What the Stimulus Bill is For

What the Stimulus Bill is For

Joe Klein’s got a wise post about the messiness surrounding the stimulus bill, most of which is par for the course for legislation of this size. I’ve got many beefs with the legislation, not the least of which is the criminal under-funding of public transit. Oh, and also this braindead, Reinflate The Housing Bubble amendment that passed the senate by the voice vote. But if I were a member of Congress I’d vote for the bill, proudly. Fundamentally, we’re teetering on the brink of a deflationary spiral, and without a serious and large commitment of federal dollars we’re going to a) have a lot of people needlessly suffer b) be mired in a prolonged recession.

I think part of what’s gotten lost in the carping from Republicans is that the bill has three objectives:

1) Immediately boost demand and create jobs

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Joe Klein’s got a wise post about the messiness surrounding the stimulus bill, most of which is par for the course for legislation of this size. I’ve got many beefs with the legislation, not the least of which is the criminal under-funding of public transit. Oh, and also this braindead, Reinflate The Housing Bubble amendment that passed the senate by the voice vote. But if I were a member of Congress I’d vote for the bill, proudly. Fundamentally, we’re teetering on the brink of a deflationary spiral, and without a serious and large commitment of federal dollars we’re going to a) have a lot of people needlessly suffer b) be mired in a prolonged recession.

I think part of what’s gotten lost in the carping from Republicans is that the bill has three objectives:

1) Immediately boost demand and create jobs

2) Make investments that will increase the productive capacity of theUS economy in the long-run

3) Lessen the misery of those caught in the black hole ofunemployment, declining incomes, bankruptcy, etc…

Any amount of money the government spends is going to be stimulus. There’s a huge range to how stimulative that spending will be. But here’s the problem! We need a massive amount of spending to close the output gap and there’s not enough places to spend that money in the “top tier” of effectiveness, vis a vis the multiplier. So we have a range of items, that vary in just how stimulative they are. There’s also a tension between short-term stimulus and long-term investment. It might be super stimulative to enact Keynes famous thought experiment with the bank notes in the buried bottles, but obviously that’s not a a very good long-term investment. It might take longer and create fewer jobs at the margin to build out broadband, but when it’s done you have internet in rural areas as opposed to a whole lot of improvised bottle-mines dotting the countryside.

As a percentage of the total, almost everything in the bill fits one of those criteria. The stuff that the right-wing Republicans have zeroed in on tend to be stuff in either the second or third category. But remember these are people that fundamentally don’t believe in the social safety net. As Josh Marshall points out 36 of 41 senator voted yesterday to strip all spending from the bill. That’s policy malpractice. And there’s no reason to think that people that cast a vote like that have much productive to offer in negotiating the final shape of the legislation.

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