ON AN UNSTIMULATING STIMULUS PLAN

SHOW-TIME

I'm still shaking my head at the speed with which the administration and the leaders of the House from both parties have been able to "come together" on a $150 billion plus stimulus package, and send it on to the Senate. 

The objective of course is to get $500 plus rebate checks to over a 100 million families by the summer, so that they may go ahead and "stimulate" the economy.  And to provide investment tax rebates to small businesses to the tune of $50 billion.

And of course, members of Congress in both houses and from both parties are trying to figure out how to add "infrastructure" investment incentives to the package that would benefit their various constituencies back home.

The Washington Post has a great piece  written by Economics professor Steven Landsburg, that gets to the heart of the matter:

"As a general rule, economic policies command bipartisan support only when they're incoherent."

It goes on to add:

"Take, for example, the fiscal stimulus package now bulldozing its way through the legislative process. It's poorly conceived, it's unlikely to work, and it's sure to do a lot of collateral damage.

The idea, we're told, is to stave off an all-out recession by stimulating both investment (through tax cuts for businesses) and consumption (through tax rebates to individuals). But hold it right there.

Investment and consumption are natural rivals.

Investment means converting resources into machines and factories; consumption means converting those same resources into TV sets and motorboats. In anything but the very short run, more of one means less of the other."

The piece goes onto explain how the terms of the package are at odd with the specified economic goals.

Of course, the real heart of the matter is that the real goals that matter here of course are political ones. 

The package is really designed to provide major political cover for both parties and the administration, as proof that they "really care" about the pain that people and businesses are going through in a Presidential election year.

Let's all try and keep that in mind, and use it as a filter, as we evaluate the earnest efforts underway by our various political representatives.

Comments

[Amit Doshi]

"Let's all try and keep that in mind, and use it as a filter, as we evaluate the earnest efforts underway by our various political representatives."

Earnest? I'd have gone for cynical as the adjective here:)