Saturday, January 31, 2009

Stimulus, what stimulus?

My Wall Street Journal tells me that New York City plans to lay off 23,000 workers in order to fill a $4 billion dollar budget deficit. It also tells me that California will delay $4 billion in income-tax refunds, student grants, and welfare checks... It also tells me that the only reason GDP only fell 3.8% last quarter was because inventories rose. It tells me that business spending on equipment and software fell 27.8% last quarter, the worst performance since the Great Depression.

And yet, and yet!, David Brooks of the New York Times apparently does not have a copy of the Wall Street Journal, and, not only that, had apparently not read the front page of his own newspaper, because what does he write in today's grey lady? "A governor with a few-hundred-million-dollar shortfall will suddenly have to administer an additional $4 billion or $5 billion. " Oh, is that why NYC is laying off 23,000 people? Because they are soon to be so flush with cash that they don't know what to do with it? Or did he just got his ole' numbers reversed. Isn't it really because NYC has a $4 billion dollar deficit and will likely only get a few hundred million from the "stimulus"? Isn't it b/c state governments like California have a $42 billion shortfall, and are only going to get a few hundred million from the "stimulus" plan?

It's sad to say it, but the above are follies in policy that President Obama owns. It is his policy to lay off government workers in a recession. He could easily have proposed an extra $200 billion for states. While doing so, he could have held conference calls with state and local officials, telling them not to cut their budgets, and getting feedback on what projects they need done. And because he has not, government appears to be making the recession worse. And the evidence suggests that he made these errors because he is ill-advised by his lead economic council.


  1. Well said.
    But maybe you should be concerned that Kevin "Dow 30,000" Hassett at the AEI agrees with you about funding through the states? I guess even he could be right sometimes:

    CNN says that the state budget shortfalls are about $90 billion total, which seems lower than your $200 billion estimate. It's not clear at how they arrive at that figure, nor how they decide how much individual states receive (and in what form). They also raise an interesting point - given fungibility, how do we assess the contribution to state finances (in terms of preventing layoffs) from giving money directly to states and from giving money to specific programs that could alleviate pressure on state budgets?

    Anyway, I love the new blog and plan to check in often. I'm even learning new things like the unholy alliance of Larry Summers and Laura Ingraham.

    -Anonymous guy you met in Puno.


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