Here's what I want to know about the stimulus bill, apropos of Obama's outrage about congressional Republicans' opposition/resistance to it: Why almost a trillion dollars, right now?
I have very little confidence that people have actually figured out whether this thing is going to work. Now, that doesn't mean it's a bad idea -- maybe we should try out a gamble even if it might very well not work, because that'd be better than doing nothing.
But why don't we find a middle ground where we spend some of it -- say, 100 billion dollars -- then study what effects it's having and decide what to do next?
Full disclosure, I don't really know what I'm talking about. If there's some reason it has to be done this way, then please explain why in the comments. I'd be curious to hear why I'm wrong. [UPDATE: A commenter has taken me up on this.]
This piece shows how much money we spent on other major projects. For instance, the Marshall Plan to rebuild Europe after World War II cost the equivalent of $115 billion in today's dollars. In other words, we could start out spending a historically enormous amount of money, while still spending just a tiny fraction of the $800-billion figure.
I was thinking about this after watching Megan McArdle's hour-long rant against the stimulus:
I especially like how she takes down the idea of economists as experts. Key points:
(1) Economists have never tested their theories that supposedly support the stimulus, because it would be impossible to do so. Any historical parallels are too different from the current situation. So there are too many confounding variables to be able to draw a scientific conclusion.
(2) Even if McArdle is wrong about that, the way economists could prove her wrong would be to make specific predictions about what effect the stimulus will have, and stake their professional reputations on it. She says none of them will do that.
Ah, but they talk about this paper, which does make predictions. Isn't that a counterexample? Well, I don't think so. Are those economists really going to accept any personal consequences if their predictions turn out to be wrong? I assume they'd say either that unexpected contingencies got in the way, or the stimulus wasn't enacted in the exact way they would have liked. And sure enough, the paper savvily includes this paragraph, loaded with caveats:
It should be understood that all of the estimates presented in this memo are subject to significant margins of error. There is the obvious uncertainty that comes from modeling a hypothetical package rather than the final legislation passed by the Congress. But, there is the more fundamental uncertainty that comes with any estimate of the effects of a program. Our estimates of economic relationships and rules of thumb are derived from historical experience and so will not apply exactly in any given episode. Furthermore, the uncertainty is surely higher than normal now because the current recession is unusual both in its fundamental causes and its severity.Translation: "Don't blame us if it doesn't turn out the way we said it would."
Of course, if the stimulus is enacted and has fantastic results, you can bet they'll say, "See, we told you it would work."
Karl Popper said people who claim to be scientific but don't make falsifiable predictions are engaging in pseudo-science. So, isn't economics a pseudo-science?
And if a pseudo-science is the main authority for people's belief that the stimulus is a good idea, then we should be a lot more cautious than we're being. A trillion dollars -- which, as Sen. Mitch McConnell correctly pointed out, is more than the amount you'd spend if you spent a million dollars a day from the supposed birth of Jesus to now -- just seems like way too much money to blow in one shot on a wild gamble.
Oh, one other slight problem:
UPDATE: Bellwether alert! "If the Dems have lost JAC on this, they've lost the country."