Monday, January 18, 2010
A Dismal Stimulus
Paul Krugman reminds us that he thought the Obama Administration's stimulus bill was too small, and suggests that the economy might not be as bleak had a larger bill passed. But isn't this an illustration of where the (dismal) science of economics works best - in hindsight? Perhaps a larger stimulus would have improved the economic and employment picture at this point in time. Perhaps we would have spent more money and ended up right where we are.
Given the nature of the problems that are causing the present malaise, I suspect that we would be in pretty much the same situation. Those aspects of the downturn that most affect "ordinary people" - people who have been out of work for a year or more - seem structural. Many will never again find jobs that paid as well as their former careers, and I just don't see how a larger stimulus bill would have generated sufficient jobs, even at the bottom end of the economy, to absorb the huge numbers of unemployed. The hope is less that a stimulus will, of itself, reinvigorate the economy and more that it will serve as a catalyst, helping to carry the country through a difficult time while the private sector kicks back into gear.
Now, if some serious, relatively pork-free infrastructure development would be part of a bill, whether it's called a "stimulus bill" or something else, I might be able to support it as an investment in the nature's future. No bridges to nowhere, please. But I'm still not sure that it will do much to kick-start the private sector. As for a "stimulus bill" that simply bails out states that haven't been responsible enough to prepare for or respond to an economic downturn, no strings attached? That seems like a recipe for perpetuating malaise, not turning it around. I don't want to understate the importance of maintaining the social safety net at times like this, but that seems more like a "treading water" or "bridging the gulf" bill than like something we should call a "stimulus".