Well, we knew it was coming, and apparently Nobel Laureate, and most certainly not my favorite economist, neo Keynesian, Paul Krugman, apparently is less than impressed with the numbers that are tentatively being put forward by the incoming Obama Administration. Here are my thoughts. Well, some of them.
As is so often the case, with institutions and individuals alike, the one thing that needs to be done is the one thing that will NOT be done.
What needs to be done is to NOT spend that which we can only raise via issuing colossal sums of debt.
Here is the premise, or the raison d'etre upon which the proposed spending program is based.
1.) A severe economic contraction here in the U.S.
Is this, in fact, true? Try not to laugh, when I suggest that a collapse in the financial services industry (the F in the FIRE economy) may not be tantamount to a general economic collapse.
Let us assume a 12% unemployment rate and then let us assume the kind of workers who have lost, or are about to lose their jobs. Putting aside the absolute certainty that we can not pay for this program honestly- (by honestly, I mean without recourse to yet more deficit spending by an economy that looks nothing like America circa 1932), does what we know about Mr. Obama's program address our primary ills with respect to unemployment?
Now on to a somewhat different perspective on matters. Government in our time has, by my lights, clearly become an instrument for looting, and while it would be comforting to believe that the Obama Administration will, in this regard, somehow comport itself differently then its predecessors, experience, to put it gently, lends to skepticism. Any proposed massive spending programs ought to be planned and administered in a way that we have not borne witness to for a very long time. This means a sizable government bureaucracy. And with that we are already behind a big, fat, neo WPA eight ball.
Another thought: (please forgive me for not wrapping the various strands of this post into a cohesive, nifty whole). Even if there were no term for what we now know as Keynesian deficit spending, we would have had it as an accepted staple in our nominal Democracy for generations because short of making war and taxing the citizenry, governments must always be seen to be doing something productive in times of crisis, even if upon close examination, the activity is demonstrably counterproductive. In short, liquidationists, however sensible their austere nostrums may be, need not apply.
And yet a few more thoughts:
Expect a lot of shape shifting from the Obama Administration as regards the still murky "stimulus package." My read of Mr. Obama is that he is, like President Clinton, a thoroughly political animal in the manner of "here are my views, if you don't like them I'll amend them...and quickly."
It is highly likely that Obama's apparent low balling on the stimulus package numbers is nothing more than a bit of misdirection. I am reminded of some of Clinton's jiggery pokery with the military budget where he managed to make the Pentagon seem frugal even as their budget was being increased.
Last thought, I promise. My view is that we will spend money, as we have so far, in epic amounts going forward and dare the rest of the world to do something about it. So far, except for a few rumblings here and there, the rest of the world doesn't yet look ready to do a damn thing about our atrocious custodianship of the world's reserve currency.