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Thursday, March 12, 2009

The Stimulus Debacle

When I say stimulus, I of course mean Nancy Pelosi's acknowledgement that another stimulus may be necessary. Rarely will you find a statement more corrosive in every which way: politically, economically, and philosophically.

Politically, this is a total nightmare for the president she purportedly supports. It is an implicit acknowledgement that in her view the first stimulus will fail. After all, if it succeeds, there is no need for a second one. To suggest so soon that another one is necessary is an implicit acknowledgement that you have no confidence in the policies of the president. After all, she hasn't even waited to see what the first stimulus has done and already she is suggesting another one is necessary.

Politically, it puts your entire party on the defensive. Politico has a piece this morning in which several Democrats are interviewed and all of them are quoted as being sour to the idea of a second stimulus.

“If there’s appetite, there’s not in my office,” said Sen. Tom Carper (D-Del.). “Enough for now. No mas. No mas.”

“It is too soon,” said House Financial Services Committee Chairman Barney Frank (D-Mass.). “No sensible person is trying to guess what will be appropriate policy six months from now.”

“It sounds to me that would be a monumental lift,” said Sen. Ron Wyden (D-Ore.). “Somebody’s going to have to convince me how they’re going to pay for it.”

There are, however, those within the Democratic party that are Keynesian purists. There are those like Jerry Nadlor that believe that the first stimulus wasn't enough. As such, you will get others in the Democratic party that will be in favor of this idea. As such, the mere mention of a second stimulus brings with it questions of many members of Congress. The answers will create the perception of a divided party.

The Republicans, of course, are united against the entire idea, and the mere mention gives them the opportunity to paint the statement as an implicit acknowledgement of failure.

“Just three weeks after President Obama signed his ‘stimulus’ bill into law, congressional Democrats are already conceding that it will fail to achieve its objective,” House Minority Whip Eric Cantor (R-Va.) said in a statement. “As the speaker knows, the only reason to craft a second stimulus bill would be if the first one failed. Every Republican in the House voted against the first stimulus bill because we believed that Congress could do better, and we had a plan to achieve that goal. America does not need another massive spending bill. What we need is to create jobs.”

Why the Speaker would give her opponents such an obvious opportunity for attack is only known by her.

Economically, such an acknowledgement is no less corrosive. The economy needs as much certainty as possible. Much more than the stimulus what the economy needs is for as much of the trillions of Dollars now on the sidelines to go back to work. If you are holding onto some of those trillions hearing the Speaker say that there maybe another stimulus down the pipe gives you that much less reason to put it back into the economy. Without knowing how much will be spent and where, it becomes even more risky to take a risk. The Speaker has just given an already weary economy another reason to be less certain.


Anonymous said...

Is it possible those trillions on the sidelines are being hoarded to cover as of yet unknown losses?

mike volpe said...

The trillions are no monolithic so some probably are there in anticipation of things worse. Others are there because they fear for the future in other ways. Still, announcing that there maybe another stimulus only adds to the uncertainty.