First, just because it’s a huge amount of money does not guarantee anything. Remember, this is money that is being *borrowed* by the government from the private sector. If the government weren’t sucking it up, it would be getting used for other purposes. It can only stimulate the economy if the government puts it to more economical use than it would’ve been otherwise used for.

Second, I think that several of the people you just mentioned (most particularly Pelosi) are, in fact, quite stupid and/or seriously lacking in judgement. Listening to Pelosi attempt to explain how spending on birth control and STD prevention qualifies as “stimulus” leaves little doubt about that. So whether she thinks it will “work” or not is irrelevent – her judgement is such that her opinion is worthless.

Friedman said:

‘The fascinating thing to me is that the widespread faith in the potency of fiscal policy – this is flying straight in the face of some words that Walter Heller spoke a few moments ago when he talked about the proven effectiveness of fiscal policy – rests on no evidence whatsoever. It’s based on pure assumptions. It’s based on a priori reasoning.’ (p. 53)

Friedman went on to cite empirical evidence that cyclical fluctuations in the American economy have been highly sensitive to monetary policy, and almost entirely unresponsive to fiscal policy.

If Friedman was right, the details of the ‘stimulus package’ will be irrelevant to whether the economy recovers in time for Democrats to claim electoral credit.

“They cut your taxes! Are you really going to stand for that?!”

I think the House GOP has lost its way, but on a purely political calculus, i can’t blame them for not supporting the Democratic bill. Probably the public won’t even remember this vote took place.

Daniel:
“As it is, TARP was never used for its intended purpose and while things have gotten pretty grim they have not yet descended to the state the biggest alarmists predicted.”

That’s because basically the actions taken by Paulson, Geithner and Bernanke have essentially stabilized the banking system. We shouldn’t ignore what’s being going on in the rest of the world btw. None of it’s been pretty because basically there’s been a lot of experimentation but to all intents and purposes it’s worked and Paulson and the previous admin deserve a lot of credit. Clearly they are going to use a chunk of the remaining 350 billion to establish a bad bank to take all this toxic stuff off the bank’s balance sheets. I’ve personally come to the conclusion it’s the only solution short of nationalizing the banks. And neither I nor I think Summers, Geithner, Orzag and Bernanke think that’s a good idea. And yes I agree there is a lot of public ambivalence about the whole process but then neither Bush or Paulson could explain it in comprehensible terms. I do believe if Obama and Summers took to the airwaves they could turn this around.

‘but that does not mean that the stimulus is going to do anything ”

I think you are underestimating the impact. Feldstein agrees there need to be a massive stimulus he just doesn’t agree with the priorities. I saw an interview with Mark Zandi on tv this evening. Now he’s a conservative if anything and while acknowledging he wouldn’t have structured it the way it is, he believed it will probably work. There are going to be some more tweaks in the senate where I actually think it will pass fairly easily and we’ll have to wait and see. I saw an opinion by Warren Buffett the other day which essentially said we’re in uncharted territory so you throw eggs at the wall until some sticks and doing nothing is not an option. As usual he’ s probably not far off the mark.

“That is the even bigger reality that the GOP leaders are completely incapable of grasping or admitting”

All too true. Dems constantly accuse us of being in an alternate universe and they are not always wrong. We need to ask ourselves when we got into this box.

“There is the added problem that the steady efforts of Fed, Treasury and Congress to “reflate” everything is going to lead to monster inflation that, perhaps, can then be reined in later.”

Since the Fed are running the printing presses to get us out of this there is a real chance of serious inflation but there’s no sign of it at present and they have tools to choke it off very quickly if they want to just as Easy Al had tools to shut down the housing bubble. He just chose not to. At the moment the danger of inflation is the leas of our troubles.

nyx, on January 29th, 2009 at 2:56 pm Said

With due respect sir I think you are letting emotion getting in the way of reason. We can all get angry with these bankers but it isn’t going to solve anything. I’m essentially with the comment by Zandi I mentioned above in that I might have ordered the priorities a bit differently (I’m a great believer in concrete) but it’s probably going to work in the round. And if it doesn’t they’ll come back to the well. One of the reasons they are steering so much money to the states is because of their fiscal condition. It’s awful. I live in CT which is facing a six billion shortfall and I believe CA is around 28 billion. They can’t allow the states to start huge layoff programs and that’s what I think is behind this.

Sorry for the length.

I believe the housing market is just the start of a massive falling down of the cards and things are going to get much much worse in the next two years and I don’t know how any stimulus, however popular, is going to preserve or create jobs. I know politically Obama has to do something and if Republicans kill it, they can say goodbye to their electoral prospects in 2010 but that does not mean that the stimulus is going to do anything nor do I believe tax cuts would help (If I hear anything more about corporate tax cuts, I would seriously murder someone).

We are getting further and further into debt with the same banks who are profiting off their connections with Government through TARP. A normal middle class family with absolutely no debt is now struggling because of the mistakes and stupidity of rich fat cats in Wall Street (true, some people took advantage of easy credit but with great power comes greater responsibility). How is the stimulus bill going to benefit an average man unconnected to Washington? I think Universal Health care is going to be much more helpful than a stimulus bill and I would gladly support that, no matter the cost, because I believe it is worth it but I am unconvinced of the merits of the stimulus.

Anyway, it isn’t just in the people’s minds–much of this is directly the product of Republican mismanagement, whether we are talking sins of commission or omission. That is the even bigger reality that the GOP leaders are completely incapable of grasping or admitting. They are fixated entirely on the mortgage lenders and fiscal policy, and seem unwilling or unable to acknowledge the role of monetary policy and Bush’s housing policy in fueling the mess.

According to Feldstein’s critique in the Post, there’s no doubt there’s a huge amount of money, but he sees it as being too slow and does not promote sufficient employment and investment. In other words, if it provides stimulus it won’t be providing it soon enough and in great enough doses to pull the economy out of prolonged recession. There is the added problem that the steady efforts of Fed, Treasury and Congress to “reflate” everything is going to lead to monster inflation that, perhaps, can then be reined in later.

As to the substance of the stimulus, I also believe it’s a mistake to think this is not going to have a fairly powerful effect in stimulating economic activity. It’s a huge amount of money. If we think Obama/Summers/Orzag/Pelosi/Reid are happily passing a bill they think is going to fail we’re either stupid or massively underestimating the Dems. And btw I wish some posters would stop referring to American voters as ignorant morons and suchlike because they are basically scared by what is the worst financial and economic crisis to hit the country since the depression and in a lot of their minds, it is the product of Republican mismanagement.

The problem of the Republicans is fiscal irresponsibility and image. Their titular head is an odious drug addicted radio personality, someone who looks like Hoggish Greedly in Captain Planet than a real human being. Bush, even if he screwed up, was a respectable human being but following orders from a radiohead, especially one as despicable as Hoggish Greedly, makes Republicans look weak and extreme even if they are advancing sensible policy.

Yeah, Boehner, you big idiot! Don’t you know that three generations of imbeciles is enough?

Sure, the “stimulus” is popular (since most people are ignorant morons who don’t know what’s in it). But if they were to vote for it, do you think the House Republicans would get any credit? Of course not. Either way, all the credit for it will go to the Democrats who both wrote it and voted for it.

Furthermore, if the stimulus turns out to be a disaster, which buries us in debt and wastefully misallocates much-needed capital on worthless projects even as we’re trying to claw our way out of a recession a couple years from now, the GOP will be able to make a claim similar to Obama on the war: “I never voted for it in the first place, even when it was popular”.

True, the Republicans are being intellectually inconsistent in opposing this monstrosity, while going along with Bush’s monstrosity a few months ago. But as a practical matter, if the electorate is going to have difficulty remembering two years from now how House Republicans voted today, they’re certainly going to have a hard time remembering (or caring) that the Republicans voted in a contradictory manner months before.

I’m not trying to give the Republicans kudos here, though. I seriously doubt that they’ve suddenly developed any stronger conservative principles than they had just a few months ago. It’s the same idiots that have been there all along, after all. Just less of them. And sadly, this means that even if we do get conservative leadership in the White House eventually, they’ll still be next to worthless when it comes to actually undoing the damage the Democrats are going to wreak over the next few years.

In any event, I agree that the negotiations around this bill were pretext. Also, I am sure that the house Republicans will relish their victory in getting contraception funding out of the bill. Although giving poor people contraception is a popular idea, the Republicans will likely be able to vote against on its own merit at some point in the future. And Boehner’s criticism of it will likely stand out as one of the most bucolic moments of the 111th congress. Another great victory in a long string of victories for the GOP. . .

I guess Boehner and Co. are hoping this turns into another Clinton budget (but, minus the internet bubble with no credible way of spinning it as a success.) Always a sign that you’re out of ideas when the other side’s failure is the only game plan you have.