The Economy is in Too Much Trouble for Stimulus to Help

(MoneyWatch)  I think again you are arguing "stimulus vs. doing nothing" rather than "stimulus vs. what I have proposed," as I noted earlier.

I suspect the core difference between us has to do with political philosophy. I would be closer to your view if I felt there was so much "low-hanging fruit" for government expenditure that trying a stimulus plan couldn't do much harm.

While I believe the low-hanging fruit is there in principle, I am skeptical that government will pluck it, for public choice reasons. I will say this, however: if the low-hanging fruit is to be picked, it should be done early in the term and with smart people in charge. At least those two conditions are present right now. We'll see how all these states and government departments deal with what will probably count as the largest one-shot procurement operation in the history of the human race.

If I were closer to you analytically, I would probably also believe, as do you and Paul Krugman, that the current stimulus package is too small (see also here and here).

That raises an interesting question: how will we know who was right?

If the economy goes badly, there are at least two possible reasons for that. First, the required adjustments were so large that our government could not do much to smooth them (my current view), plus we created regime uncertainty along the way. Second, the stimulus package was too small.

It would be good if we have a clear check list to look at five years from now, to assess which view was closer to the truth.

Follow Blog War over the federal stimulus package:

• Monday, April 6, Brad DeLong: The Stimulus Package: Like the Housing Bubble, Only Better
• Monday, April 6, Tyler Cowen: Good Policy, Bad Timing: How the Stimulus Package Could be Smarter
• Tuesday, April 7: Tyler Cowen: Stimulus Won't Help U.S. Industry Restructure Itself
• Tuesday, April 7: Brad DeLong: Arguments Against Fiscal Stimulus Exhibit a "Deep Incoherence"
• Tuesday, April 7: Tyler Cowen: It's Easier For the Government to Print Money Than to Spend It; Or, Monetarism Rulz!
• Tuesday, April 7: Brad DeLong: Fiscal Stimulus Beats Doing Nothing -- By a Lot
• Wednesday, April 8: Brad DeLong: Why the Geithner Plan is Good Medicine for the Banking System
• Wednesday, April 8: Tyler Cowen: The Geithner Plan: An End Run Around Congress
• Thursday, April 9: Tyler Cowen: Coming to Grips With the End of Debt-Fueled Consumption
• Thursday, April 9: Brad DeLong: Yes to Economic Restructuring; No to Universal Bankruptcy
• Friday, April 10: Brad DeLong: Final Thoughts: What Would Turn Me Against Fiscal Stimulus
• Friday, April 10: Tyler Cowen: The Economy is in Too Much Trouble for Stimulus to Help