Size matters (at least for stimulus)
The Fiscal Times interviews Rep. David Obey (D-Wis.):
The problem for Obama, he wasn’t as lucky as Roosevelt, because when Obama took over we were still in the middle of a free fall. So his Treasury people came in and his other economic people came in and said, “Hey, we need a package of $1.4 trillion.” We started sending suggestions down to OMB waiting for a call back. After two and a half weeks, we started getting feedback. We put together a package that by then the target had been trimmed to $1.2 trillion. And then [White House Chief of Staff] Rahm Emanuel said to me, “Geez, do you really think we can afford to come in with a package that big, isn’t it going to scare people?” I said, “Rahm, you will need that shock value so that people understand just how serious this problem is.” They wanted to hold it to less than $1 trillion.
Then [Pennsylvania Senator Arlen] Specter and the two crown princesses from Maine [Sens. Olympia Snowe and Susan Collins] took it down to less than $800 billion. Spread over two and a half years, that’s a hell of a lot of money, but spread over two and a half years in an economy this large, it doesn’t have a lot of fiscal power.
In reality, it was quite a bit less than $800 billion, as it included almost $100 billion for an AMT fix that had virtually no stimulative effect at all. So we got a stimulus that was less than half as big as what we thought it needed to be then, and then the recession we were facing turned out a lot worse than we'd anticipated.
(Via Paul Krugman)
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