The economic crisis is like swine flu: everyone thought they could just pretend it was over.
Last winter, American Prospect published a dumb article with the dumb title “‘25 Random Things’ About the Stimulus Package.” (Following the Facebook craze.) Their second “random thing” was this:
It doesn’t really matter how big it is. Passage at any size was the win the White House needed.
And I wrote that this was only true if you were thinking politically, for 2010 or 2012, and not worried about actually saving the economy. Well, there was Biden yesterday, saying that the Administration didn’t realize how bad the economy really was when the too-small stimulus passed. But he also says it’s not time for another stimulus.
Hopefully, he’s just being strategic, and making others come out first so there’s a chorus of demand for the obviously-needed second stimulus.
But even if they get a second stimulus, it is very possibly too late to pull us up from disaster. The key of the stimulus was to inject money into the economy at the right time. Cut out of the bill, at the insistence of centrists (and there is no more useless political species than centrist Democrats), was aid to states to prevent massive cuts to services and important projects. This is money that was guaranteed to find its way right back into the economy, since state spending boosts employment, and since the services that now have to be cut were already up and running. But the conservatives and centrists in Congress insisted it be removed.
And now, the Obama Administration may not have the political strength to get a second stimulus through, and is more concerned about passing health care reform. (I said last year: forget health care reform for now. The economic crisis ate our health care reform, just face it.)
If they didn’t know the stimulus was too small at the time, they weren’t reading the paper. Here was Krugman four months ago:
So here’s the picture that scares me: It’s September 2009, the unemployment rate has passed 9 percent, and despite the early round of stimulus spending it’s still headed up. Mr. Obama finally concedes that a bigger stimulus is needed.
But he can’t get his new plan through Congress because approval for his economic policies has plummeted, partly because his policies are seen to have failed, partly because job-creation policies are conflated in the public mind with deeply unpopular bank bailouts. And as a result, the recession rages on, unchecked.
And here he was a month before that, in early February:
What do you call someone who eliminates hundreds of thousands of American jobs, deprives millions of adequate health care and nutrition, undermines schools, but offers a $15,000 bonus to affluent people who flip their houses?
A proud centrist. For that is what the senators who ended up calling the tune on the stimulus bill just accomplished.
Even if the original Obama plan — around $800 billion in stimulus, with a substantial fraction of that total given over to ineffective tax cuts — had been enacted, it wouldn’t have been enough to fill the looming hole in the U.S. economy, which the Congressional Budget Office estimates will amount to $2.9 trillion over the next three years.
Yet the centrists did their best to make the plan weaker and worse.
One of the best features of the original plan was aid to cash-strapped state governments, which would have provided a quick boost to the economy while preserving essential services. But the centrists insisted on a $40 billion cut in that spending.
The original plan also included badly needed spending on school construction; $16 billion of that spending was cut. It included aid to the unemployed, especially help in maintaining health care — cut. Food stamps — cut. All in all, more than $80 billion was cut from the plan, with the great bulk of those cuts falling on precisely the measures that would do the most to reduce the depth and pain of this slump.
So if Biden and Obama — who Krugman accused of watering down the stimulus in a misguided attempt to fulfill his pledges for bipartisanship — want to claim they had no idea what was happening, I am not inclined to let them off the hook. But far more blame belongs to the centrist Democrats, the same breed that killed the Clinton health care plan in 1992.
And progressive Beltway types like the American Prospect who thought that the stimulus was a win at any size show that they are just Beltway types like any other, obsessed with political scorekeeping rather than results during a time of crisis.
