I've got a new column on the politics of passing effective stimulus legislation, as a sort of preview to today's big Obama speech on the subject:
But the bigger challenge could be crafting a stimulus bill that gets through Congress and gets the job done. Obama's rough proposal, leaked to reporters over the past weeks, is targeted at $775 billion in spending over two years -- although Obama has suggested that the figure could rise to as much as $1 trillion as Congress beefs up the bill -- with roughly $300 billion coming in the form of tax breaks and the remaining amount coming in infrastructure investment and aid to state governments.
The question on the left is whether the current Obama proposal provides enough investment to turn around the failing economy. Nobel-laureate economist Paul Krugman, looking at the very sketchy details that have been revealed thus far, calculated that the result of the stimulus would be a 1.7 percent decrease in the expected unemployment rate -- only a slight improvement over the predicted average unemployment of 9 percent or even higher; Obama himself publicly worried about double-digit unemployment. Krugman also highlighted the Congressional Budget Office forecast, released yesterday, that the economy would underperform its potential by 8 percent; Obama's spending package would only make up for 3 percent of that shortfall.
Anyways, read the whole thing. The speech today didn't really go into specifics but is intended instead to prepare the American people for the size of the package and explain the rationale behind it. A few things to keep in mind: Obama's stated goal on employment is to create 3 million jobs. He wants part of the stimulus side to include doubling alternative energy production in the next three years, computerizing all medical records within five, modernizing federal buildings and schools, community colleges and public universities. It will also include funding to expand broadband connectivity and scientific research. But the framing of the speech is that government can and must have a large role in the recovery, and that transparency and efficiency will be watchwords. An excerpt:
This crisis did not happen solely by some accident of history or normal turn of the business cycle, and we won't get out of it by simply waiting for a better day to come, or relying on the worn-out dogmas of the past. We arrived at this point due to an era of profound irresponsibility that stretched from corporate boardrooms to the halls of power in Washington, DC. For years, too many Wall Street executives made imprudent and dangerous decisions, seeking profits with too little regard for risk, too little regulatory scrutiny, and too little accountability. Banks made loans without concern for whether borrowers could repay them, and some borrowers took advantage of cheap credit to take on debt they couldn't afford. Politicians spent taxpayer money without wisdom or discipline, and too often focused on scoring political points instead of the problems they were sent here to solve. The result has been a devastating loss of trust and confidence in our economy, our financial markets, and our government.
Now, the very fact that this crisis is largely of our own making means that it is not beyond our ability to solve. Our problems are rooted in past mistakes, not our capacity for future greatness. It will take time, perhaps many years, but we can rebuild that lost trust and confidence. We can restore opportunity and prosperity. We should never forget that our workers are still more productive than any on Earth. Our universities are still the envy of the world. We are still home to the most brilliant minds, the most creative entrepreneurs, and the most advanced technology and innovation that history has ever known. And we are still the nation that has overcome great fears and improbable odds. If we act with the urgency and seriousness that this moment requires, I know that we can do it again.
The rest of the speech is after the jump.
-- Tim Fernholz
