The politics and economics of a second stimulus plan

July 6, 2009

I would doubt whether the WH thinks a second stimulus works for them politically or economically:

1) It’s clear they are closely watching interest rates to see if the”bond vigilantes” are getting spooked by all the debt. The surge in yields from mid-March to mid-June forced Team Obama to start talking about deficit reduction. Would they want to risk a further backup in rates by announcing a $500 billion package to aid cash-strapped  cities and states? Higher rates would be recovery killer.

2) It’s one thing to admit that you, like pretty much everyone else, underestimated the depth of the recession. But why didn’t the WH push for a package that was more front-loaded or had more tax cuts or, as liberals wanted, just much bigger in case the bears were right? Those questions go to the heart of the administration’s economic competence.

3) What if the WH pushed for a second stimulus package and lost? Or what if the effort drained energy away from getting healthcare and climate change passed? Those are big risks for a plan that might not help much before the 2010 midterms anyway.

4) With 90 percent of the dough yet to be spent, the whole thing makes the WH look panicky.

2 comments

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First of all, the stimulus was politically geared because the conservatives in congress were whispering loudly that they were not interested in the stimulus (they figured the package they rolled out under Bush was already too much). As a result, it became a watered-down version, with more tax cuts and less spending. With that in mind, about $350 of the $787 billion has been ‘spent’.

Secondly, a second stimulus should not be needed. Period. Full stop. It would never pass anyway. NEVER. The American people – even the most loyal Obamists – would be screaming bloody murder in the streets.

Thirdly, with the idea that so little of the stimulus has been spent and things have turned around (or at the least the brakes have been applied), it would exceedingly prudent to see how far the original stiumlus will take America before even conjecturing on a second. That is responsible thinking.

Fourthly, if America is really interested in showing the world it can be fiscally responsible, then spending will have to be reigned in within 5 years with a feasible surplus being planned. Some services are important, some taxes are necessary, some situations need immediate response, but long term focus needs to remain constant. And that focus should be that deficits cannot be sustained indefinitely. Any grade school student can figure that out. The worst has past – let’s start planning for the future again instead of crying about the past.

This should be read both for the Feds and state govts.

Posted by the Shah | Report as abusive

Leadership counts — it’s key in a crisis and we are certainly not thru this yet. The realities of California having to issue warrants and the dysfunction in the NYS legislature hampering normal debt issue amongst other very important & critical tasks will further highlight the divide between feckless political manuveurs & sound governmental stewardship.

The floodgates opened with Federal interference/take-over in private industry. No one can be surprised that some willing States ( and lobbies & industries – etc.) would be far behind in lining up at the Fed trough.

Nifty opinion – http://www.bloomberg.com/apps/news?pid=n ewsarchive&sid=abPswcmJHZVA

I really believe that the administration does not understand their policy consequences, and so many of their positions are having/will generate an inverse out come. So like the Bloomberg opinion piece says, they wanted to limit and decrease Lobbyist influence — instead they create a hot bed of Lobbyist activity in the place you would want it least., Their JOBS, JOBS, JOBS is a JOB KILLER.

Both Carter & Wilson were better men than they were Presidents. Let’s hope this isn’t some kind of redux.

Posted by Siobhan Sack | Report as abusive