Monday, February 9, 2009

The conundrum of spending

The stimulus package being discussed is probably too small too work say some. This assessment is probably right, or at least, as Galbraith says, faced with the hurricane that is the current economic woes, it would be better to err on the side of excess than moderation. However, the alarming thing is that as people have tried to rack their brains to find ways to spend the extra money required, and they've mostly failed. The fact is, the marginal programs in the spending bill are mostly pork and mostly things that will occur over years, not months. It is unclear whether the President could in fact find an effective way to make the additional spending happen quickly, even if he wanted to. It is almost reminiscent of Brewster's Millions. I suspect Obama will need a separate social program to fill the gap, if he wanted to.

1 comment:

MahaYogi said...

Over time I am beginning to realize that most economists really don't know what is going on with the economy. They have all been so dramatically wrong. I am not sure the spending package will change the fundamental risk-- that the sum of derivatives and credit default insurance products can make the entire system insolvent. I think in most other countries the system would be bankrupt.