The economic times are scary, but it's good to know we have a President who is aware of the scale of the problem. According to a report in this morning's Wall Street Journal, Obama is now considering a stimulus plan substantially larger than first indictated:
With the unemployment rate now expected to hit 9% without aggressive intervention, Obama aides and advisers have set $600 billion over two years as "a very low-end estimate," one person familiar with the matter said. The final number is expected to be significantly higher, possibly between $700 billion and $1 trillion over two years.
As a reminder, the original plan was going to be in the ballpark of about $500 billion, a number that even some conservative economists said was too low.
The general sense among economists being canvassed by the Obama team is that "every day there's a new bad number," one of the people familiar with the matter said. "And people's sense of what the appropriate stimulus is rises" with the news.
Yup, things are bad - and in a deep, structural sense. Highly aggressive action needs to be taken and taken as quickly as possible. This raises the question: what about the politics of it? Will there be Republicans, constrained by ideology as so many of them proved to be this week, who will vote against it? What about "Blue Dog Dems?"
Well, the Obama team is reaching out to economists across the spectrum to build its case in advance:
Christina Romer, who will lead Mr. Obama's Council of Economic Advisers, is also surveying economists, trying to build political consensus around a larger number before it is presented to Congress in early January.
People familiar with the discussion say Lawrence Lindsey, President George W. Bush's first NEC director, has counseled $800 billion to $1 trillion in stimulus over two years. Harvard University economist Martin Feldstein, a Reagan White House economic adviser, has raised his initial, one-year, $300 billion figure to at least $400 billion.
When the final number is rolled out, it appears it will be accompanied by a strong chorus of respected voices - both liberal and conservative - who will say it's necessary. Presented with that sort of ammunition, Obama is trying to make it very difficult to vote against this (and I'd hope we'll be there to help ensure that's the case).
As economic conditions worsen, Obama economists now say the package will have to be larger than expected to ensure the needed stimulus actually reaches the economy. Households will save some percentage of the initial tax cut. And some amount of spending, especially on infrastructure, won't reach the economy in the expected time frame of the package, since contracts and projects may be delayed.
Indeed - there are a lot of bills that need to be paid off by households, and that's not going to be enough to stimulate the economy. So we're going to have to spend a great deal to get things really moving in the right direction.
The government is the spender of last-resort, and it's pretty clear to most of us that we're getting to "last-resort" time.
The good news is we have an incoming President who sees that reality too.