Does It Work?

“The question we ask today is not whether our government is too big or too small, but whether it works…”  (Barack Obama, 20-Jan-09)

This ought to be the ultimate question, regardless of who is President or what party they belong to.  It’s what really matters, right?

We ought to ask the same question of the economic stimulus bill (HR1 – American Recovery and Reinvestment Act of 2009) that, though passing, failed to get any Republican votes.  As far as I can tell, the reasons are some combination of:

1. Not enough immediate infrastructure spending as a fraction of the total amount of spending
2. Insufficient reliance on tax cuts or too much reliance on direct spending
3. It was written by Democrats

I hope we can all agree that Representatives objecting on grounds of authorship–sacrificing the well being not only of their own districts but of the entire economy in order to play a petty game of irrelevant politics–are nothing short of idiotic.

The first issue is related indirectly to the second in that the questions we really want to answer are: how many jobs can we create through a combination of spending and tax cuts and will it be enough?

Direct spending creates jobs by creating demand and by enabling shelved projects to be completed.  People are needed to make the extra products being demanded and to implement the projects being carried out.  It’s fairly straight-forward.

Tax cuts create jobs by giving individuals more money-in-pocket to spend and by giving businesses more capital to re-invest in operations.  The problem here and now with this is that scared people don’t spend extra money, they save it or use it to pay down debt on money they already spent.  Businesses can’t re-invest in production if there is no concomitant increase in demand.

Ultimately, we want to get the biggest bang for the buck and the way that is measured is by the associated multiplier:  The government spends a dollar on building a road, so a firm gets a new dollar.  That firm hires two extra people and pays them each $0.40 from that dollar.  Those people each have $0.40 extra from that dollar and use it to spend another $0.20 they wouldn’t have otherwise spent.  That spending goes to another firm and the process repeats.  Ultimately, we’ve bought more than a dollar’s worth of stimulus with our dollar.  It works similarly with tax cuts.  But which one has a higher multiplier?  Direct Government Spending! (See the previous post on this subject.)

If you listened to House Republicans, you might not know that.  They even have gone so far as to fudge the analysis behind their tax-cuts-only alternative (which satisfies #3 also, by the way), saying it will produce 6.2 Million jobs when the analysis they cite indicates it’s only 4 Million jobs (See Dr. DeLong’s post about this.  He’s the one who knows what he’s talking about.)  By contrast, the Obama plan creates 8.7 Million jobs under the same analysis.

The current Republicans are idealogically bankrupt.  The standard lines of Cut Taxes and of Shrink Government are no longer applicable.  We may not be in a Post-Partisan or a Post-Racial world, but I think it’s clear that we are in a Post-2000s-Republicanism world.  Cutting taxes and cripling government is the problem, not the solution.

By presenting a plan based entirely on tax cuts and refusing to bargain or even debate the original proposal in good faith, the House Republicans have shown that they have no interest in reality, solutions, or functional government.  All they are interested in is an unequivocal adherence to a dead-end policy because it advances a political ideology.  They are deceiving their constituents at a crucial juncture when time and clarity are of the essence!  They are not interested in asking Will this work? but only in asking Will this match my ideology? Why don’t we question the patriotism of people who operate in this deceptive, counterproductive mode, sabotaging plans for a functional government in favor of party gain?

There is a place for conservatism, opposition, debate, and competition among ideas.  There is no place for deception, bad-faith negotiation, and pure partisanship.  It is time to put away childish things.

Edit:  This is exactly my point: Building a Conservatism That Can Win Again (Via David Frum’s blog no less… Yeah, the Axis of Evil guy.)

Now imagine if the GOP did not have such a knee-jerk opposition to spending and actually thought strategically.  The lede could have been “Republicans voted against the measure because it did not include enough large infrastructure projects and lacked imagination.”  Instead of fighting Dems on the dollar amount of spending, knowing that we would lose that fight in any event, we could have stood with Obama and called for large high-tech infrastructure projects that would employ large numbers of minorities in construction and white collar suburbanites in development.  These projects (high speed rail corridors as an example) would also capture the imagination of the green close-in suburbs that are turning viciously against the GOP and have the strategic benefit of jamming up the young Dem members (Webb/Warner/Hagan/McCaskill) who depended on these voters for their victories.

Not that I want to see my Junior Senator (McCaskill) lose, but this shows that your party interest doesn’t have to be contrary to the public interest! (c.f. Andrew Sullivan here.)

Edit 2:  Dr. DeLong talks about Good and Bad stimulus skeptics here.  It’s worth the read because it separates out ideological doubt from evidentiary doubt.  It’s fine if you have academic objections to the stimulus plan, as long as they are not demonstrably false, unacceptable academic objections.  It’s definitely not ok if your objections are “belief-based” instead of “reality-based”.  DeLong says:

The depressing thing is the number and credentials of the stimulus skeptics who are making arguments that are either theoretically incoherent or empirically irrelevant.