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Don't pull back on stimulus

Christina Romer takes a shot at those arguing signs of recovery are a signal to cut back on stimulus spending.

"Immediate fiscal contraction would inevitably nip the nascent economic recovery in the bud -- just as fiscal and monetary contraction in 1936 and 1937 led to a second severe recession before the recovery from the Great Depression was complete," said Christina Romer, who heads the Council of Economic Advisers.

Romer, in a speech to the National Association for Business Economics, also said President Barack Obama's $787 billion stimulus package had been successful in pulling the economy out of a deep recession.

However, she said additional measures were necessary to bring the jobless rate down from the current level of 9.7 percent, which she called "a terrible number by any metric."

One analogy I've found helpful on this stuff is antibiotics. People frequently get a packet of antibiotics and stop taking them halfway through because they're feeling better. But they're feeling better because the antibiotics are working. If they pull back before the antibiotics have finished killing the bacteria, then the underlying problem is still there, and they get really sick. The fact that the economy is getting a bit better isn't evidence that the crisis is over. It's evidence that the interventions are working, or at least appear to be working.

Which is why it's a good thing that the Senate broke a filibuster yesterday to move forward with $150 billion in aid for the unemployed and tax breaks. Oh, and while we're on the subject, don't ever let Blanche Lincoln talk about the evils of backroom deals: The bill "includes more than $1 billion in emergency agricultural aid sought by Sen. Blanche Lincoln, who faces a tough reelection race."

By Ezra Klein  |  March 10, 2010; 11:00 AM ET
Categories:  Economic Policy  
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Comments

Ezra, enjoyed seeing you on Colbert recently. I've been waiting for Krugman or somebody to analyze how effective the Senate's $150 billion package will be. I know that unemployment benefits are among the most effective forms of stimulus. But I don't know how much of the $150 billion comes from unemployment benefits, or what people say about the stimulative effects of the tax breaks and other provisions. Any thoughts?

Posted by: KevHall | March 10, 2010 11:25 AM | Report abuse

9.7% unemployment, even after spending $787 billion, should indicate to people with any sense, that economists on the left, e.g., Paul Krugman and Joseph Stieglitz, were right when they suggested that the stimulus was not big enough.

Posted by: rawlsian | March 10, 2010 11:26 AM | Report abuse

Anybody know which bill "Cash for Caulkers" is included in, if any? I'm having a radiant barrier installed tomorrow and the salesman claimed it was part of the health care reform bill, but I see no such indication.

Posted by: BigTunaTim | March 10, 2010 11:42 AM | Report abuse

Ezra, we know the stimulus has created lots of jobs, but do you know how many of these jobs are here in the United States and how many are for jobs overseas? American corporations are hiring, but isn't it true that not all the new hires are living here in the U.S.? I would be curious to know the breakdown of U.S. vs. outsourced.

Posted by: daveb99 | March 10, 2010 11:50 AM | Report abuse

" If they pull back before the antibiotics have finished killing the bacteria, then the underlying problem is still there, and they get really sick. "

Not necessarily true, though I understand your big principle.

At some point in taking the antibiotic, the bacteria will be killed off. Your physician prescribes a "standard" number.

Say I weight 140, you weight 180, and my strain is already weaker than yours when I go in to see the doc. He writes us both the same scrip. Say 10 days, 3 times a day. Bactrum.

My bacteria might wane immediatly, and be totally killed out of my system in 7. Yours might be ended on day 9.

Depending on the illness (accompanying fever, lethargicness, etc.) and the doctors estimation of when it was contracted or how "strong" it currently is running in your system, I bet they tend to err on the "long" side -- ie/ writing the scrip for 10 days, or prescribing one refill, if needed, on the original bottle.

So while your idea that antibiotics are causing stronger bacterias are well known, some wonder if perhaps the prescription of antibiotics for viruses -- snuffling cold w/people damanding it -- are what is causing it's increasing ineffectiveness in some over-prescribed individuals is what's causing them to pass on less-resistant strains to the rest of the population.

But as written, your statement is just not scientifically true. Plus, while doctors and their technologies can tell many things, the person who knows your own body best is you. Keep taking the scrip for 2 or 3 days after you think the bug is all gone from your system, especially if you are lightweight and don't treat often w/antibiotics (the same drug goes a long way in a body not "used to it" than it does in a regular used.) Chances are, you are indeed over it, if nothing recurrs, immediately or even in the months out future.

Let's not discount our own body intelligence while we all take the one-size-fits-all advice of medical professionals, many of whom see hundreds of patients a day, and even with a good history in front of them, might not know how two people respond and treat. So, they up the scrip dosage to cover the most resistand individual.

Posted by: Mary42 | March 10, 2010 12:47 PM | Report abuse

"I know that unemployment benefits are among the most effective forms of stimulus."

Are you joking me? The money might go back into the economy immediately to pay bills, but it does nothing at all to stimulate growth or make that money "come back" because it's not investment, but a short-term lifering.

Or do you propose we "stimulate" the economy indefinitely by paying to keep people at home, since there's not plan at all yet to use these "stimulus" unemployment payments to create jobs, invest in new industries, or GROW opportunities out there.

I sure hope it's not a high percentage of the stimulus funds, or else we'll be back hitting that source for more money when these "stimulus" funds run out ... again.

Posted by: Mary42 | March 10, 2010 12:50 PM | Report abuse

Not only does increasing unemployment benefits hurts the economy it makes people lazy. Why work if I can make my 2 required visits and get a pay check at taxpayers expense?

Posted by: AlexT2 | March 10, 2010 10:38 PM | Report abuse

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