All Stimulus (almost) All the Time
Posted on January 7th, 2009 in Economic Stimulus |
As the first official post of this blog, I want to announce that until the stimulus package is passed, I’m going to be posting extensively about it and posting links to things that I think shed light on it or are just amusing (is that possible, you ask? We shall see…) My focus on the stimulus over the next month is to remind myself as well as any readers out there what this blog is all about–not just me ranting (though I will do that, of course) but also an attempt to understand the latest developments in the Obama Presidency.
Oh, and you can be sure that I’ll be blogging about the inauguration quite a bit as well.
So, anyway, back to the stimulus. It looks like there are going to be at least two major tests that Obama and the Democrats are going to face in passing this legislation: 1) the deficit, and 2) pork. In terms of the deficit, well, words can’t really express how bad it is, so why don’t I just show you THIS:
Courtesy of the Congressional Budget Office
Just really quickly, since I’m not an economist but somehow I actually can comprehend just a little bit how bad this is, let me see here if I can explain this. So basically the crazy blue line shows the deficit or surplus over the past 40 years or so as a percentage of gross domestic product. Please don’t ask me to explain that. You kind of get it, right?
See that huge mountain around the year 2000? It looks like El Capitain? That reflects the fine time we had in the 90s when we had a surplus which at one point amounted to a whopping 3 percent of GDP. Ok, now look at the dotted line. That’s us. Yeah, not good. We’re right smack in the middle of that disturbingly steep downward spike that is lower on the graph than any other point. In other words, our deficit is now around 4 percent of GDP. And guess what? CBO projects we’re going even further down over the next year, particularly with Obama’s economic stimulus package added:
CBO projects that the deficit this year will total $1.2 trillion, or 8.3 percent of GDP. Enactment of an economic stimulus package would add to that deficit. In CBO’s baseline, the deficit for 2010 falls to 4.9 percent of GDP, still high by historical standards.
So the good news is that in 2010 the deficit is cut in half somehow…I’m not sure how. But still, that 8.3 percent is going to be tough for a lot of Republicans to deal with. Not to mention a lot of Blue Dog Democrats. It’s going to be interesting to see how much they resist the economic stimulus bill over the next month and a half.
But in addition to the deficit as a challenge for the new Obama administration, they are going to have to be careful about John McCain’s #1 campaign issue (and you thought he didn’t have one): PORK. Barack Obama has promised in recent days that the economic stimulus would have no pork. None. Now, many believe that passing a $775 billion bill without pork is impossible. It may be like trying to cut a whole in space-time with a string. But if Obama can pull this off, it would send a very powerful message that his rhetoric of change is becoming a reality.
4 Responses
As much needed as all of this is to stimulate the economy (and I do definitely think we need a Keynsian stimulus to get the economy going again), I just can’t help but wonder how this will affect other parts of President-Elect Obama’s plans and campaign promises. For instance, how this would affect his foreign policy agenda or plans to have a national health insurance program. I just wonder how much is OFF the table now and what we can expect not to see. It seems that he needs to do something to ramp down expectations on some of his other policy goals, both domestic and foreign. Or at least tell us what is going to have to be sacrificed for the short-term — what is going to have to go??
Obama was asked about this problem repeatedly near the end of the campaign as the economy began to really tank. His response was basically that he might not be able to achieve his agenda as quickly as he hoped. Also, he said that he would have to cut some things, and I believe in one debate he mentioned foreign aid. However, he held firm to health care reform and energy independence as two issues that he will not turn away from. I think if the economy recovers over the next year or two, then the deficit will be less of an issue and he will have a lot of power to achieve the rest of his agenda. Of course, that’s assuming he doesn’t try to push health care through before the economy recovers.
But I don’t see how he’s going to be able to achieve his agenda anyway if the economy doesn’t turn around. In other words, he’s betting a lot on this stimulus package. If it doesn’t work, not only is the country in trouble but his entire agenda may be at stake right from the start if this first policy decision doesn’t do some real good.
I agree with you Jared the Blogger, if the economy doesn’t turn around his whole agenda may be at stake. Hopefully, though, he will be able to do some of his initiatives in his first term. I think that the people have a very high expectation of him, although I don’t know how fair this is with all of the problems he is facing. Hopefully, the stimulus will pass (even though some prominent Dems are having some trouble with parts of it) very quickly so the economy can start humming again!
[...] let me make a brief digression. From my first post on this blog, I have often expressed my view about the need for fiscal responsibility in the Obama [...]