January 30, 2009
The press and commentators are picking apart the House and the Senate Stimulus Bill, noting many (most) of the items are not directly related to quick job creation because they are, among other things, 1) time delayed, 2) promoting social goals, or 3) promoting regional goals (pork). We should not be surprised. Members of Congress are elected by regional voters and supported (with campaign contributions) by groups promoting social goals (environmentalists, unions, trial lawyers, health care advocates). Give the members of Congress $800 to $900 billion to spend and they have an overwhelming incentive to favor local causes and social causes that provide party funding support. Congressmen Barney Frank's recent comment is choice. When Geithner put in place rules to log all calls on spending the TARP money and will, apparently, put the logs on the Internet (I will believe this when I see it), reported tracked down Frank, who was front page news in the Wall Street Journal for pressuring Treasury to put TARP money in a Boston bank that did not deserve it (TARP bails out only healthy banks; this one should be wound up). Frank's response, and I paraphrase: "Glad to see the log made public. My constituents will know I am going to bat for them." This Bill will be a very crude approximation of a true Stimulus Bill. And there are huge costs for not getting the Bill right; the government borrowing to support the bill will deplete funds for private investment and deplete funds for borrowing by other suffering countries. If the gains from the Bill do not outweigh the costs (the so-called multiplier is less than one), the Bill will be a domestic and international dead weight loss. We will have to beat the recession despite the Bill's increased burden.
January 30, 2009 | Permalink
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