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How the Stimulus Bill Will Play Out in the Economy


1.  It is large enough that it will probably get the economy out of a technical recession.  Which is to say, GDP will stop dropping.

2. It’s too small and too badly constructed to stop the ongoing job losses.  Fewer people will be employed in December than are today. [pdf]

3. There’s a lot of money for energy, but it’s not enough.  Needs to be about 200 billion, and needs to have a long term commitment so that industry will get behind it hard.

4.  There’s a lot of money for states and for schools and colleges.  That’s good.  There are some controls on the use of the money, but not as many as I’d like.  In particular universities should be told to stop raising tuition faster than inflation, period.  And states need some sort of stick to start cleaning up their own fiscal houses.  Still, overall, they need the money, and this is one of the better parts of the bill.

5. Lots of money for health care, mostly to Medicaid and to help with COBRA payments, so folks who lose their jobs won’t become uninsured.  Good idea and needed, but not a visionary plan that starts setting the groundwork for universal healthcare, by any means.

6. Less money for transportation than you’d think, with 30 billion for roads, and about 10 billion for trains and mass transit (although a fair bit of State money will be used for transportation, so probably you can double that or a bit more).  Ten billion is, well, a joke.  This is the time to be buying up rights of ways and planning for high speed train corridors. It’ll never be cheaper, and it directly tackles the real energy problem, which is less heating bills than use of oil for transportation—high speed trains will cut hard into both auto and plane use, and thus into oil use.

7.  Six billion for broadband expansion is far less than required to be taken seriously.  A lot more than that could easily be spent, given that the US has both worse broadband penetration than its competitors and far worse broadband (as in 5 to 10 times slower) than countries like Japan, Korea and even many European countries.  America invented the internet, but it’s falling far far behind. Universal high speed, cheap, uncapped broadband would be a huge win for everyone, but it’s not in this bill.

8. The tax cuts allow companies to write off prior losses.  This is bailout bill 2, hidden in the stimulus bill.  Very clever of Obama.  Since, as with other bailouts (except for autoworkers), there are essentially no conditions on this bailout, there will be no real changes in who runs things—the same people who caused the meltdown will remain in charge, with their bonuses, positions and salaries largely intact.  

How This Will Play Out

This will be a technical win that the adminstration will be able to point to and say "see, we’re not in a recession!"  For ordinary people however, there will be both wage deflation and real asset deflation, while there are fewer jobs.  People will feel worse and be worse off in December than they are today.    Private industry will take the money, but because there is no clear vision of the new economy, they will not massively invest in new hires, training and infrastructure.  The surest bet will probably be military spending, because we know that Afghanistan will be going on for years, while most of this spending is too haphazard to base a business investment plan on.

Hopefully in 2010 Obama will get a do-over, and hopefully he’ll come up with a plan with vision. Or perhaps, through the year he’ll come up with one.  But this isn’t it. Perhaps that’s unfair, as this is a stimulus bill, but when you’re spending this much money, probably your biggest shot of spending for the entire year outside the budget, where discretionary spending is limited, you should make it large enough, effective enough, use it to restructure the economy and provide a vision which private actors can get behind.  The plan as it stands right now does none of those things.

End Notes:

Chris Bowers Summary

Press Release

Full Plan

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Ian Welsh

Ian Welsh

Ian Welsh was the Managing Editor of FireDogLake and the Agonist. His work has also appeared at Huffington Post, Alternet, and Truthout, as well as the now defunct Blogging of the President (BOPNews). In Canada his work has appeared in and BlogsCanada. He is also a social media strategy consultant and currently lives in Toronto.

His homeblog is at