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A Few Thoughts on Stimulus

Daniel Gross says "it's too soon to say whether the stimulus package is working." Actually, he says something a bit different than that, but that's the subhead on his column. Over the weekend, Joe Biden said that "the truth is, we and everybody else ... misread just how bad the economy was." So do we need a second stimulus? "I think it's premature to make that judgment," Biden replied.

You're hearing this argument a lot lately. We need to wait to see if the stimulus is "working." We need to watch the economy get worse before we can put in place a plan that will make it better 12 months from the date of passage. (This is different, I should say, from the argument made by those who don't think stimulus plans work at all.) Forgive me for cadging this post from yesterday's chat, but the stimulus could "work" and we'd still need another.

Imagine I'm at the market and I'm predicting how hungry I'll be later tonight. I figure I'll have a big lunch, so I buy a modest dinner. I get busy, though. I don't eat a big lunch. I eat my modest dinner. I'm still hungry.

Did my dinner "not work"? No. My level of hunger changed. And that's what looks to have happened here: The stimulus was built for lower unemployment expectations. We can assume the stimulus will work in blunting some of the impact, but also predict, quite confidently, that it will not be fully up to the task. The question is whether we should go back to the store for more dinner materials after our light lunch, knowing we'll need it later? Or wait and hope that our small dinner is enough, knowing the stores might be closed and we won't be able to get anything?


Also: Could there possibly be a more Slate-esque headline than "Both Obama and his critics are wrong about his stimulus package?"

By Ezra Klein  |  July 10, 2009; 9:49 AM ET
 
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Comments

I think to make this analogy more correct, the food should have to be shipped to you, and you should still be waiting on most of your dinner. Also, the food you're having shipped to you is mostly unhealthy snack food with little nutritional value.

Posted by: BradBlasiar | July 10, 2009 9:54 AM | Report abuse

I think people would be more OK with the idea of another stimulus if Democrats didn't use the first one to throw a lot of money at the dem wishlist instead of things that would actually stimulate the economy.

Posted by: spotatl | July 10, 2009 10:04 AM | Report abuse

Your analogy doesn't work for me since I'm confident that whatever effects the Obama stimulus (as opposed to the GW stim. we got last year) will have will not jump out the statistical noise, and when it does impact, it will be substantially down the road. You can't tell the effect of a cancer treatment/cure by the results the day after, and one day you won't wake up saying to yourself "Oh, I'm cured".

Different impacts, phased over time, and manifest as incremental rather than step-function is the only likely result.

It was/is foolishness to say a single stimulus package at one time will produce the desired result in a dynamic system controlled by millions of individual actors, with new events happening all the time. I don't think we'd sign up for CPR if the technician was allowed only one push on the chest. Or one electric shock with paddles. It usually takes heroic efforts applied in multiple administrations of the treatment.

Posted by: JimPortlandOR | July 10, 2009 10:27 AM | Report abuse

it may appear foolish, but if the talk now is over whether to have a second one or not - and not about, for example, let's hang the Obama adminstration - then politically, expectations have been managed well.

I'm on Obama's side, just to make it clear. And as always I'm fascinated to see how well he's runing things. He incremented our expectations from the beginning, suspecting he would have to increment the solutions.

And the problems weren't even his to begin with. He inherited nonsense that simply stands in his way, and he's dealing with them using as little political capital as necessary to save the country from its dirty past while he focuses on its future.

Posted by: wapomadness | July 10, 2009 8:13 PM | Report abuse

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