The Obama stimulus reconsidered
I listened to VP Joe Biden today talking abut the Obama stimulus package, aka, the American Recovery and Reinvestment Act. A few thoughts:
— Biden credited the stimulus plan for preventing the recession from turning into a depression. I would certainly place the $140 billion or so in stimulus spending behind the Fed’s action and the natural rebound in the economy after a period of intense fear and retrenchment.
— Even though “reinvestment” is part of the name of the plan, at least two-thirds of the plan has nothing to do with long-term growth.
— If the economy was much worse than the White House expected, why wasn’t a) the stimulus bigger, and b) more front loaded toward 2009? That was a huge misjudgment.
— Clearing some fiscal space with entitlement reform would allow the WH the ability to do a second stimulus for infrastructure or reducing taxes on company and capital.
— Perhaps the smartest thing the WH has done so far is resist calls for raising taxes (like from Pelosi) or to focus on near-term deficit reduction. Those are exactly the sorts of policies that helped retard America’s recovery during the Great Depression and Japan’s during the Lose Dedade.