We have reached this point in America. Once, we rounded $9.99 up to $10. Now, we round $775 billion up to $1 trillion.
So rather than talk about the two-year, $775 billion stimulus package that Barack Obama laid out yesterday, we call it the $1 trillion package.
The rounded number is easier to remember; it includes the over-runs that are likely to occur in the new president’s fiscal stimulus spending; and reflects the probability that congressional Democrats, who are calling for a $1.3 billion stimulus, will get some of what they are demanding.
We are defining fiscal deviancy down, to borrow from the late senator and scholar, Daniel Patrick Moynihan. Trillion is the new billion.
It is also a lot of money, allowing the president-elect to promise something for everyone. Republicans want tax cuts? Fine, here is $150 billion for middle income and poor families, and more than $100 billion in tax breaks to encourage businesses to hire and invest.
Want to help “the struggling states” cover their budget deficits without cutting their bloated spending? Here are a few hundreds of billions for governors to dispose of.
Want to rebuild “crumbling roads,” bridges, airports, and have a “new smart grid” among other things? Here is $300 billion for infrastructure.
All to be transparent. Rahm Emanuel, Obama’s chief-of-staff-designate, has promised “a Google-like search function to show every programmed funded by the stimulus package, whether it comes under- or over-budget, whether it is meeting its intended purpose, and how many jobs it is creating.”
And if you doubt that a new president who has never managed even a corner candy store, and who could not organize a single meeting of the Senate subcommittee he chaired, can efficiently spend billions, there is the new CPO to look after things — chief performance officer Nancy Killefer, a Treasury official in the Clinton administration. It will be her job to make sure that efficiency trumps politics and bureaucratic lethargy.
If you are an old-fashioned deficit hawk, you are grounded for years to come. The deficit Bush is willing to Obama already tops $1.2 trillion, at 8.3% of GDP well above the postwar record of 6%, and “we’ve got trillion dollar deficits for years to come, even with … economic recovery”, says Obama.
Remember, in addition to Obama’s stimulus package there are bailouts for banks, auto companies, students, and others from the $350 billion remaining in the $750 billion Troubled Asset Relief Programme (TARP) fund, and $500 billion aimed to lower mortgage rates.
The Fed says it will lend and lend and lend, printing money to do so. The big worry is that inflation will take off, and foreigners will be unwilling to buy all those government IOUs unless interest rates go up, offsetting the stimulating effect of Obama’s spending.
Even a trillion-dollar stimulus can’t in the end drive the economy forward unless it reinvigorates the private sector. If it succeeds in persuading consumers that an end to the recession is in sight, prospective homeowners that falling mortgage rates have put a new bottom under home prices, banks that it is safe to lend again, and businesses that it pays to invest in plants to turn out stuff consumers will buy, it will have succeeded in priming the pump, as the old saying went.
If not, America will end up burdened with an enormous debt burden, wild inflation, all for no purpose.
There is reason for optimism. By including tax cuts, some for businesses, Obama has shown that he is willing to make Democrats unhappy in order to gain bipartisan support for his program and, it must be said, to do the right thing.
Otherwise, so well regarded a conservative economist as Marty Feldstein would not have signed on to the Obama plan.
Most important, Obama recognizes that he has to tackle long-term drivers of budget deficits even as he spends money to reverse the current economic decline.
Give the man credit: He has a clear view of what he wants to accomplish, of the tools he has available, of his inability to engineer a quick fix, and has put together a team that understands how a modern economy works.
Just how much of a slip there will be between cup and lip will depend on whether his star-studded team is as competent in action as it seems to be on paper.
Let’s hope so: competence is something that has been in short supply in Washington in recent years.
Examiner columnist Irwin Stelzer is a senior fellow and director of the Hudson Institute’s Center for Economic Studies.
