What all but 5 Republicans support
Thirty-six out of 41 Republican Senators voted for the proposed DeMint amendment to the stimulus bill — a massive package of permanent tax cuts that would create a huge hole in the budget, while doing very little to help the economy.
There isn’t much room for bipartisanship when 87.8% of the other party is totally irresponsible.
February 6, 2009, 1:01 pm
Appeasing the centrists
Atrios is right, though I’d put it a bit differently: centrism is a pose rather than a philosophy. And to support that pose, the centrists are demanding $100 billion in cuts in the economic stimulus plan — not because they have any coherent argument saying that the plan is $100 billion too big, not because they can identify $100 billion of stuff that should not be done, but in order to be able to say that they forced Obama to move to the center.
Which raises the obvious question: shouldn’t Obama have made a much bigger plan, say $1.3 trillion, his opening gambit? If he had, he could have conceded to the centrists by cutting it to $1.2 trillion, and still have had a plan with a good chance of really controlling this slump. Instead he made preemptive concessions, only to find the centrists demanding another pound of flesh as proof of their centrist power.
February 6, 2009, 12:53 pm
Sixteen years
A tale of two presidencies
February 4, 2009, 4:42 pm
About that deflation risk
Look out below
There has been a distinct change in tone from the Obama team today, as they seem to have become suddenly aware that there’s a real risk that the stimulus plan will either fail to pass, or be emasculated to the point that it doesn’t come close to doing the job. Obama himself has warned of catastrophe if we fail to act, and — finally!– denounced the tax-cut philosophy. Meanwhile, Larry Summers has finally made the point I’ve been pushing for a while — that we’re at major risk of falling into a deflationary trap.
I thought it might be useful to present a bit of evidence behind that concern. The figure above plots an estimate of the output gap — the difference between actual and potential GDP, as a percentage of potential — and the change in the inflation rate. Both series are taken from the IMF WEO database, for convenience, and use data from 1980-2007.
It’s not a perfect fit — this is economics, not physics, and anyway stuff besides the output gap bounces inflation around from year to year. But still, there’s a clear correlation, driven largely but not entirely by the deep slump and disinflation of the early 1980s, and an implied slope of about 0.5 — that is, every percentage point by which real GDP fall short of potential tends to reduce the inflation rate by about half a point over the course of the year.
And right now the CBO is saying that in the absence of a policy action the average output gap will average 6.8 percent over the next two years. Do the math: if anything like the historical relationship between output and inflation holds, we’re looking at major deflation.
OK, maybe that relationship won’t hold — getting to actual deflation may take a deeper slump than merely reducing the inflation rate. And maybe a regression driven in part by 80s data isn’t a good guide to current events. But deflation is a huge risk — and getting out of a deflationary trap is very, very hard.
We truly are flirting with disaster.
--- Krugman
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Obama needs to steam roll the economically illiterate Republikans and get on with the business of the country. With all this mess we could include nationalized health care and get back a huge chunk of the money spent on administrative overhead.
Who cares about tax cuts when an increasingly large number of people have no income? |
