Jim Cooper on the Stimulus

Jim and ten of his fellow Blue Dogs voted against the stimulus. Where were the other 40?

Unfortunately, some longtime House members saw the recovery plan as an opportunity to advance parochial political agendas. Some of these may have been good ideas, some may have been bad ideas-but we didn't get a chance to discuss them, and they weren't designed to help our economy recover in the short term. (Many of them contained new, long-term commitments.) President Obama delivered a bipartisan, win-win proposal, and Congress turned it into the rare lose-lose: a plan that may fail to stimulate the economy while saddling our children and grandchildren with unprecedented debt.

UDPATE: "Never let a good crisis go to waste," Obama's chief of staff on stuffing the stimulus like a turkey.

Some $30 billion, or less than 5% of the spending in the bill, is for fixing bridges or other highway projects. There's another $40 billion for broadband and electric grid development, airports and clean water projects that are arguably worthwhile priorities.

How long 'till we get there?

If the current crisis is like past ones, then

Unemployment rises and housing price declines extend out for five and six years, respectively. On the encouraging side, output declines last only two years on average. Even recessions sparked by financial crises do eventually end, albeit almost invariably accompanied by massive increases in government debt.

The other side finally shows up

But the Do-Nothing Crowd needs a better name, like "save our children."

...government stimulus plans have a long history of failure. Remember last February’s $168 billion economic stimulus package? President Bush called it “a booster shot for our economy” and promised that it was large enough to have an effect. It wasn’t, and it didn’t work.

This time around, the Do-Nothing Crowd argues that the new spending — which dwarfs last year’s effort — is probably insufficient and definitely unwise. It is largely an economic argument. But there is also a cultural dimension. Many of the Do-Nothings argue that a painful recession is the best way to destroy America’s runaway culture of irresponsibility and debt. Economic turmoil, after all, has a way of grounding Americans.

Schiff and the other Do-Nothings argue that the government should simply allow the economic chips to fall where they may. Dramatic belt-tightening across the board is the only way, they say, to stop the endless cycle of borrowing.

“Our standard of living needs to come down to the point where it can be supported by organic output,” says Schiff. “It’s brutal, but it’s called capitalism, and it works. The alternative is called socialism, and it doesn’t work.”

The recession is an opportunity, not a threat

Instead of eliminating Saturday delivery, can't we get rid of the whole thing?

Faced with dwindling mail volume and rising costs, the post office was $2.8 billion in the red last year. "If current trends continue, we could experience a net loss of $6 billion or more this fiscal year," Postmaster General John E. Potter said in testimony for a Senate Homeland Security and Governmental Affairs subcommittee.

Does anyone expect the stimulus to work?

Not consumers, who have the lowest confidence since the 1960's.
UPDATE: Shiller wants fiscal policy to stimulate our animal spirits:

the sense of trust we have in each other, our sense of fairness in economic dealings, and our sense of the extent of corruption and bad faith. When animal spirits are on ebb, consumers do not want to spend and businesses do not want to make capital expenditures or hire people.

... Especially now, when conventional monetary policy is ineffective, since short-term interest rates on safe assets are close to zero, Keynesian theory would argue that the government should have a fiscal target. If spending would otherwise be less than full employment GDP, the government should put more money into people's pockets.

Economists against the stimulus

They say that if you laid all the economists end to end, they would still never reach a conclusion

Notwithstanding reports that all economists are now Keynesians and that we all support a big increase in the burden of government, we the undersigned do not believe that more government spending is a way to improve economic performance. More government spending by Hoover and Roosevelt did not pull the United States economy out of the Great Depression in the 1930s. More government spending did not solve Japan’s “lost decade” in the 1990s. As such, it is a triumph of hope over experience to believe that more government spending will help the U.S. today. To improve the economy, policymakers should focus on reforms that remove impediments to work, saving, investment and production. Lower tax rates and a reduction in the burden of government are the best ways of using fiscal policy to boost growth.

Credit crunch squeezes MBA students

I guess Citibank and Sallie Mae have some other things to worry about:

A number of leading business schools and graduate programs were dealt a serious blow this fall when big private lenders including CitiAssist and Sallie Mae (SLM) suddenly terminated their popular "no co-signer" student loan programs. The canceled loan programs, which typically allowed applicants to obtain up to $150,000 without a co-signer to assume stewardship of the loan should the borrower default, were a financial lifeline for many international students, many of whom have no other way to finance their MBA educations. They were yet another victim of the credit crunch, which has decimated many private lenders and made those still in business more cautious than ever.

Even cartels need a strategy

DeBeers strategy of supply control is no longer working.

By the end of the 1990s, the business model of controlling supply and managing how much of its inventory went to market at any time was no longer effective: New sources of diamonds were discovered in sufficient quantity that they could be sold competitively outside of De Beers' central selling organization. Demand for diamonds was dropping at a time when demand for other luxury goods was increasing. Brand-conscious consumers viewed the stones as anonymous commodities, and the precious stones, long marketed as an emblem of eternal love, became tainted by the phrase "blood diamonds" and came to symbolize the ill-gotten gains of rogue governments.

So they are trying to stimulate demand:

Under its "Supplier of Choice" program, De Beers had the goals of stimulating diamond demand by 5% per year; improving the efficiency and margins of all De Beers operations, from mining to sales; and leveraging the De Beers brand by offering De Beers-branded jewelry directly to consumers.

Stimulus=protectionism?

The stimulus bill will undoubtedly carry "domestic content" or "buy American" requirements. This could provoke a protectionist round of retaliation from our trading partners.

The recession of 1929-1931 was turned into the Great Depression by the protectionist policies of the US.

Keynes on Obama's stimulus package

Via ThinkMarkets:

Organized public works, at home and abroad, may be the right cure for a chronic tendency to a deficiency of effective demand. But they are not capable of sufficiently rapid organisation (and above all cannot be reversed or undone at a later date), to be the most serviceable instrument for the prevention of the trade cycle.

It looks as if Lord Keynes would not be among Obama's "consensus"