More Stimulus!

I have been watching more cable news on the tee-vee box, and the striking thing about the debate Stimulus Bil is how poorly our educational system actually works.

We have individuals in Congress and the media, who do not know what happened during the Great Depression.

We have individuals tasked with making decisions on topics that they have no grasp of. Yet they purport to have a better understanding then those who have made a study of that particular field.

Most of the debate is over whether the bill can get bipartisan support. That is not the issue, the issues are whether it will work. Whether it is big enough to address the problems that we currently face.

The truly frustrating part is we have people who do not even understand the language of the problem. Literally we have people arguing over what the definition of a stimulus plan is. I posted it below but it bears repeating that every successful stimulus plan over the last 70 years involved governmental spending. It is a spending plan by definition.

Macroeconomics principles are different then Microeconomics principles. This is an important distinction that seems to get lost in all the cable and villager chatter. And something that most people do not now. What works on a micro scale, not only may not work on the macro level, but may also worsen the problem.

What is a personal virtue can paralyze a large economic model. Aggregate activities are way more dangerous at that point. People do not seem to grasp this. If everyone starts saving money and cuts spending, then there is less being money being spent, less products being produced. Profits drop. Jobs are slashed. Leading to more saving/hoarding, and even less spending. A vicious cycle.

Compromise and moderation can and are good things, however sometimes they should not be embraced simply to embrace them. Compromising with bad ideas for the sake of compromise is a bad idea.

The constant paeans to moderation miss the larger fact, that if we had learned some of the lessons of the past ('93, Great Depression, Japan's economic collapse). Sometimes extreme times, require extraordinary measures.

I know that there are those that are philosophically opposed to any government spending, and are absolutely convinced of the efficacy of tax cuts and spending cuts. To pull us out of this economic tailspin. Though there is no hard evidence that, that is the case. I could produce chart after chart showing that governmental spending (infrastructure, increased benefits) is 3 to 4 times more effective then tax cuts. Yet that still would not convince those die hard tax cuts proponents out there.

The facts at hand are this. Our country is facing at least a 2 trillion dollar deleveraging. We are trying to fill that with 900-800 billion dollars of "stimulus". Dr. Krugman described it correctly it is like trying to bridge a canyon but with only enough material to go halfway across the expanse.

-cheers