No Trillion Stimulus?
By Justin Gardner | Related entries in Economy, Money
Looks like the Obama team is dismissing the number, as well as even lower numbers. And I know that this news will make Keynesians like Krugman and Reich extremely nervous.
Some outside economists have pushed the trillion-dollar figure. One recent report suggested the transition team was working with an $850 billion plan. But this official describes the amount Obama advisors are currently considering as significantly lower than both.Obama and his economic team met for four hours yesterday. They are still working on the package, which will not be announced before the president-elect returns from Hawaii later this month.
Perhaps he knows if he asks for a trillion in stimulus, there will be no political will for healthcare reform or any of his other agenda items?
More as it develops…
This entry was posted on Thursday, December 18th, 2008 and is filed under Economy, Money. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
December 18th, 2008 at 2:48 pm
Justin,
Forget about political will, between the bailouts, the economy, and a trillion dollar deficit, we don’t have the money for Obama’s health care plan.
December 18th, 2008 at 3:32 pm
Remember Obama’s a politician. And very, very careful one. Stimulus might not be a popular term next month. Which means calling New Deal spending “stimulus” is a tactical risk. So he could easily intend to call for a huge spending increase, but just not call it stimulus.
Saying we need to spend $150 Billion on roads, because they need $150 Billion in maintenance, and putting off maintenance tends to kill people; that we need $50 Billion to subsidize mass transit, and putting that off is stupid because we need to reduce CO2 emissions and gas consumption; that we need to spend an additional $50 Billion on Unemployment and Food Stamps because more people need them; that we need to spend $50 Billion more on developing Solar and Wind power to reduce energy use, fight global warming, and catch up with Europe; $50 Billion to improve the VA Health System, so it can offer better care to Vets and free care to their immediate families; etc.
Most of the stuff people want in a stimulus package is stuff we needed to do eventually anyway. This way if he needs to take this stuff out of the stimulus package the GOP will have trouble claiming victory if it’s “only” a quarter trillion or so.
December 18th, 2008 at 4:30 pm
Okay Doug,
So if we’re spending so much money and supposedly don’t have access to any more, then why are we seeing price deflation?
I’m sorry, but all you’re arguing is ideology at this point, and right now it’s not in step with the financial realities that exist in this country or across the world. I mean, you would have let the entire financial system collapse because you didn’t think it was right to go against free market principles. Nevermind that politicians on both sides saw the gravity of this situation and worked together to make sure that we didn’t slip into another Great Depression.
I respect you Doug, but saying we don’t have the money simply isn’t true. We can borrow money or print it and you know that.
December 19th, 2008 at 4:54 am
Justin,
The money is being sucked in to pay debts that have been due for decades, plain and simple.
Also, the supposed evidence of real price deflation doesn’t exist yet. The CPI is notoriously inaccurate, and once you take out energy prices, there’s no “deflation” to speak of.
Furthermore, this isn’t about principles, this is about the simple fact that there is no money to do what Obama wants to do. Unless there’s some slush fund somewhere that we all don’t know about (which there isn’t), he’ll admit himself that before long, I suspect.
That’s why the trillion dollar stimulus is being “significantly reduced” I suspect.
December 19th, 2008 at 6:04 am
Justin,
Borrow money = increased national debt, increased interest rates, and increased payments on the national debt in each annual budget
Print more money = a devalued dollar, with all the consequences thereof.
You really don’t believe there aren’t consequences to these actions, do you ?
December 19th, 2008 at 8:08 am
Doug,
You’re wrong about the CPI - it is accurate as a weighed average of sub-indices - but only after the fact. Accurate CPI numbers are typically 6 months to a year in arrears and all indications right now show massive price deflation coming that will coincide with a massive rise in inflation. You are right that this is not an exact science, but if you know what you are looking for it does help one see over the horizon several years out.
A $trillion dollars spent today will have 10-15% more power than that same amount spent in 2014. I think members of the BO administration know this, and are waiting for the right time to spend spend spend throughout 2009-2010. We’re heading for alot of “hurt” in the next few years no matter what they do - but actions can and will be taken to lessen the pain long term.
There is great historical precedence showing a direct relationship between massive amounts of national debt followed by massive currency inflation in order to pay off that debt. Turkey/Ottoman Empire last centiury, the Weimer Republic after WWI, Argentina 20 years ago, and many others. Without a strong industrial base to “pick up” on the golden opportunity for exporters when this does happen the US will get “faced” by the Chinese, Indians, and other countries with a balanced (read:cheap labor) industrial policy.
A strong industrial base will start exporting as goods are manufactured less expensively here and it will pull us back from the edge economically - if we can focus on a strong manufacturing sector as a matter of national security. You can be certain of the fact that the Chinese will make a big move on us economically in the next 10 years. They will suffer the most when the dollar drops 30-40% in value as it will - their imports will be expensive, the “US paper” they hold will be worthless, and the commodities they stockpile will be worth twice as much as they will be able to purchase on the open market. And they will try and influence US policy - but if we can beat them at the export game - they’ll lose long term.