passing the largest fiscal stimulus package in history they can’t be accused of fiddling while Rome burns. When the economy inevitably recovers, they can take credit for the recovery. If the recovery is phlegmatic or takes longer, they can always declaim that the stimulus package should have been larger.
Not “politicians,” Democratic politicians. Republicans contributed nothing. Why they think that’s politically wise is a mystery to me.
The point of this stimulus, as I understand it, is to take some of the sharp edges off the inevitable adjustment. Yes, it will result in the adjustment taking longer, being less efficient. But it should also keep some people working who might otherwise be unemployed, and when we’re all done we’ll have some nifty new bridges and schools.
It was a no-win situation for the Republicans. Once the House Democrats had rammed through a bill without consultation, the House Republicans had a choice of taking positions that were the opposite of what they’d run on and which, presumably, their constituents disapproved or not being in line to take credit for when the economy recovers. They chose the latter.
Whether this bill is a Good Thing or not depends on how serious you think the problems we have actually are. If our problems are not serious at all, this bill is horrible—significantly worse than not doing anything. If our problems are serious but no worse than those in, say, 1981 or 1976, this bill is a very good thing.
If we’re in really serious trouble, this bill is a catastrophe.
I think we’re all guessing about the level of seriousness. Let’s get an old crone to read goat entrails. I suspect she’d be about as right as anyone.
What I do notice here in the heart of the housing collapse portion of the event, Orange County, there are few For Sale signs, no household goods piled on sidewalks, full parking lots at shopping centers, and the sit-down restaurants are still doing business. I think people are buying less — I probably am — but at the same time we’re building up a powerful backlog of delayed gratification.
One other quick point, from having moved from Italy back to the States: we Americans are incredibly rich. I drive around this area and see millions spent just on landscaping shopping mall parking lots. That would be unthinkable in Italy. We take better care of food courts than they can afford to do for Michelangelos.
If you had a catastrophic drop in American wealth you still wouldn’t be likely to see us fall to the level of an Italy. Which, despite the lack of landscaping, was a generally pleasant place. We have a lot of ground we could give up in this country and still be shockingly rich by world standards.
I’m really glad you made that point, Michael. It touches on something I’ve been musing over for a post.
Let’s say, just hypothetically, that America lost 20 years of growth and the rest of the world 10 years. We’d still be the richest country in the world and China would have tens of millions of people starving—they’d be desperate.
I’d actually love to read your thinking on that.
I’m not sure if it makes sense. Economies go through cycles and recession is part of the cycle. I read a good article on the history of cycles at
http://www.recessioninfocenter.com
The next great question is how we’re going to finance all of the new spending. I’m betting that the Chinese and Japanese will continue to buy U. S. financial instruments whether they like it or not simply because the alternative is so much worse.
Yes, they’ll keep buing from us. But they’re going to hate our guts for it too, as we devalue their investments. Don’t take my word for it, take their’s.
That’s been the most popular story on the Financial Times for several days now.
The upshot: This is “really serious trouble”, the bill will ultimately only be seen as a drop in the bucket, the Republicans won’t get any credit for opposing this bill because of the previous 10 years of Republican policy, and this bill will make the Dems look at least as bad as the Republicans. What happens if both of our national parties implode at the same time?
Oops, I forgot to change the ID back to the old moniker. “Outis” & “Icepick” are the same person.
Yeah, I read that, too, Outis.
Since I’ve been complaining about the policies that have put us into this fix for the last 35 years, it’s no surprise to me and I believe it’ll take us a long time to get out. I think that the government should focus on the financial crisis. The greater economy needs to be allowed to adjust and that’s only possible in the context of a functioning financial system.
The policies we need to reform include trade, immigration, health care, and intellectual property. Our current policies are distorting.
Everyone has made a good point that the stimulus package worth $800,000,000,000 is extremely to high. Are economy being in the pickle that it is could dig it’s self an even bigger hole if this package fails. I believe that the stimulus package is a ticking time bomb that if it goes off the area around it may be destroyed but, if it stays dormant then the area will flourish. But if success is apparent the economy could jump right back up. Funds are very important especially when it comes to tuition assistance, and tax cuts seeing that those affect a lot of Americans. I do believe that 50-75% should go to those important opportunities such as a person’s education. I can’t quite tell if this package will succeed but if so, the United States will benefit. We could realize that this stimulus package has succeed by observing stores, companies, stocks, and etc, to note the change in productivity, local business, and amount of customers. I believe that what the government should do is reform the problem areas that have decreased the amount of productivity and financial intake.