"Cutting the Stimulus"
By Matthew Yglesias
It’s really remarkable to see all this talk, and even action, of people cutting things out from the recovery bill. Even more remarkable is that the folks doing the talking aren’t being compelled to provide any rationale for what they’re doing. As I see it, there are basically three reasons why it might be a good idea to cut something or other from the package:
- One is that you might want to maintain that the macroeconomic situation isn’t actually so dire that we need such a quantity of stimulus. Obviously, if that’s the case then you want to reduce the overall amount of stimulus.
- A second is that a proposal might be actually harmful. Offering to pay a $1,500 no-questions-asked bounty to anyone who brings another person’s severed finger into their local post office could stimulate the economy, but the cure would be worse than the disease.
- A third is that you might think a given proposal isn’t as good an idea as some other proposal, so you’re offering a swap. To my mind, spending money on new highway construction is a worse idea than spending money on fixing up existing highways. And spending money on transit is better than spending money on highways. And spending money on operating costs is a better idea than spending money on new transit construction. So within that set of hierarchies, if I were a Senator I would be seeking to shift funds from worse ideas to better ones within the realm of the politically possible.
But an awful lot of the proposed cuts seem to be getting cut for none of those reasons. Instead, people are just acting as if this or that idea is obviously silly. Terms like “X isn’t really stimulative” are getting thrown around. But why not? Money to refurbish the national mall is money that will be spent on salaries and on materials. Money to upgrade health care IT is money that will be spent on salaries and software and materials. Economic activity is economic activity. Jobs are jobs. And when people have jobs and earn salaries, they spend their salary on buying goods and services from businesses. And when businesses have customers they avoid layoffs and even hire new workers. It’s true that the merits of a lot of these specific ideas are contestable, and I wouldn’t cry to see some of them eliminated in favor of other, better ideas but the notion of just stripping some of this stuff out in favor of doing less and hoping for the best is lunatic.