Economic Recovery: Here's What We Should Do Next
The compromises necessary to pass the recovery bill in the Senate damaged it in several ways. The overall size of the package was reduced, evidently for the cosmetic purpose of keeping the top-line number below $800 billion. And funds urgently needed to stabilize state and local governments and for construction were cut back, along with the credit against the payroll tax Ã¢â‚¬â€œ evidently to make room for a rollback of the alternative minimum tax, a step with a strong political constituency but a weak economic rationale.
In my local paper Thursday morning, I read of $20 million that will be cut from our city budget next year, including a day labor center, public library hours, and overtime for the police force. Cuts like that Ã¢â‚¬â€œ and in many places they are far deeper than here Ã¢â‚¬â€œ are going on everywhere, and the bill as passed will help but it will not stop them. Contrary to Grover Norquist's comment in this space, police, libraries and day labor are part of the productive economy, as much as anything else.
It is difficult to know what the so-called moderate Senators were thinking. Do they have special insight into this crisis? Do they have their own forecasters, with deep understanding and good track records in these matters? Do they have their own models? Do they have, in other words, any ground for believing that less than $800 billion, spread over two years, will be enough to bring the economy back? If so, they weren't saying so, so far as I could tell.