Stimulus II: This Time It's Fiscally Responsible
One of these quotes is from Chance the gardener; the other is from Sen. Majority Leader Harry Reid (D-Nevada). Which is which?
A. "The crops have been planted, the shoots are now appearing above the ground."
B. "As long as the roots are not severed, all is well. And all will be well in the garden."
Reid is referring to the need for a second stimulus package, which he doesn't want but other Obama Administration allies support.
The issue has revealed divides among Democrats who think the second stimulus isn't necessary because the first one is working (Vice President Biden and economic advisor Austan Goolsbee); those who think we don't need a second stimulus because the first one needs to work faster (House Majority Leader Steny Hoyer, from the Old Line state of Maryland), and those who think we need a second stimulus.
This last group is eclectic. Stimulus 2 is expected to save or create the job of informal Obama economic advisor Laura Tyson, who the other day said in Singapore, "the real economy is a sicker patient," and called the first stimulus "a bit too small." But Tyson is only a size queen on stimulus, not on budget deficits; she dismisses worries that the country can't afford another package: "The concern is that the U.S. will have to inflate away its debt. I do not think that is a valid concern," Tysone says. "The Federal Reserve is not going to let the U.S. government inflate away its debt."
On this point, Tyson is correct as of this time. This week's auctions of Treasury notes have attracted ready buyers; yields on long-term Treasuries (and concerns about inflation) continue to fall. The Federal Reserve continues to buy up Treasury notes in case the rest of the market loses interest, but with few other attractive investments out there, that precaution may be unnecessary. As long as the economy stays in the crapper, the government can continue to issue debt. AOL Daily Finance writer Joseph Lazarro puts the metaphor too bluntly in his report on Tyson: "The U.S. recession has created a big hole, and it's going to take a great deal of capital from a variety of sources to fill it, most economists agree."
Also agreeing is Federal Department of Bond Fund Management Pimco, whose managing director Paul McCulley is ready to shoot himself he's so excited about a second stimulus package. Completing the circle of magical thinking and perpetual-motion economics required for stimulus support, McCulley wants Stimulus 2 to be "not just a platitude, but a plan for fiscal responsibility." As Mish Shedlock notes, this is like hoping for rain that doesn't make things wet.
The admissions by Biden, Tyson and other Obama experts that they seriously misunderestimated the recession way back in February admits several interpretations: A) their policies are making the economy worse; B) they didn't know what they were talking about five months ago and have shown no evidence that they know better now. I'm going with a combination of A and C) they were lying in February. After all, the contraindications are always clearly labeled on the stimulus bottle. Remind yourself what they are with the now-more-than-ever infomercial for Stimulis: