Is It July 2010 Already?

Fri, 09 Jul 2010 13:02:10 +0000

In the world of fiscal policy, you could have left the planet for a year and not missed a beat.  Charles Wallace, of AOL's Daily Finance column, quotes his interview with me as follows:

But Andrew Samwick, a professor of economics at Dartmouth College, says the proposed stimulus of about $80 billion is too small to do much good. He adds that unemployment benefits aren't the most efficient way to stimulate the economy.

"You're giving them money, but they're not giving you anything in return," Samwick says, rejecting the argument that unemployment benefits are usually spent immediately and thereby sustain the economy. "There's no virtue in spending money -- the government could do that directly," he says.

Samwick says he'd like the government to commit to a long-term spending plan costing hundreds of billions or even trillions of dollars to address the country's infrastructure needs, such as developing a smart grid for electricity distribution.

"All of those things use material that has to be produced, which means it creates jobs, or it creates new opportunities for people, where it creates employment as well," Samwick says. "Why is that not better than just giving the money to the states to compensate them for their own budget challenges or the unemployed?"

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The quote is accurate, in the larger context of the arguments I have been making about better ways to deal with downturns.  In fact, we can rewind the clock a full year and see how little progress has been made.  From July 7, 2009, "On the Need for More Stimulus,"
 
I think we are now 18 months behind where we should be in moving forward with sensible government spending plans.  We should have pulled the fiscal policy ripcord in January 2008 with a public investment plan designed to repair our aging infrastructure.  I'd rather have the 18 months back -- as would the millions of unemployed workers who could have been collecting a paycheck if we had started sooner -- but the proper course of action today is the same as it was then.
 
Change 18 months to 30 months, and nothing else needs to be updated.