It seems the Republicans and Barney Frank are talking about doing a stimulus bill. Since capital isn’t going to flood from banks into the private sector to help the economy, it needs to come from government.
Unfortunately Barney is talking about having the lame duck Congress pass the stimulus. Word I’m getting is that they’re also thinking of cramming through a pay-go rule at the same time to make sure that now that the banks have their money for free, no one ele gets anything but love for free. Roy Blunt, always the soul of human kindness, apparently is willing to go along, as long as:
it did not include a massive public works program and budget bailouts for states that overspent on health care and other social programs
In other words Roy doesn’t want blue states to get money, only red states. Nor does he want a real stimulus that actually puts people back to work. Got that?
Do it in the lame duck Congress when you don’t have as many Democrats so you have an excuse for it being a sucky bill. Pass a pay-go rule at the same time to make sure that the next Congress can’t pass a real stimulus bill, even though bankers have been given something like 1.6 trillion over the last couple months, including 700 billion from Congress, and go home, knowing that once more the people who matter have been taken care of and everyone else has been told to exercise some "personal responsibility".
Let’s be clear, the US has already thrown away fiscal responsibility. It is well into effectively running the printing presses hot. Given that this is all funny money anyway, there are only two reasons not to do a real stimulus:
1) You’re a bastard. i.e., Roy Blunt and most Republicans in the House.
2) You’re scared of real world inflation. Because it is true that if you were to plunge, say, 350 billion dollars into the economy without any controls on how it is spent, it would go right into oil prices.
However there are ways to do a stimulus which wouldn’t cause a lot of inflation. Whether people like Barney Frank and Roy Blunt understand these ways, I don’t know, but they’re simple enough and any liberal worth the name from the first 30 years after World War II would know how. Your stimulus package includes 4 main things:
- Money for the states and for municipalities so they don’t have to cut back services.
- Increases in unemployment benefits, food stamps, welfare and so on for relief, and also because poor people spend that money immediately, so bang for buck it’s the best stimulus possible.
- Laws intended to make sure oil prices don’t go up, like making every road a 55 mile an hour one if faster, a program to buy back the worst 10% of cars on the road for mpg with a credit to buy a new, most fuel efficient car made in the US; everyone works 9 hour days and gets a long weekend every two weeks; a program intended to refit houses that use heating oil;, and so on.
- Direct, government spent stimulus (for the purposes of stimulus a government doing things is just fine) to green the economy in a massive way. Money is money, making the economy more efficient is just as good a way to spend money as any other. In fact, better, since it too will fight against energy inflation.
Nor do you worry about pay-go. I’m about the most hardcore of fiscal conservatives around, and I will tell you that at this point it just doesn’t matter any more. You’re bankrupt, living on the charity of others, and printing your own money. Another 350 billion made up out of nowhere just isn’t going to matter on the downside. It won’t be the straw that makes the Arabs or Chinese decide to pull out. But if it fixes the economy in a real way, if it kick starts the spluttering engine, then it will help pay back the funny money with real money in the not too long run.
Everything everyone has been doing for the last couple months, indeed for the last year, has been the policy equivalent of screaming "we’re all going to die, we’re all going to die! Ahhhhhh!" All the solutions suggested have been essentially sticking money into holes in dikes. "If only I shove enough money in this hole it will all bind together into one big mushy ball and the water will stop flooding through!" None of it has considered what’s fundamentally wrong with the financial system, or with the economy.
There is no reason, none, why a stimulus bill can’t start fixing the fundamental problems with the economy at the same time as it provides a stimulus. It’s true that not one single solution suggested to the financial side of the crisis has tried to fix it long term, but perhaps on the economic side we might try and do things right?
Dare to dream, that’s what I say.