Obama has begun his campaign to get Congressional approval of his stimulus package. He has met mild, disorganized, and scattered objections, which dissuade him not. And the objections shouldn't; they are weak and misguided. There are rational grounds on which to argue in favor of the infrastructure projects proposed in the stimulus package; but stimulating the economy to grow again is not one of them. There are rational reasons to oppose the stimulus package; but the enormous amount of spending proposed is not one of them. The stimulus package cannot and will not return the economy to a growth mode. It proposes to stimulate consumer spending, which is weak, but which is not the cause of the economic downturn at present and the depression-sized recession to come. The fundamental cause of the financial-banking crisis is the collapse of the housing market and the trillions of dollars worth of bad loans the banks and other investors hold. The stimulus package has absolutely nothing to deal with these two problems. The fundamental cause of the economic collapse is not the banking crisis; the banking crisis is only the pressure point on the structural weakness in the American economy. The structural weakness in the economy is the collapse, over the past thirty years, of the manufacturing sector and the collapse of productivity dependent upon it. We have a crisis of productivity. I have explained the nature of the problem here, here, and here. The rational reason to oppose the stimulus package is that it won't do what Obama and the Democrats say it will. If we want to rebuild and build up the public infrastructure, by all means, let's do so; but let's not pretend it is some kind of Keynesian magic, and let's call it a national infrastructure program. America's economy will grow again only when the private manufacturing sector is growing in size and increasing in productivity (also see my discussion here).
We can't expect the liberal economic advisors to Obama and the Dems, like Rubin, Reich, and Summers, to voice these truths; they have become political economists rather than economic scientists. And the Republicans appear to have absolutely no economists advising them. Most Republican objections to the Obama-Democrats plans for the economy sound uniformed and, well, honestly, stupid. Republicans need to smarten up about economics. Ain't econ supposed to be their--our--thing?
------------------------------
A Primer on America's Economic Crisis
Recent Comments