Paul Krugman hopes that whatever the stimulus package proposed by the Obama administration has in store, they get it passed and in place quickly.
News reports say that Democrats hope to pass an economic plan with broad bipartisan support. Good luck with that.
In reality, the political posturing has already started, with Republican leaders setting up roadblocks to stimulus legislation while posing as the champions of careful Congressional deliberation — which is pretty rich considering their party’s behavior over the past eight years.
More broadly, after decades of declaring that government is the problem, not the solution, not to mention reviling both Keynesian economics and the New Deal, most Republicans aren’t going to accept the need for a big-spending, F.D.R.-type solution to the economic crisis.
The biggest problem facing the Obama plan, however, is likely to be the demand of many politicians for proof that the benefits of the proposed public spending justify its costs — a burden of proof never imposed on proposals for tax cuts.
This is a problem with which Keynes was familiar: giving money away, he pointed out, tends to be met with fewer objections than plans for public investment “which, because they are not wholly wasteful, tend to be judged on strict ‘business’ principles.” What gets lost in such discussions is the key argument for economic stimulus — namely, that under current conditions, a surge in public spending would employ Americans who would otherwise be unemployed and money that would otherwise be sitting idle, and put both to work producing something useful.
All of this leaves me concerned about the prospects for the Obama plan. I’m sure that Congress will pass a stimulus plan, but I worry that the plan may be delayed and/or downsized. And Mr. Obama is right: We really do need swift, bold action.
I wonder how Dr. Krugman feels about the $300 billion in tax cuts that Mr. Obama is proposing, apparently as a sweetener to the suddenly-budget-conscious GOP. Hilzoy at Political Animal casts a dissenting vote, saying that “there are a lot of reasons not to focus on tax cuts. First, the money we are proposing to spend on stimulus is not free. We are proposing to spend a lot of it, and a lot of economists seem to think that $750 billion is on the low side. For both reasons, it’s important to get the greatest possible stimulus per dollar. And tax cuts won’t do it.”
Throwing a bone to the Republicans just to get them to vote for it is one thing, but there’s no point in throwing them the whole side of beef, especially this early. All it will do is enable them and not hold them accountable for the financial disaster they led us into in the first place. Sure, doing something is important, but there’s a difference between doing something and doing anything.