Words and expressions
All these confessions
Of where we stand
How I see you
And you see me
Dedications of symmetry
Together we will be
Fugazi lyrics are probably not the best way to begin any blog post, much less this one. But hey: the ObWi community gets right-of-center bloggers* that it has, not the right-of-center bloggers whom it might want. And promises are going to be broken with the Democrats' stimulus package.
The stimulus is not well targeted, and it will not have the desired effect. I've spent a lot of time (1, 2, Hilzoy's response, 3, 4, 5) writing about the stimulus and encouraging a more critical look at its components.
The most recent Senate version has a single, modest improvement: It fixes the Alternative Minimum Tax (AMT). That was a good idea before the economic downturn, and it's a good idea now. Otherwise, the package is probably worse than it was before. (See Ross Douthat's trenchant observations regarding the "help" provided by moderates in the Senate.)
Still, if Hilzoy's depressed about the press coverage of the debate, I'm depressed by the arguments. Much debate about the stimulus seems to assume that all government spending is stimulative and that even stimulative spending is always a plus. (Big, however, ain't the new bold.) Or that Keynes believed that spending is always more stimulative than tax cuts. (He didn't.) Or that a hoped-for "multiplier effect" -- assuming it can even be measured -- is the only relevant issue when comparing the stimulative effect of tax cuts versus government spending. Or that tax cuts can't have a multiplier effect (albeit with the same caveats).
Most depressingly, among the things lost in the mad hullabaloo about multipliers and Obama and the eternal question of whether Republicans are kid-starving evil or merely baby-seal-clubbing evil is that the incentives created by a government policy matter as much as, if not more than, whatever bridge-and-multiplier combo you think you just purchased.
Incentives matter. Does this stimulus incentivize folks to act in useful ways? Or does it just subsidize (and make permanent) the present? I fear the latter -- where the stimulus is stimulating at all. This stimulus is too small on the front end and focused on the wrong types of programs on the back end. A good stimulus would combine a bigger, short-term punch in the form of incentivizing tax cuts and credits with leaner -- but bolder -- long-term infrastructure projects.
Even if the stimulus package does stimulate, it will have permanently reduced growth over the long term by a modest amount. That's not an error: We will pay tomorrow for any -- or no -- gains today. Perhaps worse, the interest that we'll pay on this unprecedented new debt will not only crowd out growth, but also lead as well to future tax increases and/or cuts in government programs. Instead of tomorrow's new school, we may get tomorrow's new interest payment. Think of the children! I might cry with arms outstretched, if I were inclined to think beyond myself.
Tired old saws are tired old saws for a reason. There is no free lunch. Pay today or pay tomorrow, but you will pay. And so on, and so on, et al.
*I don't think of myself as right of center. My ends are liberal, as any good conservative could tell you.
UPDATE: Added clarifying sentences to the "incentives matter" paragraph. It struck me that a reader might be confused by my single, abstract sentence here in light of my prior criticisms, so I added some concrete.
UPDATE 2: Responding to several commentators .... My praise of the change to the AMT was intended as snark: Yes, it's a good idea to fix the AMT, but it should've been done in a different bill. I disagree that the change is not stimulative, however: Changing the AMT is stimulative. (See the more detailed CBO letter, available here. Page 2: "First, the Senate legislation’s provisions regarding the alternative minimum tax (AMT), which do not appear in the House bill, would add stimulus to the economy, especially in 2010.")