by Mario Rizzo
The stimulus package which was virtual or notional for a long time was posted on the internet on January 24th (or thereabouts) – all 647 pages of its provisions. The Congressional Budget Office analysis was issued on January 27th. And now the House of Representatives has passed the bill on January 28th.
Why the hurry?
If you listen to the economic advisors – formal and informal – you will hear that it is vital to have fiscal stimulus now to prevent the economic situation from drastically deteriorating. However, I do not think that the urgency is primarily economic in nature. There is no economic evidence that suggests that a stimulus package enacted by mid-February will work, but that one enacted, say, two months later will not – or work significantly less well. Are the social benefits of a more careful consideration of exactly where the money will be spent, how much will be spent, and whether particular expenditures will be effective obviously less than the incremental benefits (if any) of faster stimulus?
No. The urgency is political in nature. If the Congress were to examine the stimulus plan in detail it would become quickly obvious that there is no broad agreement with respect to the details. In fact, coalitions of resistance would begin to emerge. The plan would begin to fall apart. The ultimate result might be that a plan of the magnitude President Obama and his advisors want would not be passed.
So what lesson do we draw? Perhaps Keynesian fiscal policy of the kind and magnitude proposed cannot be enacted in a way consistent with democratic ideals. In the mega-stimulus world, the Congress becomes an ineffective “talking shop” that stands in the way of the interests (or “true preferences”) of the people. The plan must be rushed through before there is much discussion. Thus, as the economic role of the State grows, effective democracy withers.
I’d like to see an explicit recognition of this tradeoff by those who are rushing headlong into this new world.