The latest figures of the Obama stimulus plan (we're not supposed to call it that, it's now the American Reinvestment and Recovery Plan--ARRP; don't confuse it with AARP) suggest that it will be less than $750 billion. A lot of money--inconceivable before the recent giveaway of a cool trillion to the bankers and brokers. I'm not economist, but from what I've heard, the great danger is not that we shall spend too much on priming the pump, but not enough. This is a time to think big, and I hope that the size of the program will grow, not shrink. This will be the first test of Obama's presidential (not political) acumen.
Last week I heard a debate over the stimulus on NPR. One economist took the Keynesian position that we need government to step in, because no one else is spending or investing. The other espoused the view that private decisions about spending are better than choices made by government.
Generally, the second view is correct, but that is like saying that generally people like sunny weather more than rainy days; we all know that we need the rain. Surely the present crisis was caused by private decisions. And we know something about how to use government dollars to promote economic growth.
But the real fallacy in the free-market approach lies in the question of timing. If they are honest, enthusiasts of laissez-faire economics tell us that the market will right thing over time. True, but time is the problem. People are suffering now. As John Maynard Keynes noted, in perhaps his most brilliant pronouncement, "In the long run, we are all dead."