Late today, Congressional Democrats and their coveted three Republican partners (Three! In total!) announced they made a deal to pass a plan to save the economy. Their press conference today at times seemed like a sort of Economic-Stimulus-Compromise Awards Show. The Stimmies! They didn't thank their agents, their third-grade teachers, or The Academy but the awards-show echoes were a little jarring:
Collins: I want to thank all of my colleagues who have worked so hard.
Reid: ...speaker of the house
Snowe: I'm very pleased to have been a part of this.
Lieberman: I was proud to work with this group, proud to be part of it.
Nelson: To all of my colleagues here I say thank you for the experience.
Yes, it's not just a ginormous piece of legislation, it's also a heartwarming story that shows the triumph of teamwork over adversity! Two Thumbs up, Congress!
Americans who believe in macroeconomics 101 are glad to hear that there is a stimulus deal, a deal that has enough support to pass, to pump some money into the demand-side of supply-and-demand to start getting the economy to work again. Two thumbs up!
That said, looking at what's actually in the compromise, what's actually in the bill, makes my thumbs feel slightly less enthusiastic about what happened today in Washington. For starters, the stimulus got smaller in the compromise. The House Bill was $820 billion. The Senate Bill was $838 billion. And the compromise? Down to $789 billion. How is that a compromise?? The math doesn't work!
Spending is the point of the stimulus. The economy's bad because no one's buying anything. There's no demand in the supply-and-demand. So the way the stimulus works is by buying stuff. The CBO says there's about a $2 trillion dollar hole in demand in the economy. Spending $800 billion to fill a $2 trillion hole was probably not a big enough plan anyway, and now the compromise has made it even smaller??
Hmph. Thumbs down.
Which much-needed billions did they cut? They cut $35 billion in proposed-and-desperately-needed aid to the states. That's to keep states from laying people off and cutting public services -things that will make the economy even worse. Throw a dart at a U.S. map today and, chances are, you'll hit a state with a deficit in the billions of dollars. The compromise also cuts $16 billion in school construction funds, one of President Obama's priorities. That's a line-item that's essentially pure stimulus. If the point is to stimulate the economy, there are no conceivable grounds on which any rational policymaker could argue that reducing the amount of school construction money makes the plan better.
Why did the plan get worse? Well, at least there is a pass-able stimulus. A bill exists. But does what just got agreed to actually have enough juice left in it, after its trip through the wringer of Congressional compromise to actually save the economy?
I'm not sure. I need to be talked down.