In his New York Times column today entitled “Confidence Surplus” David Brooks worries about Obama’s big stimulus program. He thinks it’s is too big and ambitious. Can government really do all this stuff? Can it be done in time?
I don’t know, and realistically no one knows. But here’s the deal: Obama isn’t proposing massive government spending and huge deficits because he’s feeling super confidant and thinks he and the government can do it all. He’s proposing this stuff out of desperation. He’s looking at economic activity coming to a standstill, and a Fed with no ammunition left—short term interest rates are essentially zero. Economists across the political spectrum are all proposing government deficit spending.
Obama is inheriting an economic disaster without precedent (at least since FDR). In my opinion this disaster could have been avoided if the country hadn’t been convinced to follow the laissez-faire economic theories of Milton Friedman et al over the past decades, but that’s irrelevant now. I wish Obama didn’t have to borrow tons of money and launch massive government spending programs in a fire drill atmosphere, but he doesn’t have a lot of options.
Incidentally, Brooks also seems to favor that old GOP favorite, tax cuts. That’s unlikely to help. People are already refusing to spend or invest their excess cash. That’s why the federal government can borrow money at zero percent interest. People are throwing money at the US Treasury because they think that’s the only safe place for their savings. Only tax cuts directed at the very lowest wage earners would likely be spent. That doesn’t stop the GOP from proposing tax cuts, though. Here’s a chart of Mitch McConnell’s recent proposal to stimulate the economy—a tax cut aimed at the very rich:
If you think the country’s in a mess now, what if the GOP were set to run the country for the next four years?