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Go Home TRB: In Defense of Waste

FEBRUARY 12, 2009

TRB: In Defense of Waste

BY JONATHAN CHAIT

Republicans like to accuse Democrats of wasting taxpayer dollars and being condescending eggheads. But if President Obama’s economic stimulus fails to prevent a depression--and I’m not saying it will--it will be because he didn’t waste enough money, and didn’t spend enough time being a condescending egghead.



Let’s start with the egghead part. The stimulus bill is based on Keynesian theory, which I’ll briefly explain in the condescending manner we liberals so enjoy using. When we’re in a severe recession, good productive capacity goes to waste. Autoworkers sit home unemployed because nobody has money to buy cars, and cooks sit home unemployed because nobody has money to go out to dinner. The first thing for government to try is to reduce interest rates, to encourage businesses to borrow money to hire more workers and buy equipment. But, if interest rates hit bottom, then the government has to shock the system back to life by spending money directly. Say, Washington hires construction workers to build something, and those workers start buying cars and going to restaurants, and, after a while, the economy is running again.



So Obama decided to spend a lot of money. The Republicans’ hoary opposition technique is to boil any legislation down to one or two silly-sounding expenditures that Joe Sixpack can understand--Midnight basketball! A bear DNA study! Obama anticipated this critique and tried to eliminate all waste from the bill. He kept earmarks out and focused the spending on public investments like energy efficiency and education. The logic went beyond just politics. If you’re going to spend a lot of money, you might as well get something useful for it.



Yet a few downsides to this clever tactic have emerged. First, a stimulus can shock the economy back to life if it happens quickly, but there are only so many useful projects you can spend money on really fast. Mass transit and new electrical grids take years to plan and build. There are worthwhile programs you can fund right away, but the list runs dry after a few hundred billion dollars. So the stimulus is less than half the size of the projected drop in output. It might be enough to stave off disaster, but then again, it might not.



Second, by emphasizing the worthiness of his spending proposals, Obama has allowed the debate to revolve around the merits of each project. Normal spending is judged on those terms--whether the goods or services justify their cost. The point of stimulus spending, by contrast, is simply to spend money--on something useful if possible, wasteful if necessary. Keynes proposed burying money in mineshafts, so that workers would be hired to dig it out. (Imagine what the GOP could do with material like that.) World War II was an effective stimulus that, economically speaking, consisted of 100 percent waste. If war hadn’t broken out, we could have enjoyed the same economic benefit by building all those tanks and planes and dumping them into the ocean.



Third, Republicans have simply carried on as if the stimulus were filled with pork anyway. In fact, the bill contains either zero pork or a vanishingly tiny amount, depending on how you define the term. But that didn’t stop Rush Limbaugh from calling the bill “porkulus,” showing, for a man of his girth, an unusual lack of self-consciousness about deploying porcine-themed insults.



Even before the bill was written, Republicans decided its prototypical measure was a “mob museum” in Las Vegas. The basis for this claim was not that there was legislation funding a mob museum, or even that such legislation had some chance of becoming law, but that that Las Vegas had wanted funding for a mob museum. Congress not only declined to fund a mob museum, it bent over so far backward to avoid frivolous projects that it forbade any funds going to a “casino or other gambling establishment, aquarium, zoo, golf course, swimming pool, stadium, community park, museum, theater, art center, and highway beautification project.” (Because Lord knows the government has no business funding things like zoos or museums.)



Congressional Republicans have continued to churn out lists of “wasteful” spending in the stimulus bill, highlighting such outrages as funding for Amtrak, making federal buildings more energy-efficient, flood-reduction projects on the Mississippi River, and the like. They have assailed the bill as a “wish list.” Well, yes. If you suddenly had to spend $10,000, would you spend it on things you’d always wanted, or would you spend it on something you’d never even considered before?



The mass ignorance on display was best exemplified by the contretemps over a provision to help undergird hemorrhaging state budgets. Most states are required to balance their budgets annually. During downturns, their revenue collapses and their costs (on things like Medicaid) rise. This forces the states to raise taxes and cut spending, the exact opposite of what you want in a recession. Thus, the notion of giving federal money to the states was probably the single most defensible provision in the whole bill. Naturally, it became a particular target of conservative ire. A Weekly Standard editorial declared:




It’s hard to argue that the $248 billion in transfers to the states will stimulate the economy. The money is being taken from one pot and put in another so that the states can balance their books and ensure the proper treatment of beneficiaries. It doesn’t prime the pump. It just keeps the pump from falling apart.



It’s a breathtaking passage. It begins by insisting that helping state budgets won’t stimulate the economy, then proceeds to methodically undercut its own assertion by pointing out that the stimulus will help states avoid cutting spending or raising taxes, and concludes with a metaphor that clinches the case: After all, keeping the pump from falling apart is a good idea, isn’t it?



Part of the problem here is that Obama never explained the theoretical basis for his plan. Even moderate journalists and members of Congress don’t understand it. Democratic Senator Ben Nelson cut state budget support, which he called “non-stimulative” spending, apparently unaware that this is a contradiction in terms.



In his press conference last Monday night, Obama summed up his approach like so: “I think that, over time, people respond to civility and rational argument.” A little intellectual condescension wouldn’t hurt, though.



Jonathan Chait is a senior editor of The New Republic.

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101 comments

"Reagan proved deficits don't matter." - Vice President Dick Cheney (December, 2002)

- Bukharin

February 12, 2009 at 2:19am

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Even during the good times when the government was planning on drawing up the 2009 budget, the government planned to overspead $400 billion. Even when the economy eventually recovers it will still be unable to pay for all of this. In fact the government will have to pay more with all the projects that will continue to be build. Many of those programs will be maintained by states that already have too many projects to maintain to the point they were in debt during the best of times. So even with the state and federal government already overspeading, it wasn't enough to create a positive outlook on the economy. In fact, government workers were complaining about cuts and everyone was complaining that they would have to pay higher taxes. Now Obama and the Democrats are making things much worse. This is no investment, just a short term jolt. In 2011 the baby boomers will start to hit 65 and by 2020 all the baby boomers, 76-77 million of them, will have turned 65. 40% say they will work past 65, but eventually they will retire and or die off too. These people will be sucking on government programs such as Social Security and Medicare and eventually, around 2040, cause a $50 trillion or more added deficit to the federal government alone. People have known about this upcoming problem for decades and they never called it a stimulus package. They have called it a added burden on tax payers. There might not even be enough bond holders to carry the debt and either taxpayers will have to pay more as soon as the deficit appears and or the government will have to print more money which will cause mass inflation. Will a $800 billion stimulus program even work? Well the $700 billion stimulus package known as this conflict in Iraq didn't seem to have helped the economy even though it created jobs. Now instead of building tanks or fighting terrorists, the people will be doing some other job and the number of jobs wouldn't have increase, just changed. So instead of waiting a couple of years for this larger programmed stimulus package to kick in, Obama and the liberals want to spend trillions of dollars now which will add to the flames later. That added tax will kill the future economy and every U.S. politicans 10-20 years from now will feel the stimulus plan will be the worse mistake so far this century.

- Greg D

February 12, 2009 at 2:43am

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Right, as if Keynesian theory was just completely uncontroversial truth. Then the only problem is us stupid nonliberals who don't share in your sophisticated (dare I say "scientific"?) understanding of how the world works. For instance, something I never understood is: what if some of the fabled "good productive capacity" had no market, namely it produced goods that could only be purchased in the context of a wildly overleveraged economy. Say I hire people to produce golden toilets and US consumers start borrowing 700 billion dollars from, say, the Chinese, in order to buy my products. Then, when there is no more money to borrow by the consumers, should the US government start pumping (borrowed) cash into the system so people can keep purchasing my products and I don't have to fire my workers? What happens when the Chinese stop buying US treasuries? We print more dollars? Just asking.

- carlo

February 12, 2009 at 3:11am

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He uses conventional economic theory to address a financial crisis that puts us in economic "uncharted waters". I can't wait for article a year from now saying "Who could have possibly known?!" For a liberal know-it-all there was surprisingly little substance in this. Just read the Bill rather than listening to commentators with empty opinions, and then consider the risks of more debt for our children. I sincerely hope it works, but with the GLOBAL Economy in retreat, our fiscal policy and spending policy have a lesser impact than ever before,

- akcita

February 12, 2009 at 7:17am

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no waste ? you are kidding ... please tell me you are kidding ? lived too long away fromfolks who work really hard for their 20 ,30, 40 thousand .... no wonder we are all in trouble

- jknor

February 12, 2009 at 7:45am

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A plan?! "you can spend up to $850 Billion" is not a recovery plan. Obama's "plan" was to spend a ton of money, nothing else. This article is a joke. The author considering himself capable of being a condescending egghead is hilarious. It is like he claimed to be a world class mathematician and then added 2+2 and said it equaled 657! His dishonest or ignorant description of the actual "bailout" is actually shocking. His only reference to the people who will have to pay the $1,000,000,000,000,000 bill(you know, the taxpayers) was a derogatory one. Isn't Mr. Chait aware that much of the spending in the "stimulus" doesn't occur for two, even three years?! So all the talk about the cook out of work is what? Just a game to cover the fact that this bill is more a gift to Democrat supporters than it is a "stimulus". Or is he really ignorant of the facts? Mr. Chait also seems to have a complete lack of knowledge about FROM WHERE taxes come. How does it aid production to have the few productive people robbed by bureaucrats and then shuffle the money around and then redistribute it? Of course, it does not.

- Marshall Gill

February 12, 2009 at 8:03am

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How you spend is important! If you give a man a fish he is fed for a day, but if you teach him to fish he is fed for a lifetime. The problem with government spending is that it tends to support things that would not otherwise be supported by the economy. It supports spending dollars on projects that bring cents in value. Why does that matter... First, it is consumptive spending, just like the fish for a day. Tomorrow you have to find new sources of income to spend. Second, consumptive spending increases debt and will make the Federal Government the next failure. I'm suprised no one addresses this as it is quite possible. Huge debt, not able to be serviced, requires a banker like China, and India. If the US prints more money to pay the debt, the dollar is devalued. A shrinking dollar causes international investment in the US to shrink, as markets will move to the stability of the world bankers... this is quite likely. So spending does matter. It has to create more value than it consumes or it has no chance of sparking the economy. The only real chance consumptive spending has, is to convince people that things are still OK and they can go into debt further. This is also destructive in the long run. How about we have a real strategy of absorbing some consequences, shrinking personal economies to strengthen the overall economy in the long run?

- Dan Clayton

February 12, 2009 at 8:35am

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How you spend is important! If you give a man a fish he is fed for a day, but if you teach him to fish he is fed for a lifetime. The problem with government spending is that it tends to support things that would not otherwise be supported by the economy. It supports spending dollars on projects that bring cents in value. Why does that matter... First, it is consumptive spending, just like the fish for a day. Tomorrow you have to find new sources of income to spend. Second, consumptive spending increases debt and will make the Federal Government the next failure. I'm suprised no one addresses this as it is quite possible. Huge debt, not able to be serviced, requires a banker like China, and India. If the US prints more money to pay the debt, the dollar is devalued. A shrinking dollar causes international investment in the US to shrink, as markets will move to the stability of the world bankers... this is quite likely. So spending does matter. It has to create more value than it consumes or it has no chance of sparking the economy. The only real chance consumptive spending has, is to convince people that things are still OK and they can go into debt further. This is also destructive in the long run. How about we have a real strategy of absorbing some consequences, shrinking personal economies to strengthen the overall economy in the long run?

- Dan Clayton

February 12, 2009 at 8:35am

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You've have to be an economic idiot!!

- Ranger

February 12, 2009 at 8:43am

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Drop the other shoe. A dollar of government spending adds up to a dollar of taxes or bonds, which are nothing more than IOUs. Currently, China holds more of our IOUs than any other creditor. Granted, China will not march up to the U.S. government window demanding repayment of all the IOUs they hold when they fall due. But they'll be reluctant to lend any more unless we raise interest on the debt we float - - or have the printing presses run overtime printing one hundred dollar bills. Chait's piece is shortsighted, myopic at a time when vision is required.

- Bretlaw

February 12, 2009 at 8:43am

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"A little intellectual condescension wouldn't hurt." Why yes you're right so here goes. How about a program to inspire and enable high school girls to imitate the conduct of that unwed mother of 6 who gave birth to octoplets. Think of all the government jobs such a policy could generate-DYFS employees, ADHD shrinks, K-12 child-study teams, prison guards with benefits-why the list is endless! It's the jobs that matter, right? Let's make every state like California. As long as the prevailing liberal pathology is of the mindset that would not see a tidal wave that wipes out a city as an economic loss(think of all the rebuilding jobs!)we are all doomed. We are headed for demise of the former USSR variety, whose citizens had once said "we pretend to work and they pretend to pay us." Chait, I hope you get a ticket on your way home from a cop who has been instructed to increase his summons-writing in order to pay for cop overtime(I wouldn't wish for you to have an accident to provide work for those auto-body guys, but hey your're free to chose).

- lesserliz

February 12, 2009 at 8:48am

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Suspending ALL federal taxes would have a stimulating effect and would occur nearly instantaneously. Why won't Obama and the Dems just pass a simple one page bill that suspends taxes for six months? It's about the same amount of money as their "stimulus" bill and would begin stimulating with the next round of paychecks. Could it be that Obama and the Dems just don't like people spending their own money? Isn't it just fact that liberals/progressives really love forcing other people to spend their own money how the liberal/progressive wants them to. Why can't I just keep all of the money that I work for and spend it how I want to? What is so evil about that?

- Sean

February 12, 2009 at 8:51am

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Absolutely agree with this article. As well intentioned as the Collins/Nelson "moderate" efforts may have been, I can't help but feel they've been penny-wise but pound-foolish (albeit where 1 penny = $1B). I keep thinking about Pearlstein's call for "economic personal trainers" for our elected officials. I just don't think enough of them grasp the dynamics at hand, and further, the Republicans are playing Don Quixote games with their same ole tax-cuts/low-spending prescriptions to any economic issue. I expect (and hope) some good Republican contributions were made to the bill, but this Boener/Cantor led phantom alternative that claims to create twice the jobs for half the money has been nothing nothing but a farce - which I'm sure they know but feel at least some will fall for.

- TheNest, VA

February 12, 2009 at 8:51am

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The intent, or at least the original intent, of this bill was not just a plan to spend in order to stimulate the economy, but to spend to resuscitate the infrastructure of the nation. The Republicans who somehow have convinced too many in the US electorate that spending money to benefit the US citizens is "social spending" that will construct a platform for "socialism." Now, there are very few Americans who even know what socialism is made apparent even more so by their understanding of what an economy is and how we got into this crisis in the first place. But, that's another story.

- Amit

February 12, 2009 at 8:54am

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I may be a liberal, and I may be condescending, but I am not an "egghead," at least with regard to economics. Your analysis makes sense to me, but I have a couple of what may seem to be ignorant questions. First, I understand the basic principle that getting money into the hands of consumers so that they have purchasing power will create demand for products and services, which in turn will cause businesses to hire people and buy equipment to make products and provide services, etc. What I don't understand is why putting money into the hands of businesses (by lowering interest rates for borrowing and/or by lowering taxes on busineses) creates jobs. Even if a business has access to capital, why would it invest in employees or equipment if there is no demand? Second, if it does not matter what the stimulus money is spent on, why doesn't the gov just write checks to everyone who is unemployed and seeks employment?

- dhurtado

February 12, 2009 at 8:57am

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Wow, what crap!!

- Bob Ennis

February 12, 2009 at 9:03am

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Sure spending can be stimulative, but only smart spending. Retarded spending is more waste. Building bridges to nowhere is costly but in the end pointless, useless, and in the end really didn't even employ alot of people. This bill is a giant bridge to nowhere.

- mike

February 12, 2009 at 9:13am

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Mr Chait- I doubt that anyone would argue against the notion that the whole point of stimulus is to spend money. However, to spend trillions of dollars that you don't actually have and the effect that the coming massive budget deficits will have on an economy struggling to return to growth from retraction is a valid point for discussion. I'd like to hear a discussion that addresses the kind of growth rates that will be necessary to raise revenue enough to make a dent in these deficits. Even President Obama realizes he won't be able to increase taxes to raise revenue in this economic environment, so how do these gargantuan deficits come down? Anyone...?

- Raconteur

February 12, 2009 at 9:42am

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It is time for the states to come to terms with their spending, period. Some tough love is due and the states cannot keep psying out more then they take in. Social programs have gotten too large and as a working stiff I prefer to keep more money. Having read most of the original bill there was alot of items that quite frankly did not stimulate anything. I work very hard for my money and I am tired of seeing it go to people that are not elderly or disabled or to that working family that may need some help, Instead it goes to able bodied people that do not work or worse to illegal aliens. Even worse to some organizations funded by the government that clearly break the federal laws. If the government really wanted to stimulate the economy they would have given money to the people to spend. 100 billion dollars back to taxpaing people would have stimulated the economy alot faster then this will, and eliminated alot of the forclosure problems. Oh and then we would have had to pay more taxes!

- GCT

February 12, 2009 at 9:49am

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Mr. Chait, did you ever start a business? If so you would know that those who do often have to forego their own income to make a payroll in tough times. You are right to say you are condescending. And you are over the top to imply that this bill is anything other than fulfilling a left wing wish list which will actually discourage people from starting new businesses. As for idle capacity, I agree that it can be put to work with some deficit spending. How about preserving the imcome of the unemployed with enhanced benefits and tax relief for businesses that are not doing well this year? $200 billion at most! The rest is counterproductive and will make things worse.

-

February 12, 2009 at 10:08am

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Wonderfully said. You wouldn't happen to be running for office yourself would you? :)

- Michelangelo

February 12, 2009 at 10:12am

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As pointed out by Henry Morgenthau, FDR's close friend and Treasury Secretary, Keynes didn't work in the 30's and, as we've read for the past decade, it didn't work in Japan in the 90's it's easy to oppose the Democratic stimulus plan on economic principal. Unfortunately, due to liberal indoctrination, many think it can work so it must be disected, examined and opposed piece by piece. There is good spending and there is bad spending. There is spending that can have ian mmediate impact and there is long term spending that won't. And there are tax cuts which, parenthetically are the best growrth stimulants. Creating new long term government programs that commit us to spending money forever with huge bureaucracies are not what Keynes ad in mind. Having never built anything, run anything or created anything, except bigger government and tax bills, liberals just don't get it.

- Richard Marren

February 12, 2009 at 10:13am

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What people forget is that a good deal of the money spent on WWII came from the Allies. England, particularly, used US workers and plants to build the ships, planes, and tanks that won the war. After the war, US factories retooled to manufacture the goods that helped to rebuild and restock European homes and businesses. Our plants were in perfect working order after the war, and the US had tremendous trade surpluses with Europe and Asia as we rebuilt those countries, their factories and their economies. We exported goods, services and knowledge, all at healthy profit margins, in light of the limited competition from the ruined manufacturing complexes in England, Germany, France, Italy, and Japan. Essentially, there was a massive transfer of wealth to the US from Europe and Asia. The same is not true today. This is a closed system, we are spending our own money here. If we spend it wastefully, it will have a negative effect; spend it usefully, and it will create positive effects. The devil is in the details, and spending for spending's sake is not good, never is. We need judicious spending, not willy-nilly spending, which is what appears to be proposed here.

- Linkster

February 12, 2009 at 10:13am

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Idiot. If this is a stimulus, why is only 15% of the total $800 billion spent in 2009 with the rest being phased in over 10 years????? That sounds like an expansion of big government, NOT a stimulus.

- jwl2672

February 12, 2009 at 10:17am

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The (intellectually honest) argument against stimulus does not necessarily deny that spending per se has some stimulative effect. I thought the point was about multipliers, and whether one dollar of spending actually generates more than a dollar of increased GDP. For certain activities that will be true, and for others it won't be. And since every dollar we spend now is a dollar we have to pay back eventually, it doesn't make sense to spend a dollar for 50 cents worth of (temporary) GDP increase. The "GDP shock" that pro-stim advocates envision will be more like a bump followed by GDP decline unless the money is spent on things that actually help the economy expand, and eventually allow private firms to re-enter and pump capital back into the system (as opposed to crowding them out).

- tm1015

February 12, 2009 at 10:20am

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to ask for a stimulus in which our money is spent on projects with lasting use? As in, not waste? Theory is all great and fun, but the government can't just spend $2 trillion without consequence, so we need something of lasting effect out of this. So no, there is no defense of waste. As the saying goes: you can have good, fast, and expensive, but only two of the three at one time.

- Is it so wrong...

February 12, 2009 at 10:30am

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I am happy to see that the left is equating spending with stimulus, instead of categorizing stimulus as a subset of spending, but not for the reason you think. It is too late to take your statement back now; you all have already said it, and it will be remembered. Keynesianism is a lie. It has been disproven over and over again, and it will be this time, too, and there is little you can do about it now. You will soon have a piece of crap on your hands, and you will own it in the world's eyes. Now let me condescendingly explain to you where you went wrong in your theory. As two centuries of classical economists have explained, production drives consumption, not vice versa. Hazlitt gave the example that you could decrease unemployment (temporarily) by banning trains and hiring people to transport items on their backs. In essence, that is what you are doing here with your "stimulus" plan. Four years is a LONG time to have to prop up a bankrupt idea. Of course, that is not your strategy, is it? Your real strategy is to buy votes from parasites. Good luck with that. Ha ha ha....

- wendy

February 12, 2009 at 10:52am

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Its all utter nonsense. Increased government orders will only effect limited sectors. The money the government spends coming from the free market! Its simple economics. Lower the Federal overhead on consumers and business. That is the only way to truly stimulate the economy without jeopardizing Americas entire future. The Porkulus Bill is an out rage. It is not a stimulus bill. It is a huge supplemental spending bill. It contains hidden Trojan socialist horses and Democrat payoff and pet projects. Many of the areas were money is thrown are already fully funded. Some even have surpluses. Just spending willy nilly is preposterous. We have had weeks to prepare a bullet like targeted bill to decrease government overhead on the economy. Instead, we get golf carts and Mice and a tripled NEA budget and light rail which is a loser deal and Amtrack which has always been a lose deal...

- Impala

February 12, 2009 at 10:58am

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Yes, it is true that neither side in Congress has made any economic sense in what to include in the stimulus bill. I'll go even further and agree that in some senses this is free money--the govt can either run a large deficit because of a collapse in revenue or because of spending used to avoid that collapse. But in either case the money will have to be paid back. That means it is important that a lot of the money goes to things that will help make America richer in the future, to be better able to pay back the Chinese and the many other holders of our debt. A new road that is truly needed fits this criteria, a road that is merely politically desirable does not. Spending on education can qualify as an investment, but I am not convinced that building school buildings does much beyond fortifying the corrosive education establishment (An aside--I would put the school board, principals, and union leaders of the school system I personally went to through a Maoist show trial if I could).

- Mark R.

February 12, 2009 at 11:00am

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Very nice job, Mr. Chait, although you can see from the responses that macroeconomics is not terribly well understood. It is a sort of inevitable habit of mind to think of the US economy as if it were a giant household to which the rules of household budgeting apply with more zeros. But it isn't. It took a genius like Keynes to understand that and, even after considerable training, it still requires effort to keep it all straight. Your point about WWII is the most telling and yet constantly overlooked: the massive war spending was, from a productive point of view, 100% waste, the equivalent of digging holes and filling them in again. Yet, it enabled us to escape the Depression. For tm1015: No, it is not particular activities that have different multipliers. It is a question of who gets the money. The higher up you go in class -- i.e., the wealthier -- the more likely that a marginal dollar of income will be saved rather than spent as the spending of the well-to-do is less directly related to immediate income. The poor spend every dollar they get. So, paying workers to build a bridge has no different impact on aggregate demand than paying workers for childcare. There may be other reasons to prefer one to the other, but stimulative effect is not one of them.

- roidubouloi

February 12, 2009 at 11:02am

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If all spending is stimulative, then why aren't John Thain, the directors of Citibank and their ilk stimulus heroes for spending money on antique commodes, private-plane pilots, and junkets to Vegas (keeping all those Vegas workers employed)? What this crisis proves is that debt will ultimately have its revenge. Substituting public for private debt is not magic. This emperor is naked and shivering.

- Gypsy Boots

February 12, 2009 at 11:03am

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If you read the bill in its entirety, you see the government growing, wasting, and giving more handouts - the way of the Denocrats.

- sparro21

February 12, 2009 at 11:09am

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When the government "stimulates" by spending they are simply taking a dollar from one person and giving it to another. This does nothing to increase the amount of "fuel", that is capital, in the economy. And you have a net decrease because the mechanisim of the transfer is a nonproductive cost that strips a percentage of what gets back into the economy. By cutting taxes you actually increase the amount of available capital for economic activity without the nonproductive losses associated with the redistribution mechanism. Also the money is spent or invested in things the market actually wants so long term efficiencies are improved. History shows us that Keynseian theory does not work unless implemented in a massive way such as WWII - which frankly we are not in a position to do today because of the % of our GDP already consumed by government spending. FDR tried Keynesian approach unsuccessfully in the 30's (unemployment was over 14% until the beginning of WWII), The Japanese were unsuccessful with it in the 90's. The best approach to rapidly turn this economy around is to cut taxes drastically, say by $800B and let the market pull itself out.

- Bill

February 12, 2009 at 11:28am

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Jonathan, thank you for calling it mass ignorance. It can't be said often enough that the Repub messages are a pure compound of lies, ignorance and stupidity. To take them for anything else is to misunderstand them.

- kling

February 12, 2009 at 11:28am

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I know you know so much more than the rest of us Mr. Chait. So, can you tell me why the markets are dropping?

- Bob Ennis

February 12, 2009 at 11:32am

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I thought listening to an economist (Krugman) rant about non-economic issues was painful. Now a non-economist on economic issues.....someone please put me out of my misery.

- dtohmatsu

February 12, 2009 at 11:34am

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Hey, Chait - The point of a stimulus is to get BUSINESSES TO CREATE JOBS. This bill will do very little to do that. In addition, most of the jobs the fed. government will create through this bill, as stated in the bill, are temporary one-year construction jobs. So in one year, all these workers will be laid off again. Also - this bill is a one-fell-swoop effort by the Dems to get their 40-year wish list implemented. Have to say - after only two and a-half weeks, we've got a failed presidency here.

- firefly2

February 12, 2009 at 11:44am

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If i have to hear one more liberal mangle Keynes by equating him with blind spending i'm going to freak out. By this logic, the simplest thing the government could do would be to print 100 trillion dollars and hire people to shovel it into a furnace. Its all spending right? Guess what- that money comes from SOMEWHERE. In this case, the government is selling bonds. Those bonds are bought with money, money that would otherwise be invested elsewhere in the economy- probably somewhere more productive than Philipino veterans of WW2. All this idiotic spending is doing is trying to fill a pool by using a leaky bucket to carry water from one end to the other. Liberals have talked themselves into believing spending any amount of money is of itself a good thing. Thats a disaster, at least before they were indifferent that theyre socialist spending programs were hurting the economy, now they justify it by misunderstanding economics in a way that reinforces their appetites.

- Mark Buehner

February 12, 2009 at 11:52am

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So if spending is good why chastise the banks for having blowout spending on meetings and jets?

- Gus

February 12, 2009 at 11:58am

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Let's compromise: I'll agree to the pork, like the mob/politician museum, and you join with fellow lib's to pay the costs.

- PeterJ

February 12, 2009 at 12:01pm

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I know you know so much more than the rest of us Mr. Chait. So, can you tell me why the markets are dropping?

- Bob Ennis

February 12, 2009 at 12:01pm

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It's rich that all the ignoramus conservative commentators (who are mercifully not allowed to post on blog articles) insist that tax cuts are the best stimulus ever, etc., etc. We have had two major tax rebates since 2001 and a huge set of across-the-board tax cuts during that time, and they did nothing to stimulate the economy during that period or lead to significant wage or job growth across the board. The most recent tax rebate, from last summer, went almost entirely into consumer's bank accounts, where it has largely remained as the same consumers have seen their retirement accounts decimated, their home values plunge and their jobs imperiled or lost. All of this is perfectly rational, and does absolutely nothing for the economy in the next 5-7 years except lead to further job losses and spending reductions. I would hazard a guess that the morons who yammer for tax holidays and permanent tax cuts would not go out and spend their extra money these days on new cars, houses or furniture, or invest it in the market, but stick it right in the mattress.

- wildboy

February 12, 2009 at 12:27pm

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Note to egghead: take an econ 101 class and find out why borrowing $1 and wasting it on unproductive efforts does not "stimulate". The point of a stimulus plan is to borrow $1 and create $1+. This bill will not do that. That's the point everyone opposed to this bill is trying to point out, not do it my way or nothing at all.

- emtrader1004

February 12, 2009 at 12:27pm

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As one of my college roommates (an economist at a federal agency that shall not be named) said the other night: "We need to pump up demand a whole lot, like NOW!" The fact that doing this hinges, in the end, on the recently-reelected Susan Collins' fear of being yelled at by some ignoramus at a town meeting in Lewiston -- well that's the price of the Senate's needless departure from majoritarianism. I've hated the filibuster since I first learned of it 45 years ago and I hate it still, as should all progressives who take the long view.

- cforeman

February 12, 2009 at 12:28pm

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All of this would be true if the money could be conjured from thin air. Unfortunately, the government must either tax the money away from person A to give it to B, in which case we only benefit if person B uses the money more wisely, or they can borrow the money with the same effect as above, or they can print it which causes inflation. There is no free ride. It's interesting that WWII is described as the stimulation that presumably ended the depression, and not the 8 years of massive federal spending by FDR. Pouring capital into bad projects is a long-term road to dissaster, as the Chinese are learning. Every exercise in Keynesian intervention ever attempted has failed. Spending this $800 billion will not shorten the recession, it will only leave us with a big debt to pay off after the recession ends on its own.

- Jay Richards

February 12, 2009 at 12:29pm

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Gee, Mr. Chait, you call Rush Limbaugh a fatso with such elegance and sophistication.

- indipete

February 12, 2009 at 12:32pm

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All spending is stimulous and details don't matter? Then why this whole farce? Why not take $1T, divide it by the population and send everyone a check? All spending is stimulous? Then why did they choose to spend on what they did in the bill? Or why not divide the trillion by the number of members in congress and say "spend on whatever you want"-REpublican or Democrat it doesn't matter as all spending is stimulous. This bill is a partisan joke.

- Andy

February 12, 2009 at 12:34pm

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Chait, like the Democratic leadership, misrepresents Keynesian economics. Note that he never mentioned the education spending - how does 12B in Pell Grants put people back to work? How does $200 million to Philipino WWII veterans put people back to work? How does $650 million in DTV coupons put people back to work? This doesn't even meet Keynes' own criteria! Chait knows this, of course, but conveniently fails to mention those aspects of the bill.

- poorich13

February 12, 2009 at 12:40pm

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It's not just spending. As many have said, if any type of government spending stimulates the economy, then the more the better. But the last 20 years has demonstrated that those governments that spend the highest proportion of their national incomes are not the wealthiest countries. In fact, if increased government spending made us wealthier, we wouldn't be in the position we're in, since spending has skyrocketed in the last 10 years. The question is whether the government spending is more effective than the alternative private spending that would occur in the absence of the governmental taxing, borrowing, and spending, and the resulting impacts of all those activities. The supposed benefits of Keynesian spending is a multiplier effect - that every $1 spent will increase growth by $1.50, though other studies have shown that it costs at least $1.20 for the federal government to actually spend $1.00, and that assumes that private spending doesn't have at least an equivalent benefit of $1.50 (if I spend money buying a car, the dealer spends it, and so on...) In fact, Mr. Obama's own White House chief economist, Christina Romer, has shown that every $1 in tax cuts (not the kind in the stimulus, however) can increase output by as much as $3, much higher than the supposed Keynesian multiplier. Congress' own CBO has also reported that the stimulus bill will actually REDUCE long term growth because of the additional borrowing, though it is likely to increase growth somewhat in the next two years. But isn't short-term growth spurts and long-term drags on the economy what we're trying to avoid? We had that with the housing bubble - short term growth followed by long-term pain. This is nothing but more of the same, and apparently using discredited 50-year old theories just for fun. Aren't there any new ideas (you know, the kind that actually work?) in the democratic party?

- DL

February 12, 2009 at 12:48pm

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Amen!

- Beth

February 12, 2009 at 1:14pm

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It is true that consumers borrowed to spend on the goods that expanded capacity made available, but don't forget that supply side theory says we should cut taxes to encourage business to invest and that this investment will create permanent capacity to produce wealth and that is a good thing. I would argue that allowing 40% or 50% of the nation's wealth to accumulate to the top 1% of the population and then giving them tax cuts to boot only encouraged them to take outsized risks that created the asset bubble that has brought us down because they had more money they could afford to lose. Supply side has lead to boom and bust, just as it did in the 1920's.

- rma

February 12, 2009 at 1:22pm

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Delusions.

- MPN

February 12, 2009 at 1:34pm

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Excuse me while I LMFAO. This is the intellectual defense of Keynesianism? Chait is an insufferable prig.

- Joe Calhoun

February 12, 2009 at 1:42pm

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Chait hates Bush so much that he's suffering from the opposite of Bush Derangement Syndrome: he'd follow obama to hell and back, no matter what this guy proposes or does.

- jwl2672

February 12, 2009 at 1:57pm

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You know, Porkulus is taking the standard term for wasteful pet project spending, Pork, and combining it with Stimulus. Pork-ulus. It isn't a porcine themed insult. You, however, seem to have no compunction about devoting a paragraph to set up a fat joke. You, sir, are an ass.

- Jerkulus

February 12, 2009 at 2:02pm

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The stimulus is very bad economic policy. If this were Kenysian eoconmics, it would be a one-year bill that would focus on spending in the next 6 months. That would do the most good for stimulating the economy. And Keynes would say it doesn't matter how the money is spent, only that it is done quickly. This stimulus puts most of the spending into late 2010 and 2011. So the bulk of the money is not for stimulus. What is it for? It is to fund 8 years of pent-up demand for new programs. Virtually every program that has been turned down by Bush over the past 8 years is in this bill. Simply put, Nancy and Harry are using "stimulus" as a cover for taking care of their friends and funding their favorite projects. If someone objects, they say "I won" along with BO. In two years, the funding for this orgasm of spending will run out. What are the chances that these new programs will not have their funding renewed? Virtually zero. We are looking at nothing less than doubling federal discretionary spending in the first 30 days of the BO administration. So we will be facing a huge funding gap. We will need to pay for all of the new programs, pay more interest on the debt, and pay for nationalized health care. And we will raise taxes: a carbon tax, repeal of the bush tax cuts, increases in social security taxes, and increases in gasoline taxes to name a few. We'll have a socialist economy - after nationalizing the banks (10% of the economy), health care (15% of the economy), and autos (5% of the economy) the nationalized industries and federal budget will comprise more than half of the economy. What the feds don't own, they will tightly regulate to stop "excesses". Unprecedented increases in spending, huge tax increases, a socialized economy. That's change we can believe in!

- Ernie Banks

February 12, 2009 at 2:12pm

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There is a choice: Foolishly spend money on something that will leave you with nothing tomorrow other than a memory or Wisely spend money on something that will benefit you tomorrow and well into the future. Somehow, I do not have confidence that Nancy, Barney, Harry, Chris and Barak will spend my money wisely.

- Bill

February 12, 2009 at 2:18pm

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The laughable part of the whole liberal premise is that Keynes was right. The sad part of the conservative premise is they can't figure out how easy it is to pick apart the liberal theory. As pointed out, Keynes' theories didn't work in the 30s, they never worked since, and even more importantly, a simplistic economic theory derived in the 30s should not be the basis for economic plans in a totally different and more sophisticated economy. And that is not even addressing the fact Keynes was a pure socialist..... The only part I agree with Keynes is the economy needs "animal spirits" to get it going again. In other words people need somehow to have confidence and feel good about spending their money again (instead of putting off vacations, buying cars, etc). Having our president run around talking about how this is the worst crisis since mankind started doesn't help one bit. Not that it was the only reason, but the former president at least tried to keep up optimism and confidence by saying "we will be ok, times are tough, but we will get through it, etc". Notice things didn't fall off a cliff until we all realized "Negative Nelly aka the Obama Administration" was taking over....

- brian

February 12, 2009 at 2:20pm

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So is the construction company going to go to bankrupt firms or to ones that are ready to "construct"? You assume that spending will go to idle resources, but a simple real world analysis says otherwise. Only firms that are already solvent with capable labor can execute projects, and they will be hired to dig the ditches and fill them in. And really, are all those unemployed financial workers going to be the ones hired?

- brannigan

February 12, 2009 at 2:29pm

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Wrong: the objective to STIMULATE DEMAND in the economy. Spending money is one of many ways to stimulate demand.

- Dave

February 12, 2009 at 2:56pm

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Permanent stimulus is communism. Burying money in a mine so people can work to dig it up is like bulldozing housing to rebuild it. What is the point? Doing nothing certainly is better. In the long run, unless this spending adds real value, we're back here in a few years, and even more in debt. Keynes has been discredited long ago. The last time Keynesian theory was at its peak, we went from a robust economy to a bear market from 1966-1982. That was the result of the "Great Society".

- X

February 12, 2009 at 2:57pm

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Picture a swimming pool (the analogy belongs to the economist Robert Higgs. Water is draining. The Government is trying to have the water level rise. It cunningly grabs a pail and scoops water from the deep end of the pool and unloads it at the shallow end. It doesn't matter if you hope that the President doesn't succeed. He will not raise the water level..er.. I mean the economy.

- Bernie

February 12, 2009 at 3:05pm

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Anybody who comments that the intent of the stimulus is to "resuscitate the infrastructure of the nation" hasn't read the bill. Tell me, how does an additional $1 billion for nuclear "weapons activities" do that? Yes, it's in there, as a whole lot of other disgusting waste of taxpayer resources.

- AZ99

February 12, 2009 at 3:12pm

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The stimulus is all about spending. It just depends upon who you want to do the spending. The current administration feels that government knows what is best. The minority (Republicans) feel that the consumers (citizens) know best. The idea of having more government control of macroeconomic decisions appeared to have failed in the Soviet Union (more profound cases) and most of Europe (less profound cases). I would be curious to how the world would have prospered if the effects of the US free market economy were removed. I know that republicans want tax cuts in the stimulus bill, but most of the items are temporary in nature. While i agree that putting money back into the hands of consumers is best, the changes needed in the tax code should be more permanent in nature to encourage long-term investment. Giving one-time checks doesn't change the analysis a business will do when evaluating business investments. They are still subject to the same high rates of tax. We need to cut corporate income tax rates, provide investment credits, etc. then you will see the private sector come back.

- shon

February 12, 2009 at 3:37pm

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As I recall, the much vilified Bush and Greenspan prevented what Obama calls "catastrophe" after the double hit of the dot-com crash and 9/11. Let's see if Obama and Bernanke can do the same. They did it without dropping money out of airplanes, as is suggested here. Bush reduced marginal tax rates and (justly) gave tax money back to those who actually paid taxes. It worked very well. Let's see how this does.

- lenw9

February 12, 2009 at 3:44pm

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The stimulus bill includes only half of Keynesian Economics. As I recall being taught, the other half of the theory is to raise taxes during good times to pay off the deficit accumulated during the bad times. The only problem is that no one has ever begun the second part, raising taxes. President Obama doesn't seem likely to do so since he promised to cut taxes for "90% of American families".

- sasha

February 12, 2009 at 4:18pm

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I think I understand your argument then... The proper course of action at this time is to spend money on anything because spending "by definition" is stimulative. Just do it quick. In that case, we need to pump more money into failed banks and stop railing against their executives for spending $1,400 on a wastebasket. By getting the money out to these proliferate spenders, we have found an amazingly efficient manner of getting stimulative money into the economy. Of course, this lidicrous. Common sense tells us that whatever stimulus is applied should be quickly applied, and must result in some genuine benefit. The problem that many people have with various items in this monstrosity is that it fails one of those two criteria. It is libelous to defame those who want some grown-up supervision over how over a trillion (let's not forget interst on this money, shall we?) will be spent. This money will eventually have to be paid back. We've been avoiding this truth for decades now, but can't kick the can down the road much further. This recession is nothing to the one we will experience in about 10-12 years when the government is the one who needs the bailout. Huge existing debt + Social Security + Medicare + Stimuls + Whatever other foolishness is passed between now and then = Catastrophe Just because Bush was an idiot does not allow Democrats to act like idiots too. This year, I will pay close to $50,000 in taxes. I consider this to be the "dues" of being an American. I simply don't want that money to be pissed away. Please tell me where I'm wrong...

- Paul Thiel

February 12, 2009 at 4:30pm

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Mr. Chait, how much government spending is enough? How much do I need to send to Washignton so the government and liberals like you can save me from myself? I have a business to run and employees to pay, so clearly I do not have time to do the important value-adding work that you all do. God Bless you (hope that doesn't offend you, please let me know if it does and I'll take some sensitivity training).

- When Will It End?

February 12, 2009 at 4:37pm

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The whole point of being a journalist is to actually find out if what you state is true. You claimed that Mankiw never responded to Yglesias' criticisms, when he indeed replied on Feb. 10, in a blog post. This is not an error of opinion or interpretation, but of fact.

- anonymous

February 12, 2009 at 4:42pm

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Excellent piece but I would take issue with one major point: "World War II was an effective stimulus that, economically speaking, consisted of 100 percent waste" Indirectly ww2 produced all kinds of economic growth.

- gio

February 12, 2009 at 4:56pm

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Ridiculous! In order to work, and I'm certain that it will not, the stimulus MUST create goods/services that have a positive return. Positive return is a requirement because WE HAVE TO PAY THE MONEY BACK. In the absence of this, you simply delay the day of reckoning which will be more severe because now the nation has a sputtering economy AND is further in debt. I like the article, though, as it provides a shining example of how terrible ideas are perpetuated.

- john

February 12, 2009 at 5:08pm

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A few thoughts... 1-The Congressional Budget Office estimates this stimulus package to have somewhere between a 1.2 to 4 percent positive effect on the American GDP in 2009. You may call it what you will but this reader calls those numbers a good thing. 2-The same report outlines the dangers of the package's spending: Namely that in oh say ten years down the road the impact of these expenditures will be blunted by the drag on the budget to pay for this bill. Now that IS a valid concern. This reader is willing to take that risk. I think that the federal budget can be balanced in time. I KNOW the economy sucks right now. 3-As a business owner and a taxpayer let me say that I will cheerfully exchange taxcuts for increased sales.

-

February 12, 2009 at 5:14pm

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Gio, That is exactly the point. The output of war spending, equipment to be blown up and 12 million people fighting, was economically wasteful, of no direct economic value whatsoever. Yet, it generated all kinds of economic growth. That is precisely why Keynes observed that even paying people to dig holes and fill them in again would work in a period of slack private demand. No different than paying people to build machines and then blow them up or scrap them. But it still produces economic growth and private demand kicks in again because people have money to spend. Of course we should want to get the most useful goods and services for the money spent, but that is a separate agenda from replacing missing demand. Chait has it right. The supply-siders and conservatives are just as ignorant today as they were when they drove us into this economic ditch.

- roidubouloi

February 12, 2009 at 5:43pm

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Hey, why don't we mandate that all CEO's use private jets? Think of the ripple effect that will have. After all, spending money is all that matters....

- MGrixx

February 12, 2009 at 6:39pm

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Can I be reading comments on a new republic article? Amazing how many "get it". FDR did NOT spend us out of the Depression; he lengthened it. WWII did NOT end it. WWII took 15M young men out of the work force and made them $20/month slaves. Instantly solved the unemployment problem. Killed about 500K of them. My father being one. Took the rest of the populace and made them work at making bullets. My mother being one. "Paid" them pretty well, but there was nothing to buy. The country went from no money, but plenty to buy in the 30's to lots of money, but nothing to buy in the 40's. By about 1950, people both had money and goods to buy. THAT is when the Depression ended. In the meantime, we had utterly destroyed the manufacturing capacity and infrastructure of two superpowers--German and Japan. If the world wanted anything, they had to buy it from us. Prosperity, chicken in every pot. So--liberals--you want a New New Deal? Ready to conscript about 50 million young people? Adjusted for population, that is what we are talking about. I guess we have to go flatten China, Japan (again), and a couple others. Japan would be fairly easy, but China would be quite the undertaking.

- rpm

February 12, 2009 at 7:07pm

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Your suggestion that keynesian economics says spend spend spend and it does not matter on what is sheer madness. Creating jobs, paying jobs without creating real output does nothing for the economy other than to cause inflation. Stimulus is only meaningful if it not only creates jobs but also creates output that feeds, choths and houses people.

- econ123

February 12, 2009 at 7:07pm

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Chait's most fundamental error is to assume that "spending is spending is spending," as if a dollar spent to build a needed road is the same as a dollar spent to build an unnecessary road. If you don't understand the difference I despair for you, but there's another way I can explain it: The government has the option of digging two holes. The holes are essentially identical. They both require the same amount of money, time, and manpower to reach the same depth. The only difference between the two holes is that one hole has platinum ore at the bottom of it, while the other hole just has rocks and dirt. Which hole do you dig? Obviously, anyone with his head screwed on straight will say that you did the hole that leads to platinum. Chait disagrees. It's digging the hole that matters, employing the workers that counts. Both holes give you the same amount of direct labor employment, but only digging the hole with platinum gives you any kind of value. In fact, it would be better just to hand the hole-diggers the money that you would have paid them for digging the hole than to make them work and sweat to dig a hole that nobody wants.

- AK

February 12, 2009 at 7:18pm

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If it didn't matter how the money was spent or how much was spent, if indeed the details don't matter, then why was Congress arguing about the details?

-

February 12, 2009 at 7:56pm

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"...A little intellectual condescension wouldn't hurt, though." Jonathan Chait "I am so smart, I am so smart, S.m.r.t I mean S.m.a.r.t." Homer Simpson While Mr. Chait patronizes the rest of us uncomprehending leadheads with his superior intellect, he might ask himself: 1) Why he thinks that 1930s shovel-ready stimulus would necessarily work in a service based 21st century economy; 2) why any "stimulus" measures of a temporary nature (temporary tax cuts, temporary spending)should work in a world where taxpayers recognize that they are temporary and that they will have to reduce future consumption through higher taxes or lower services to pay for the associated increased government debt. 3) What's next in the willing suspension of economic disbelief, the return of the Phillips Curve? Oh, right, it's already back. 4) If such economic stimulus and related deficits can really pull an economy out of recessions, then why not do it all the time to prevent them?

- Just askin'

February 12, 2009 at 7:56pm

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Keynesian economics only works when the stimulus/spending recycles within a closed economic set. Unfortunately most of this stimulus will be spent on imports manufactured somewhere else. If Keynesian spending, deficits and wars were enough, we would be doing very well with the Bush Policies. He pissed away close to 5 trillion dollars in eight years. Do you think if Obama pisses away another 5 trillion he will have better results? Just as Bush's "Stimulus" was lost, most of this money will soon go to the Far East to pay for imports and sucked up by trade imbalance. Hopefully they will lend it back to us. I remember the 60's when a common laborer making $5 and hour (me) could buy a home in Boston and a vacation home on Cape Cod and buy a new car every year. Today you would have to make $500K per year to afford the same standard of living. We had a trade surplus until 1971. Life was good. We now DE-STIMULATE the economy by sending 180 billion a MONTH offshore for imports. Granted we also export but the net trade imbalance is about a trillion per year. What good is 832 billion of Keynesian Stimulus/Spending when we import (and thus send out) 180 billion per MONTH. Jonathan you are a total lightweight and a moron. You totally missed the big picture. This is not the US in the depression or the big one(WWII) or even the post war. This is a global economy. Welcome to the Global Economy. Unskilled labor pay per hour is 45 cents. Skilled software developers make $1.50 per hour. (I used to make $150K per year as a software developer. I now make 30K per year managing PHd coders from India) Globally PH'ds make $300 per month. Journalists like you will make about half of this soon. Here is a simple math test for everyone. If we stimulate the economy with $1 dollar per year. and 50 cents of that dollar leaves the economy every Month for a foreign country. How long will it take to have Keynesian stimulus in the US? Another math puzzle. If the Stimulus bill was 100 trillion dollars per year and we spent half of this stimulus package buying products from China or other countries every month. What would be the net stimulus per year for the US economy? Time for Tariffs anyone? China has 'em.

- axegrinder

February 12, 2009 at 8:06pm

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Somehow I don't think most of these comments come from regular TNR readers. Perhaps the hyper-link from realclearpolitics has something to do with it -- or maybe I missed the one from the CATO institute. It is amazing, though, how many folks never took macroeconomics 101. The government can increase GDP through the fiscal policy of increasing spending or cutting taxes or through the monetary policy of reducing interest rates. The problem using monetary policy is that the prime rate is already effectively at zero, and as between spending and tax cuts, spending has much higher multiplier effects throughout the economy. For every dollar employed on a tax cut, the multiplier is only 0.6 (i.e., less than the amount "spent"), whereas for "stimulus" spending it can be up to 2.5. I think it was Mr. Chait in this very magazine who some time ago published a table of the multipliers for various forms of spending. So I really don't intellectually understand the arguments of those who oppose the Stimulus. And by the way, Keynes proposed deficit spending/stimulus to prime the pump in bad times, and then paying off those deficit in good times. Bill Clinton seemed to get this right; George W. got it exactly backward.

- Russell1

February 12, 2009 at 9:33pm

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Bush spent a ton of fake money. About 5 trillion over 8 years. Why did his keynesian stimulus fail? What makes you think Obama's will succeed? There must be something that is sucking up stimulus. Could it possibly be -- China?

- sceptic

February 12, 2009 at 9:53pm

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If the point is just "to spend money," why not just give every American family like $8,000? Not in tax cuts, but in the form of a check. I don't see any principled difference between that and paying workers to dig money out of the ground. And surely that plan would be better for the average person than millions of dollars doled out to various congressional districts to buy votes for the package.

- Greg

February 12, 2009 at 10:44pm

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Ridiculous and ignorant piece. The best part is that if his assertion is true - government spending stimulates the economy - then George W. Bush was one of the best things to happen to the economy with his uncontrolled spending.

- reb

February 12, 2009 at 11:31pm

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Jonathan, You need some background on Keynesian Theory. Keynesian theory is simply bury a can in the backyard with enough money in it to make it appropriately priced to dig it up. This is how us eggheads, liberal or otherwise view the Keynesian theory. The assumption and the payoff is - you spend it. Granted digging up the can is using unused productivity, but unlike your analogy, Keynesian theory is less about productivity and more about money supply or transaction velocity. What if it takes an hour or a week to dig up the can? Same thing. Productivity rates can fluctuate by a factor of 40. Nothing happens until you spend the money. Spending the money in the can is the stimulus. This spending increases the velocity of money and is the stimulus. You spend it, somebody makes money, they spend it, someone else makes money, etc. What happens if you dig up the can, obtain the money and burn it. There is obviously no stimulus. You can do it in a minute or a month. If you burn it, the productivity factor is not a factor. There is still no stimulus until it creates velocity. There is no Keynesian effect. There are no profits. But there is still interest on the debt for the money placed in the can. This sucks more money out. Things get worse. What is the same as burning the money? Sending it offshore to another country. This money does not increase velocity or profits in the US. We send (burn) 60 billion dollars a month offshore in our trade imbalance. Why did George Bush fail when he buried 5 trillion in cans that we all dug up over the past eight years and this is now national debt on which we pay interest(offshore). He cut taxes, he increased spending, he created two wars. How Keynesian can you get? This previous Keynesian behaviour failed for one simple reason. In the same time frame Bush buried 5 trillion dollars in cans, we burned (sent offshore) over 6 trillion dollars plus interest on the debt. Keynesian economics only works with a neutral or positive balance of trade. Just ask China. They know. Why do you think China imposes 30 to 1000% tariffs and barriers for imports. Why does a pair of Levi dungarees cost $200 in China? China understands the rules of Mr. Keynes and a whole lot of other rules as well. Before you write another partisan piece, learn the economic rules, do some home work. It does not matter if FDR, George Bush or Barack Obama puts money in a can to dig up. If the money is burnt,(sent elsewhere) there will be no stimulus. Economics 101. On the other hand, you may be right. If we were to spend 10 trillion fake dollars, this would overcome the trade deficit, our currency would be close to worthless globally and we probably could not import anything. Welcome to the third world. Buy Food and Gold Stocks. Sell everything else.

- jaded egghead

February 12, 2009 at 11:45pm

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Can someone please help me out? Is this piece meant to be satirical? The overall flow bears the chief characteristics of satire: a reasonable opening argument, obsequious praise to a distant “expert” with emphasis on their pet theory while slyly skipping over its past performance, followed by supporting the proposition with utterly absurd, hyperbolic examples [such as proffering as viable an economic stimulus program to deliberately bury money for the unemployed to subsequently dig up and expounding that no economic difference exists between winning a world-scale war that plunged the majority of the civilized world into ruin thereby requiring the victor’s exports for rebuilding and manufacturing the exact same armory for the specified war and then dumping the virgin products into the ocean], flippant dismissal of critics while misinterpreting (or misrepresenting) their arguments and analogies (a non-primed pump will deliver as much water as one with a broken shaft), and a condescending, self-proclaimed “egghead” author who is gradually revealed to be either a Chekhovian imbecile or a Gogolian con-artist (a frequent ambiguity in well-crafted satire). However, the author apparently disregards the common convention of donning a pseudonym. As satire, the piece is brilliant; as a forthright argument, it is clinical.

- Puzzled

February 12, 2009 at 11:49pm

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This article demonstrates the spirit of Stephen Glass is alive and well at New Republic.

- Bill

February 13, 2009 at 12:13am

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The post by Posted by roidubouloi 30 of 70 "Very nice job, Mr. Chait, although you can see from the responses that macroeconomics is not terribly well understood." is right on! I mean, I struggled with macroeconomics in college and business school, but the extent to which it is apparently misunderstood by the public as large is breathtaking. As roidubouloi also points out, almost all of the criticisms stem from confusing microeconomics and macroeconomics. People, we are on the verge of a possible Global Depression! I doubt that many of the posters here experienced the 1st global depression, but I certainly don't want to experience the next one! 52 is far too old to be standing in bread lines! I used to wonder how Herbert Hoover could be so shortshighted as to allow the 1st global depression to arise. Now I see!

- Elric O M

February 13, 2009 at 1:40am

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Insulting the intelligence of people who disagree with you is no way to prove your point. By the way, spending just to spend will put our country into debt that we will never be able to pay back. Now that is just plain STUPID!

- Lib

February 13, 2009 at 2:45am

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The mind boggles at the ignorance is just one single article. Have you ever been responsible for the creation of jobs, a payroll, growing a company? Perhaps an evening’s dinner with a “Joe the Plumber” would help. For me, today’s payday. Meaning I will sit at my computer, click the “Pay Employees” button on my accounting system and pay my employees. It takes money to do that. Companies need to want my product first – then they need to HAVE money to pay for it. THAT is how responsible companies work. They find a NEED they must take care of – then they MUST HAVE to money to make their purchase. That is how a responsible company works. Obama seems to have changed things up a bit. NEEDS have been “dumbed down” to field mouse level and rather than being responsible in spending – rather that HAVING the money for such an investment he will simply TAKE the money or borrow on behalf of my grandchildren so the mouse is protected. What does this mean to me and the more than 20 MILLION “Joe the Plumbers” who employ fewer than 500 employees? It means I am going to button down the hatches. With the level of “theft” that will be required to pay for the pork filled piece of crap, my customers will be lucky to be able to buy a roll of toilet paper, let alone new systems. I am not alone. I can’t think of a single friend of mine looking to hire in 2009. We will all wait for “the economy to turn around”. It’s going to take along time – into the next working generation – to payoff this piece of crap. Two examples of his ignorance. “Don’t go to Las Vegas”. Is he really that stupid? Meetings need to be held. Conventions sell things. Did you notice the meeting Obama screamed about simply got moved to San Francisco? I’m sure the hotels, restaurants, casinos, taxi drivers, maids all appreciate Obama telling ANYONE receiving funds to stay away from Las Vegas. And private jets. Wow, reminds me of the destruction of luxury boats. I’m sure Lear, their employees, the small airports and their staff, Rockwell, the fuel producers, the cleaning and service staffs all appreciate his destruction of their industry. There is no stimulus in this bill. It’s filled with paybacks, government expansion, the theft of American’s wealth and debt. Bone crushing, soul robbing, business destroying debt. Of course, it’s just the beginning you know. As jobs are lost, Obama will have to “stimulate” us more, take more control – just the beginning. Nationalized banks, nationalized healthcare (1/7th of the US economy BTW), nationalized power grid, nationalized radio (or at the very least – full control of its content, must be “fair” you know). Nationalized housing market. Nationalized auto industry. But, NO stimulus – just the consolidation of power in the hands of Obama.

- W. Keller

February 13, 2009 at 8:28am

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I don't see a lot of stimulus in this heaping pile of pork $h!T As a matter of fact its being rushed through conference so fast, nobody, even those that wrote it know what really in it. When this massive spending bill fails and it will, the American people will be so pissed at Obama,the Dems and the 3Rinos that voted for this, I predict a Republican sweep of congress in 2010 and Obama to be a 1 term president in 2012

- buster

February 13, 2009 at 8:29am

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I don't disagree with you Bretlaw, but GB and Japan own more debt than China. US citizens own more debt than all three together, and the US government owns more than us.

- Uncle Rico

February 13, 2009 at 9:10am

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what a complete joke. this author's balls obviously haven't dropped.

- jyd

February 13, 2009 at 12:21pm

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I find it amusing that the same Republicans who agreed that deficit spending for the war in Iraq and Afghanistan was acceptable because the deficit was small relative to GDP are now stating that deficit spending is inappropriate to wage peace and prosperity. Lets face it, the nations huge deficit is largely a function of defense, and much less a function of social spending. FDR started his presidency as a fiscal conservative. His sole economic focus was on balancing the budget. he resisted Keynes advice, while Sweden, which accepted it in 1932, was out of the depression by 1935 and had an expanding economy by 1935. Roossevelt took the hint and started applying Keynsian economics, however he simply did not spend enough to counter the economic contraction caused by the 1929 crash. He didnt inject the amount of money lost in 1929 into the economy to counterbalance that loss. The evidence that Kenysian economics was working can be seen in Roosevelts own actions in 1936, after seeing more than a 14 percent increase in GDP in that year. He retreated from government spending, because he was worried about the balancing the budget. An immediate recession ensued. Its simple, not complicated. If you do something and it works keep doing it. In medicine, this is called "Evidence Based" You try something and if if works over and over again, this is an indication that it really works and is not simply an accident. The one virtue that Obama has is that he is being pragmatic. The Republicans are acting like "faith healers" practicing "faith based economics"

- N.J.

February 13, 2009 at 1:01pm

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Now let me get this straight. If spending money on stuff that doesn't directly encourage spending will help the economy then why on earth did the liberals raise so much alarm and voice such disgust over money spent in Iraq. After all, Keynes suggested burying money in a hole... building another strong ally in the middle east is as good as any project. We could have thrown all the money at education for all the benefit it will give us. The thing has too many nickle and dime projects and is unfocused. I am against the bail out/ stimulus as a TRUE conservative (unlike the boobs that make it into office). Frankly they if they felt like helping everybody out they should have bought all tax paying working adults a new car, or payed off their current car. That would have stimulated the automotive industry directly and could have given everyone with a car note hundreds of dollars more each month to spend. On a general note: I feel like I'm in George Orwell's Animal farm with democrats lined up saying OBAMA good BUSH bad! OBAMA in Iraq good Bush in Iraq bad! OBAMA spending good BUSH spending bad!... etc.

- Chuck

February 13, 2009 at 5:46pm

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A demand-focused stimulus-bill might have been the right response if this were a garden-variety recession caused by a cyclical dip in overall demand. But it is not. The cause of the present economic crisis is the mortgage-repayment crisis. As such, the bill should have focused on just three things: 1) helping individuals get through the crisis (i.e. aid to the unemployed), 2) helping the states continue critical services through the crisis (i.e. aid to the states), and 3) addressing the cause of the crisis (i.e. focusing efforts and money on resolving the housing/mortgage crisis). The rest had no business being in there. We have had huge tax-cuts and huge deficit-spending for the past eight years; if that were good economic policy we would be doing great right now, and obviously we are not. There should have been no tax-cuts in the bill. As for the other programs, they should have been considered separately, on their own merits, in their own bills. And, if they were then considered worth having, they should have been supported by a financing mechanism other than just more borrowing. Again, fix the true problem, which is the mortgage-repayment crisis, and help unemployed people and the states get through the crisis while it lasts. That is it, and this will be expensive enough.

- Jonathan Starr

February 14, 2009 at 4:42am

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I find it astonishing that anyone pays any attention to Congressional Republicans on anything, especially the economy. They are the gravediggers who collectively helped dig the hole we are in and now want to use the same shovels to get us out of it. The Law Of Holes: When you are in one, stop digging! Why would anyone care what John McCain has to say about economic matters after admitting, in the campaign, that he knows little to nothing about economics. Is either Mitch McConnell or John Boehner an economist? Their specialty seems to be a tested and failed ideology, obstructionism and ignorance. It's like the old homily, "How do you know when they're lying? Their lips are moving!" How many members of Congress know what the hell they are talking about when discussing arcane matters of stimulating a $13 trillion economy that has no demand and is staring into the abyss? With almost two million jobs lost in the last three months ...and lots more job losses already announced and more to come. Let these Wizards of Oz find economists who believe that cutting taxes is stimulative compared to creating jobs and demand and have those ideas tested in the arena with other economists. Even Martin Feldstein, as conservative an economist as is out there, thinks the stimulus package is too small. Having said all this, economists (from Greenspan to Summers) have gotten it wrong and helped create our present chaos, while those who were prescient, (Baker, Roubini, Galbreath, Krugman, Steiglitz) have been ignored and frozen out of decision-making. I agree that there is no such thing as a "stupid" job if it puts someone back to work and uses his or her paycheck to buy groceries, get a haircut, and have a meal at a struggling local restaurant. How is this a bad thing when the goal is to put people back to work so they can feel comfortable spending again? Yes, we should be smart about this and initially fund things that create jobs and have a longer-term positive and lasting effect on local communities, but the WHOLE IDEA IS TO SPEND MONEY AS FAST AS POSSIBLE! The fact that Republicans complain that the stimulus package is nothing but a spending bill just demonstrates their total ignorance, at best, or their continuation of partisanship at the worst. And, it seems, as far as they are concerned America can go to hell as long as they might pick up a few seats (they won't) in 2010.

- Ed Goldman

February 14, 2009 at 9:13am

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what utter nonsense. This will probably destroy the Dollar over the course of the next 2 years and reintroduce high inflation. The world was awash with dollars before and this is the single greatest outflux in history. At the same time, the European governments, and European industry especially, are trying to do the same thing. There is only a certain pool of investment money available, and the usual customers for the debt have been pretty clear they cannot afford much more. China, Japan, the Middle East and other customers are all having similar problems..... This whole thing is fairy dust and smoke.....and may destroy our country in the process.

- matt

February 14, 2009 at 3:28pm

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Wow. Judging from the first few comments, the right wingers are out in force on this one. Their comments mainly prove that their "understanding" of the stimulus package must come from radio shock jocks. It's also hilarious to hear people say things like "spending isn't stimulus," as if providing funds for workers to pay for goods and services needed for their families (funds not otherwise available at the moment) isn't badly needed stimulus. And all the talk about "bureaucrats" and "paying off voters" ignores the good work this package will do, from repairing roads to expanding broadband to improving health care and paying teachers. Their alternative? Other than gripe and pontificate, it's not clear. Maybe just more taxes for the rich? Yeah, that really worked. Fortunately, by every indicator of public opinion, these tiresome voices represent a minority, just like in the last election.

- tmginnova

February 15, 2009 at 9:43pm

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I think you are missing the point.You seem to believe,erroneously,in my opinion, that the "stimulus" law is really about stimulating the economy. It is not. The economy,whatever that is, is just an excuse for enacting all the legislative priorities,social engineering,class based re-distribution of wealth and environmental goals of the liberal democratic party.Which is fine,unless you are out of work. The Dems really don't care much about jobs,so they extend unemployment benefits,enact aid for health care for the jobless and talk about how long it's going to take to "fix" the economy. The real economy, the banking system and credit markets are left to Geithner and Co. to deal with.This is where the Dems are clueless and soulless.Yes, they want to re-regulate finance so it won't happen again(a fantasy) but they aren't going after any of the Bad guys for jailtime. Why should they-they need them and their money.There'll be jobs when there are jobs, so keep your shirt on! And the Repubs,wh get the economy,because you have to get it in order to rob it,wnat to make sure it comes back fast,but without any permanent "socialistic" tendencies,like Nationalization.And they hate the whole friggin Dem.agenda from top to bottom,from Medicaid,Medicare, social security,make work jobs,unemployment checks ,tax rebates and the coming Health Insurance battle.They hate health insurance,so why should they want to give it to everyone.Remember the time when you got sick and went to the doctor or he went to you.Sometimes he helped you and sometimes you died.That was it.No insurance,no claims, no nothing.And now the friggin insurance is sinking the economy with its costs to the employers.But if you nationalize it, it will sink the whole top 1% of the population,where almost all the wealth is. So, the Repubs aren't going to let this friggin downtown,which is really a bank fraud,sink the capitalist system as it is in America.Where a really significant redistribution of wealth takes place and the top 1% get hit hard.The Repubs will oppose all Dem.social spending until they die,but they will commit murder before they allow the ?Dems to use this recession/depression to turn America into Sweden.

- len

February 16, 2009 at 2:27pm

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A lot of idiots in the comments here swallowing a lot of right wing misinformation on this bill. Funny how they've all suddenly discovered the scourge of deficit spending. Way to stick to principle, you ignorant hypocrites.Reaganomics is how we got all that debt; now it's your turn to suck eggs and whine. You will never be in power again, thank God.

- SonofMog

March 4, 2009 at 4:21am

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