The Economic Situation
The Fall Campaign Begins...

Fiscal Stimulus II

Josh Green today:

A Second Stimulus: It goes without saying--doesn't it?--that this morning's news that the White House will push a $200 billion plan for business tax cuts, coupled with its $50 billion proposal for research and development tax credits, $50 billion for infrastructure, and its $30 billion plan for small businesses, amounts to calling for a second stimulus... without, of course, using the dread term "stimulus."

Seems to me that this brings a few small advantages. It will, in theory, offer some help to an economy in desperate need of a boost. Adopting the pu pu platter approach seems to have had the effect of broadening the coverage: rather than one big story about a second stimulus, this morning's Wall Street Journal devotes separate stories to each component.... And I suppose that not calling it a "stimulus" makes it marginally less easy to attack.

But mainly it seems like an enormous--again implicit--admission of error on the administration's part, and rolling it out piecemeal, on balance, a losing strategy. First, these measures come far too late. Had the White House put forward a unified package in the spring, as it considered doing, some version might have already passed...

Josh Green last July:

Why the Stimulus Ran Out of Steam: This came as no surprise. Earlier this year, the White House considered calling for reinforcements. But political caution again took precedence, and any further stimulus initiative was deemed unfeasible on the grounds that it wouldn't pass Congress and that the public would recoil at the added size of the deficit. The president kept quiet. The strategy adopted was to pass a series of small measures -- a $50 billion unemployment bill, a $40 billion tax extenders bill, a $30 billion small business bill -- that they judged should collectively produce a big effect.   That approach clearly hasn't worked, economically or politically. Only the unemployment bill has passed, and that at half the size. Meanwhile, caution has failed to translate into more effective politics, leaving the president in the awkward position of having to campaign for puny bills plainly inadequate to the larger problem. It's hard to imagine the clamor over the deficit being any louder, and easy to believe that it might have been quieter had a stronger stimulus lifted the economy to a healthier state, for all the long-term costs.

The White House insists that it could not have gotten a larger stimulus through Congress, a debatable claim. But by twice neglecting to try, it has staked its fortunes on a policy that has visibly fallen short on the issue of greatest concern, the economy. Because of the divide between the experts and the strategists, nothing is happening. Given the weak state of the economy, the White House cannot claim that the stimulus it settled for has sufficed. Unwilling to call for another one, it is left to look on silently and helplessly.