Stupid Stimulus Compromise
I found this article from this post. This bit struck me as insanely stupid:
“The biggest fear is that people will do too little,” said one Democratic leadership aide, “like a start-up that fails because it didn’t do enough.”
Obama aides hope to keep the package below the trillion-dollar mark, a psychological threshold that could carry political consequences, as they fear being accused of adding too much to the country’s long-term budget deficit.
Now, let’s examine two schools of thought. The Austrian camp believes that the government is a bloated, inefficient, and corrupt institution that has no right to redistribute wealth. That school of thought is pretty set against the government spending money on projects as a way of stimulating the economy, especially since we’re borrowing that money from our children and grandchildren. The Keynesian camp believes that at this point we are in a liquidity trap, and the only way to generate inflation is to appear to spend irresponsibly (no, really, read the link). Neither side is going to be happy with a compromised stimulus plan. In fact, both sides would likely be happier if the policy went to one extreme or the other. Either it would work, and one side would claim victory, or it would fail, and the other side would claim victory. Instead, we have a plan that is doomed to fail precisely because it represents a compromise. One side will claim we spent too little, and the other side will claim we spent too much.
Earnest question: for the Keynesians can there not be a “sweet spot” that is irresponsible enough but not too irresponsible? Could these sort of comments be part of the ground-softening campaign to make $850 billion seem like a compromise…?
I should add that I agree that an actual compromise between the camps would be worthless.
Less earnest/slightly more stridently political note based on your characterizations: if we let WWII be called the last comparable stimulus program, I would say that the children and grandchildren ended up being done right by it.
