The “stimulus” is far too large and far too small.

Republicans are getting traction by condemning the “stimulus”, as an outlandishly extravagant porkfest, as miserly and inadequate, and as a disaster that should not be repeated – an attack made all the more effective by the many radical Democrats who complain the porkfest was inadequate, and call for a bigger and better porkfest: “Stimulus II”

Obama’s approval ratings, though still high, are plummeting fast under this withering criticism.

In Japan, they are now on stimulus umpteen, the Japanese economy is not looking very stimulated, and the Japanese government is getting close to bankruptcy.

The porkfest is too small in that it takes the government a very long time, several years, between deciding to spend money, and the money actually getting into people’s pockets, so the only stimulus that has had any effect are the tax cuts – and the carbon bill looks suspiciously like an alarmingly large tax rise: “tax and raid”, as the Republicans are calling it.  This is not very stimulating.

As for too large – well we cannot definitely say it was too large unless serious inflation or national insolvency sets in, and so long inflation remains subdued, people can always say it would have worked had it been larger.

My expectation is that it will not work, not matter how large, because this is primarily a Galt Strike, and only to a minor extent the inadequacy of aggregate demand that Keynes described.  But this theory can only be tested if the Democrats put the pedal to the metal, and do enough stimulus that serious inflation sets in.

If inflation sets in without recovery in employment and investment, that will be compelling evidence in favor of the Galt Strike theory and against the Keynesian theory.  But as long as inflation remains low, people can say of the American stimulus, as they say of the Japanese stimulus, that it would have worked if only it was tried hard enough.

If, on the other hand, the stimulus actually stimulates something broader than gigaprofits at Goldman and Sach, then that will be compelling evidence that Keynesianism or neo Keynesianism does describe the present economy accurately enough.

If inflation with high unemployment and stagnant investment, then I am proven right.

If low inflation with high unemployment and stagnant investment, then everyone can plausibly claim to have been proven right, though in fact nothing will be proven – the situation we now have with Japan.

If low unemployment and adequate investment, the Keynesians will be proven right.

3 Responses to “The “stimulus” is far too large and far too small.”

  1. The Porkulus is a train-wreck… these jobs figures are far worse than the ones the White House warned us about if we DIDN’T pass the bill- so it was passed, and then unemployment soars anyway?

    Instead of creating jobs, interest rates were bumped up, the dollar slid… and it didn’t help anybody get any work. Much of this is due to the fact that Obama’s agenda has mortified almost every source of job-and-growth creation in the country.

    The Dear Leader couldn’t deliver the type of “temporary, targeted, and timely” bill that he promised repeatedly. Regardless of his image in the MSM, Obama simply lacks the the political stature to control Pelosi and Reid… who hit the trough hard, while bickering like children.

    And the lack of GOP co-conspirators exposed Obama politically… this legislation now looks to be a HUGE gamble. And when all this pork-n-welfare fails to generate any real economic gains, the Democrats face a bloodbath in 2010.

    http://reaganiterepublicanresistance.blogspot.com

    • jim says:

      Reaganist Republican:

      Obama’s agenda has mortified almost every source of job-and-growth creation in the country.

      This is what I meant when I said it is a Galt Strike – the Obama program is horrifying those who really create jobs.

      The Dear Leader couldn’t deliver the type of “temporary, targeted, and timely” bill that he promised

      Well of course not. The only way to get money into people’s hands quickly is by tax cuts or direct handouts – government pork projects take many years before the the shovel hits the dirt. This is what I meant when I said it takes the government a very long time, several years, between deciding to spend money, and the money actually getting into people’s pockets

      But don’t get carried away with blaming the democrats. The Obama stimulus was originally the Bush stimulus, and in the recent presidential election the Republicans ran a candidate who supported all the worst things the Obama regime has done, and frequently outflanked Obama on the left, as if anyone to the right of Pol Pot was a guaranteed republican vote, and the candidates were competing primarily for the left wing of the Democrat wing of the Democrat party.

  2. Barry Liendo says:

    This is a huge win for the Republican­s on many levels. It humiliates Obama yet again, it keeps all the tax cut in place, they get to crow during the 2012 election that they prevented a tax increase, and when the $700 billion cost blows up the deficit again, they will claim that it’s all because of Obama’s and the Democrats economic policies. The sad thing that with people’s short memories and stupidity, they’ll get away with it. Again.

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