« Public choice perspectives on the fiscal stimulus | Main | Assorted links »
Right-wing radicals who wish to rethink the stimulus
This was from a story in The Washington Post:
In testimony before the House Budget Committee yesterday, Alice M. Rivlin, who was President Bill Clinton's budget director, suggested splitting the plan, implementing its immediate stimulus components now and taking more time to plan the longer-term transformative spending to make sure it is done right.
"Such a long-term investment program should not be put together hastily and lumped in with the anti-recession package. The elements of the investment program must be carefully planned and will not create many jobs right away," said Rivlin, a fellow at the Brookings Institution. The risk, she said, is that "money will be wasted because the investment elements were not carefully crafted."
It's not a puffin, but here is a good post on the stimulus from Arnold Kling. And read Marc Ambinder on which parts of the bill will take how long.
Posted by Tyler Cowen on January 28, 2009 at 09:47 AM in Economics | Permalink
Comments
Excellent puffin pic!
Posted by: Anon at Jan 28, 2009 9:53:57 AM
We decompose this increase in average volatility and find that it is far from representative of the experience of most people: there has been no systematic rise in volatility for the vast majority of individuals.This edit I enjoyed.
Posted by: tuba buyukustun at Jan 28, 2009 11:53:30 AM
This is where I get annoyed at the Obama team's much vaunted "transparency." What is their response to these arguments? I'm sure they are thinking about them or have thought about them, but why can't we just hear what they are thinking?
Of course, if you are fully open and honest about the shortcomings of your proposal, you run the risk of weakening its prospects politically. That is a central problem of politics and it is why "transparency" is so hard to do.
On the other hand, one could argue that Obama's moving a big aircraft carrier and in some ways he has been more transparent. But I think he could go much, much further. His entire brand is built around doing things differently. Why not be fully forthright about all the arguments, pro and con? Why not post responses on the White House blog?
The problem is that without such transparency you make bad decisions. Politicians want power, but the more power they hold onto, the more they screw things up.
The complication is that in the long term voters reward you for competence. If Obama is really playing chess he should have his advisors engage the critics more directly.
Posted by: mk at Jan 28, 2009 12:29:44 PM
The stimulus is pork by any other name...
Posted by: jorod at Jan 28, 2009 2:19:30 PM
I am starting to think that Tyler is trying to work up to blogging about birds. Maybe he has seen Bruce Schneier's blog about security and likes the Friday Squid Blogging segment.
Posted by: Sam at Jan 28, 2009 2:53:56 PM
The complication is that in the long term voters reward you for competence.
If only that were true. Even remotely. Sigh.
Posted by: efp at Jan 28, 2009 3:10:43 PM
This approach is not conducive to the legislative process. A better one is to create and fund an agency or commission to collect and sort out proposals and prioritize, plan, and organize the response.
Posted by: Lord at Jan 28, 2009 4:46:55 PM
Shorter Lord: shut up and color. Thanks, but no.
Posted by: The Sheep Nazi at Jan 28, 2009 5:39:51 PM
What Rivlin says is obviously true: make the stimulus package strictly about stimulus right now and leave the investment portions for later. This will not only provide enough time to figure the best approach to the investment bill but will make the stimulus package much simpler (which will make it easier to understand and evaluate) and cheaper.
The stimulus package should be things that are done in 2009. What further stimulus is required in 2010 and beyond will depend on how the economy is doing at the end of 2009. There is no need to be in a rush to decide on 2010 stimulus spending and even less need to rush on investment spending.
It would also be good if the administration would produce a technical explanation of exactly how we got into this mess before we throw money at the problem. If it is true that the primary problem is a banking problem, shouldn't the focus be on fixing those problems first or at least at the same time as working on the stimulus package?
The head of the IMF said that he was concerned that the USA has still not moved aggressively to disclose and deal with the bad loans that have triggered this crisis. He said the IMF has dealt with over 160 banking system disasters in various countries over the years and that the most critical step in solving the problem was always transparency in revealing the exact extent and details of the loan problems. He also suggested encapsulating these loans into a "bad bank" (such as the RTC in the S&L crisis). This approach reestablishes confidence in the banks that are still operating.
Obviously the standards for real estate loans need to be tightened immediately. IIRC, real estate loans are the largest single source of collateral in our banking system. We have to take a more conservative approach to real estate loans (no more 0 down variable rate loans that depend on market appreciation to work).
The rush to spend the better part of a trillion dollars without taking the time to thoroughly understand the implications is unwise. It is an attempt to take advantage of panic in the electorate to pass agenda legislation that is not directly related to 2009 economic stimulation.
Posted by: Steve Koch at Jan 29, 2009 12:48:49 AM
The last puffin pick was better.
Posted by: Jacqueline at Jan 29, 2009 2:09:12 AM
Well, actually, I am not really sure that long-term investements that are not hurried through, but "fought" over a long time, are really that much better =) From a libertarian view they are better, because there is a chance that in the future, the policy might not make it.
And from the rent-seeking side it is better, because money spent later is less worth than now =) HOwever, most likely, they will just spend more of the more worthless money =)
I find it hard to believe that longer time in the making = higher quality. Are there any indicators (papers etc.) for this assumption?
Posted by: max at Jan 30, 2009 1:10:54 PM
Could someone please explain to me what makes the stimulus stimulating?
I'm not being facetious. The spending is paid for by borrowing from the "real economy". So where is the net addition to aggregate demand? Is it that the money goes to people with a higher MPC than the general community? What about the crowding out effect? What is the specific economic theory that shows a net positive increase in aggregate demand, without adversely affecting private investment?
I just don't get it.
Posted by: Andrew at Feb 11, 2009 6:47:50 AM
