I’ve seen a lot of bad analysis over the stimulus bill. One prominent liberal blogger told me that it didn’t matter what the money was spent for, only that it was spent, as if money that reaches the economy quickly isn’t better than money that takes years to enter the economy, and as if money that creates a lot of jobs isn’t better than money that creates a few. For this blogger, all that mattered is that the money was spent and not take the form of tax cuts.
I’ve seen a lot of analysis of the size of the package where it is taken as extremely significant that the package be $900 billion rather than $800 billion. In the grand scheme of things, $100 billion isn’t a significant enough percentage of our economy to make or break the economic recovery effort. If this bill isn’t big enough, it is likely that it needed to be two or three times as large, not $100 billion larger.
There is a lot of analysis that lambastes Harry Reid or President Obama for poor negotiating skills and pointless and meritless efforts at bipartisanship. Yet, we’re looking at having about the bare minimum of Republican support needed to pass the bill. Is it really likely that a more hardline approach would have intimidated more Republicans into falling in line?
A lot of the decent analysis is focused on the specific measures and cuts in the bill and makes an effort to explain what portions of the bill are likely to be efficient at providing stimulus versus what parts are not. It’s worth noting, for example, that corporate tax breaks are inefficient at stimulating the economy while Food Stamps are very efficient at that task. But, again, these matters are marginal. It’s possible that the economy needs two or three trillion dollars of stimulus, but it is unlikely that the fact the bill has corporate tax breaks in it is going to lead to failure.
We all want good policy and sensible expenditures. But we also want to retain our credibility. We also need Barack Obama to retain his credibility. And he cannot do that after campaigning on changing the tone in Washington by going into instant mortal combat mode. There is a process underway here, and it has to play itself out.
Republicans are going to learn many things from this stimulus debate, as is the Obama administration, the Democratic leadership, and the general public. For the Republicans, they are going to lose a fight over the biggest spending bill in history. They will have won a few concessions, but those concessions are more about denying spoils to Democratic interest groups than winning concessions for their own.
Republican members of the House will have nothing to show their constituents and, whatever good that comes out of this bill, they will not plausibly be able to take credit for it. Arlen Specter, on the other hand, can point to $6 billion that he won for the National Institute of Health. Over time, the Republicans will learn that they cannot win concessions and then vote against the legislation because they won’t win concessions the second time around. But the olive branch has to be offered at the start in order for that lesson to be effective.
I have major concerns about the economy and about how the Obama administration is approaching the financial bailout. I worry that this stimulus is far too small and that we are wasting time and resources in a desperate and ill-fated attempt to avoid nationalizing the banks. But I find a huge percentage of the criticism I’m seeing to be wildly off the mark.
Thanks Booman. You manage to be more sensible and mature than I am most of the time. Check out the story below. I think something interesting is brewing– there are likely to be so many home foreclosures that the banks and the courts will be overwhelmed, so people are likely to just stay in their homes and tough it out. Ohio Congresswoman Marcy Kaptur is telling her constituents that if their homes are foreclosed, they should stay put and fight. It turns out that banks packaged millions of mortgages into complicated investment vehicles that were then re-sold multiple times, and it is now difficult to determine which institution is actually is holding the mortgage. The paper trail isn’t so easy to follow, and this could make it far more difficult to initiate foreclosure proceedings against distressed homeowners. The way things are going with our economy, I’m not sure the banks even want to foreclose on huge numbers of properties anyway– what are they going to do with them?
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/02/04/EDK215MNA0.DTL
The banks, for one thing, can write off the bad debts/foreclosures on their taxes. Sometimes that’s as valuable as collecting monthly payments.
Whether squatting works depends on the concentration of foreclosures in an area and the attitude of the local Sheriff. As they happen in slo-mo, the Sheriff and his deputies have the time to deal with, at least, one foreclosure every day. Then, squatting can be dangerous. Passive resistance or an altercation can land you in jail and all your stuff goes to the curb where it becomes “trash” and anyone can legally cart it off. And your children could be taken away by FACS. So I’m not sure Kaptur is giving good advice.
It would also be better to go ahead and rent before the foreclosure hits your credit score and squeezes you out of any kind of housing. In the majority of the cases around here — a low-population, rural area — people have lost their jobs and staying in their houses doesn’t solve the need to feed themselves. (Yeah, a lot of them don’t know how to garden. That knowledge skipped a generation.) They leave the house because they’ve found employment over a hundred miles away.
Just in general, I would think the circumstances in which squatting would be viable are quite rare. But postponing the foreclosure by demanding the note is a pretty smart idea.
I agree about demanding the note and taking all legal steps to delay foreclosure and eviction.
However, wholesale abrogation of debt and squatting will lock up the entire housing market and crash the economy for sure.
It’s important to talk about what the stimulus is supposed to do. Obviously stimulate the economy, but to what end? We are in a crash for a reason, the economy before the crash was fake. We need to become poorer in terms of a country, a stimulus that prevents that is just another bubble. We really do need housing prices for instance to go down another 10-15%. Artificially propping them doesn’t do anything.
But we also need to mitigate the pain for people so they do you know, die. Slowly down the decline to more manageable levels is key, enabling people to still have jobs through gov. spending until the rest of the economy works the pain through is also an important goal.
And Larry Summers and Timothy Geithner, who seem to be unable to get past their ideological hangups to actually do what is needed in the economy are making things worse.
Separate the stimulus from TARP. As Minsky says, paying people to dig holes and fill them in is more stimulating than just giving them a check, because you also stimulate the sales of shovels and the hiring of overseers. TARP is a huge problem. Making the banks whole without new regulations and institutions will just lead to new rounds of reckless pursuit of easy profits. Why not issue more and more CDO’s and CDS’s if the government will bail you out? The bonuses prove that the banks have learned nothing from this except daddy will always bail you out.
Right on.
It’s amazing to me how many on the left ignore the fact that Obama’s promise of bipartisanship means that, at least at the outset, he could not possibly come on as a hardliner.
I’m sure there will be a time for him to draw the line in the sand and lambaste the GOP; but the first couple of weeks of the administration was not the time to do so.
Bargaining is one thing, but you don’t cut your price without a counteroffer. Obama should have spent more time at Maxwell Street in Chicago.
Those of us who disagreed with his promise of bipartisanship are completely consistent in objecting to how it constrains him now; in fact, it was one of our objections.
It’s not so much about being “hard line,” but about negotiating from a place of strength rather than weakness. Obama showed all his cards before the game began. He started the negotiation with a tax cut figure that was way too high, and then had it go higher. If he had started with a much lower tax cut figure, and explained in no uncertain terms why he did, we might well have ended up with a much more effective bill.
Also, the parts that have been traded away for just a few votes are incredibly important ones, especially the spending for school construction and states. The “centrists” were also allowed to add in bucks for defense procurement. Amazing.
There is a lot of room between being ham-handed and giving the store away. The Obama-Emanuel strategy leans way too much towards giving away the store. I don’t take what Krugman says lightly, do you?
I’n no economist, but for a long while I’ve wondered if we haven’t been making the mistake of gauging our economy on purely quantitative terms. Those Dow Jones and S + P numbers just express raw numbers that don’t tell much of a story. How much of the economic activity is actually productive and has a real multiplier effect?
Here’s an example of what I am talking about from Jed Lewison:
His math is rounded. It’s actually 1.857%.
What was the House bill at $820 billion? Answer: 1.952%.
So, the difference between the two packages is actually 0.095% of GDP. How is that going to be a critical difference?
It’s even worse than that, though, because the Senate version is actually going to be around the same $820 billion price.
The House version is better because it is more efficient, not because it is bigger.
I think Jed’s math is wrong. Should be two years, or $28tn, shouldn’t it?
In any event, the bill needs to be at least twice its current size. Whether we can ram enough spending into other bills over the year or not, I don’t know, but I’m inclined to think Krugman’s right — that Obama won’t get another clear crack at a stimulus package.
It isn’t that we gave up too much in the Senate. It’s that Obama could have let the House start with a bill with more emphasis on spending and little if any on tax cuts, and the centrists would, at best, been able to push it to where the House bill is now. The only real argument for tax cuts is that they are fast. And, no, it doesn’t matter that a middle class tax cut was a campaign promise. If Obama could put off canceling the Bush tax cuts, which could have been used to counterbalance further spending in the stimulus, he could put off the middle-class tax cut while the government is spending and bailing out like mad.
Over at OpenLeft, the people who always disliked Obama, who consistently have provided incorrect critiques or urgent bad advice, have worked themselves into a teapot tempest denouncing Obama’s strategy on the stimulus. Paul Rosenberg has been the most hilarious practitioner of OpenLeft’s advice factory. Here he is citing another regular’s hostile advice that Obama act should have acted more like Harry Truman
I believe that her point is inarguable, self-evident. One can spin whatever sorts of theories one wants about Obama’s grand strategy–and I’ve got a post in the works on that. But one thing should be blindingly clear: it’s just been refuted, “big time” as war criminal Dick Cheney would say. If one wants to argue that Obama’s bipartisan strategic vision is not to blame, then all the blame has to go to how it was executed–and it surely could have been better done. But if it had been better executed, wouldn’t that have only postponed the inevitable??
http://www.openleft.com/showDiary.do?diaryId=11432
So let’s consider: The President who 3 weeks into his presidency is about to pass a nearly $1Trillion dollar public works and social sector extension bill reversing decades of Republican rule – on top of a fair wages act and a major extension of health care – is supposed to emulate the guy who lost control of Congress and presided over the passage of the Taft-Hartley act?
One of the things that we need if we are ever going to solve our economic difficulties is some hard facts. Like just what our large banks actually worth? How much do they stand to lose in this economic crisis of ours? How about no bailouts of any kind or guarantee of loans to banks until these same banks come clean on what their net worth actually is.
Until there is transparency on how big the problem is with the sub prime loans and derivatives of all types, everyone is in the dark. Who knows what the hell is going on? If the situation were not so tragic what with lost jobs, income and fear, worrying and suffering spread across the land, it would be downright ridiculous.
We have no idea, really, how big the stimulus should be because we don’t know how sick the economy is. Come on legislative and executive branches open up your eyes, get the necessary info and start preparing a solution before the whole damn thing falls apart.
And, maybe Obama should add Krugman and Dean to his list of key advisers. Somehow, I get profoundly uneasy with Somers and Geithner at the elbow of the President. They both had a hand in the creation of this God-awful mess, did they not?
How sick is the economy?
Terminal. $1,269 trillion overhang or one quadrillion, 269 trillion of derivatives (OTC and listed. BIS Bank of International Settlement figures as at November 2008).
Derivatives are protected from bankruptcy law. Private treaty contracts. Betting on someone else’s bets by a factor of 100 sandwiched with fraud.
We cannot continue these bank, insurance, auto, retailers bailouts.
$126 trillion won’t cover this tab.
Death of the dollar. Death of consumerism.
I’d rather let the bankruptcy courts determine the value of the bank’s assets, but Booman disagrees with me on this.
I’ve banked with Citibank for almost twenty years. Citibank now is not Citibank then. I value Citibank now at zero.
Two thoughts. First, I think it would have have made a more palatable argument for the stimulus spending if the word ‘infrastructure’ had more time spent on it to explain just what it included. Every time I hear it defined narrowly, the stimulus loses.
Secondly, when any bill, especially one of this magnitude, gets broken down into all its smaller elements, the larger picture is lost. This bill will end up attacking the economy fro more angles than any other stimulus package that has ever even been dreamed of. The multitasking of it alone will show up immediately to stimulate attitudes. Unfortunately, it should be better, I hate that science is left on the curb, because in the end we’re asking ourselves our economy and our globe to take a gamble with us, and that means believing in ourselves again.
ding! we have a winner:
this package is not about “jobs”, because there is not way to restore the ones already lost, not the millions more that will be lost. if anything, it’s too small by a huge factor.
at it’s most basic, it’s about restoring “confidence”. and unfortunately, those least able to endure the hardships approaching will be the ones bearing the burden of the damage.
frankly, l see this as a logical, if painful. step towards the ultimate nationalization of the banks ala the “swedish solution”…especially given the wall streeters continuing to run the show…after this fails, and in all likelihood it will, they can claim “we tried” and then do what should have been done now. it’s too bad there isn’t the political will to achieve that sooner rather than later.
wall street, the banksters, and the titans of industry will be just fine…everybody else will pay a severe price.
I’d like to toss out a philosophic perspective on the current economic depression. Skipping the argument over exactly what triggered the start of the recession, I’ll just define it generally as the most significant negative economic event that initiated a continuous decline that continues today.
At this point I view the expanding effects of the depression as an ever widening series of concentric circles fanning out from the epicenter of each location of a major economic collapse. For example, a major plant closing or a major worker layoff from one location quickly becomes a wave of reactive layoffs from nearby service and support businesses in the area or the region. As opposed to 1929 where the big crash was Wall Street and all national business followed down a single open drain into the depression; we have pockets of severe marginal to severe failures happening intermittently across the country. In order to stave off expansion, joining and coalescing of these pockets into forming the proverbial gigantic “open drain”; money must INJECTED into areas surrounding the epicenter of EACH NEW big negative economic event. This will have a suppressive/damping effect on the ancillary wave of layoffs that normally follow the main event.
So what the government is actually trying to do is SUPPRESS the reactive ancillary layoff waves that naturally follow each huge layoff event. Political-speak finds it better to call the current economic rescue package a stimulus package/plan than to tell it like it is and call it a job loss SUPPRESSION plan.
So since Congress is far from being a great big volunteer Fire Brigade, capable of sounding the alarm before a huge plant closing. Nor is Congress capable of rushing out into the neighboring effected communities to hose them down with the supportive streams of loans and capital needed to dampen the outbreak of reactive layoffs. Since the location of the next big economic collapse is unknown, the designers of the Stimulus Bill relied on information from the Mayors of large cities around the country to suggest the projects that would suitable for government sponsorship. People employed by these projects would serve as economic dampeners against the next big layoff in the area.
This is where the problem of terminology came in. “Stimulus” is not pick and shovel infrastructure road work to everyone, so suggestions were made that reflected each individual’s concept of the word stimulus. To a certain Mayor of West Overshoe, rehabbing the cities museum is something the city has long wanted and it would certainly put people to work. However, to a Republican Congressman in full attack mode, this project would only employ a few select group of people and contribute nothing to the idea of the money being “Targeted, Timely, and Temporary”. He would argue that in this instance, the money is not properly “Targeted”.
The problem here is the effort to oversimplify the problem has only added more confusion to the current painful situation. Republicans keep bleating for a return to Reagan economics which stands as the most probable cause of the current depression in the first place.
The question is what to do? The President wants to create positive economic waves by putting 3 million people back to work. If properly applied such a series of positive waves would have a decided dampening effect against the reactive layoff waves caused by future massive job terminations. This will work only if the distributions of positive jobs have been properly positioned in anticipation of future gigantic layoffs. If the distribution fails to generally track the demographics of possible future big layoffs then the reactive waves will coalesce in certain regions, leading to the “open faucet” sequence of the depression. The only solution IMHO is the immediate creation of new green industries. The nation is stuck on a threshold of a dynamic situation that requires a new national power grid to support the sale of electric cars in 2010. Put people to work on this first. Work can begin on the shovel ready projects also. Finally, it is time to stop wasting money on the big banks and financial houses. Setup a national bank on an emergency basis to handle the movement and distribution of stimulus funds. This bank would be controlled and operated by the Federal government and would replace the Federal Reserve (during this emergency) as the only financial arm of the government active in this economic emergency.
A significant part of this bank’s charter would allow it to control the distribution of funds DIRECTLY to local governments. States rights issues are certain to materialize, but these can be resolved after the termination of the economic emergency.
“We all want good policy and sensible expenditures. But we also want to retain our credibility. We also need Barack Obama to retain his credibility. And he cannot do that after campaigning on changing the tone in Washington by going into instant mortal combat mode. There is a process underway here, and it has to play itself out.”
This should be written in gold and framed. What’s wrong with so much of the commentary on lefty blogs is, they just do not get this.
Of course, it demands faith. Why does Obama deserve our faith? Bill Clinton started as a compromiser. Unfortunately, he never that’s really all he was. One thing I remember is that, even when Gingrich & Co. infamously shut down the government by refusing to ratify the budget, Clinton still wanted to compromise; it wasn’t Clinton that beat Gingrich, it was congress led by folks like David Obey and David Bonior.
I don’t get any such sense from Obama. The situation in this country is intolerable, and if nothing substantial is done it’s going to get a lot worse. By washington consensus, Obama was not “supposed” to win the nomination, and he was not “supposed” to win the election.
And how many Democrats thought Obama couldn’t possibly win the nomination? And how many thought, if nominated, he couldn’t possibly beat McCain? But he did. And he did it by running a very different kind of campaign and being in tune with the times and the American public.
And this is a guy nobody outside the state of Illinois ever heard of until a year or two ago.
We need to remember this when in trying to understand what’s going on. It’s a Herculean task. But the circumstances and public mood are more favorable to real change than at any time in decades. The bigger the task, though, the less he needs to come in like a bull in a china shop — he has to gradually push the envelope, keep building, and in the process change the consensus in Washington. And he really needs support from us, the public.
I think there is some seriously bad faith argument going on from people who claim to be “progressive”, but are really frustrated mandarins.
“in a desperate and ill-fated attempt to avoid nationalizing the banks”
Hmm-m-m-m, I’m a lot more concerned about the U S A defaulting on its debt.
You’ll see a de facto default. The government will pay but with debased printing press money supplied by the Fed. The Federal Reserve System can create any amount of money that it wants and “loan” it to the Federal government, taking back Treasury bonds as “collateral”.
Central Banks can go broke. Ask Mugabe.
At some point no one will buy those bonds and T-Bills.
We’re in Phase 4 of this systemic crisis. The inter-connected global banking system is insolven
The Fed buys them. Of course they are only toilet paper, but people use it internally. External debt then can be satisfied with a few rolls of Charmin.
Well said Booman. While I agree that a lot of the criticism against Obama etc has been much ado about nothing, the problem is that many people are wary of where the money in the stimulus package is actually going. Not that the Republicans’ dissatisfaction with the stimulus bill is anything more than political posturing, but the truth is no one sees to be overseeing how and where the money is being distributed and used. $50 million on a new, luxury corporate jet and $30,000 on a toilet is not exactly how most Americans envisioned their bailout money would be spend. Until we fix the skewed culture of Wall Street it will just be more of the same old, no matter how many billions we pump in.
http://democralypsenow.blogspot.com/2009/02/living-on-prayer_07.html