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A Question from the Audience...

Gerardo asks a question about last night's U.C. Davis debate on the stimulus:

Hoisted from Comments: Brad, any ideas as to why in last night's debate Mr. Boldrin avoided any reference to his work on opposition to the stimulus bill? It was an interesting "debate". It seems you only debated yourself, while Bodrin kept rambling on about other issues, important issues but not relevant to the topic of the debate. Why do you think, he couldn't just stake his position and declare what everyone in the room knew; "that he was curing a broken nose by placing a band-aid in the butt".

Here is a link to the Denver Post article he kept on trying to ran away from....

It was odd. There are six reasons people have given me for opposition to the stimulus package:

  1. (The main one) It can't work: it is theoretically impossible for stimulus packages to boost employment and production.
  2. It will work too well: we will wind up with an inflationary spiral as federal government demand runs into supply bottlenecks and sharply raises prices.
  3. It will work too well: it will cause a crash in the dollar and then we will find ourselves with a lot of inflation imported from abroad as the dollar prices of traded goods rise.
  4. It isn't needed: the economy will recovery quickly on its own, and the stimulus will give us an economy with too much government spending and too little investment.
  5. It would work if business confidence was not so shaky or if business confidence was already so shaky that there was next to no private investment, but we are in the bad middle--so the stimulus package will shake business confidence and cause a spike in interest rates and a collapse of investment that will offset the effect of more government spending.
  6. It won't work well enough: it will work somewhat but it will leave us burdened with the task of amortizing the debt taken on to fund it, and that is a bad trade.

Yet Michele Boldrin seemed at various points to disavow all six of those arguments, and to come up with a seventh:

I'm going to fight the stimulus and say that we shouldn't try to keep unemployment rising via fiscal stimulus because we cannot afford a big fight over fiscal stimulus--it will distract the political system from the real and necessary task: fixing the banking system.

Yes, we do need to fix the banking system. But whether we do or do not do a fiscal stimulus is unconnected with what we do to try to fix the banking system. So his argument seemed to me to be incoherent.