A lot of my friends and family members are currently being laid off across the country. Many of them have been working in the non-profit sector which is now being DECIMATED by state budget cuts. I am truly sick about these job losses. On the other hand, I am not in the camp calling for more "STIMULUS." I think that it is way too soon to be judging the effectiveness of the current "stimulus."
I remember having to take a serious break from progressive blog reading during the "nationalization" of banks firestorm. At the time, I argued that it was worth giving the Geithner plan a chance before moving to nationalization (even though I am not against bank nationalization). It seems to me that most banks will be earning their way out of trouble in the coming months. Citibank is likely to need to be nationalized in 2010 but that can be handled in the same professional way that the GM and Chrysler bankruptcies were. A bank restructuring in 2010 won't throw the entire financial system into collapse as it would have earlier this year. Additionally by then the administration will have secured the resolution authority from the Congress that it needs to handle a financial entity like Citibank (which is part bank and part hedge fund).
Now I am reading more and more stories about the need for a second "stimulus." I am having the same feeling of needing a serious break from all media. Then I just came across a wonderful article by Daniel Gross in Slate Magazine. It is one of the "sanest" essays that I have read in the past month. I highly recommend reading the article in its entirety.
http://www.slate.com/...
The particular sections of his piece that spoke to me were:
I am not an economist. Still, I am confident in saying that, just as it was absurd to talk about an Obama bear market in March, it's much too soon to be condemning the stimulus package. Last Sunday, Vice President Joe Biden said the administration had misread the severity of the decline. But that's not quite true, either. Rather, the "failure" of the stimulus may have been as much a failure of managing expectations as about managing public works projects.
Perhaps the biggest mistake stimulus proponents made was to suggest that this recession would (and could) end quickly. Modern America is not equipped—financially, socially, or psychologically—to deal with long recessions. We don't have the safety net or the savings to cope with a protracted downturn. And fortunately, we haven't had to. The last two recessions, which ended in 2001 and 1992, respectively, lasted only eight months each. But recessions brought on by financial crises are always deeper and more long-lasting than other recessions, as economists Ken Rogoff and Carmen Reinhardt show in this paper. By February 2009, when the stimulus package was passed, the recession was already the longest in 28 years; now it's the longest contraction since the Great Depression.
President Obama, I believe that now is the time to speak truth to power. The federal government will not be able to turn this ship around on a dime. I believe that you must continue to talk to the American people acknowledging the pain of job losses and stating as you have consistently that it is likely to get worse before it gets better.
You need to escape the beltway filter and the overwhelming chatter and just speak honestly with the American people about how long it will take to dig ourselves out of this deep hole.
This is my favorite part of Gross's argument:
Sure, Obama & Co. could have been more aggressive in January and February in talking about how bad things were (although the stock and bond markets were doing a pretty good job of communicating the misery). But the truth is that, due either to a misreading of the situation (Biden) or a desire to build confidence (Gross), the stimulus efforts were mislabeled. The Obama team spoke of the patient as if it were merely wounded, when it had flatlined. The big package was dubbed the "American Recovery and Reinvestment Act of 2009" when it should have been called the "American Systemic Failure Aversion Act of 2009."
Of course it's taking time for appropriated funds to trickle down into the economy. (You can follow the progress at Recovery.gov, or at my colleague Chadwick Matlin's new "Recessionary Road" blog.) But even if the administration had infused hundreds of billions of dollars into the economy instantaneously in February and March, it might not have made a significant dent in the unemployment rate. After all, as some of the same folks who have declared the stimulus a failure have told us, unemployment rates aren't the best way to measure the short-term success of economic policies. Bush economists thought the combination of fiscal and monetary policies in 2001 and '02 were highly successful in pulling the economy out of recession—even though the number of payroll jobs continued to decline for nearly two years after the economy started expanding in November 2001.
It's time for the sane folks in this country to start doing some ECONOMICS 101 trainings in our communities. In the meantime, it would be great if the Obama administration would continue to push for funds to create new green jobs and to rebuild our infrastructure. JUST DON'T CALL IT A STIMULUS!