Size Matters

Those whose memories can reach back to January may recall that Paul Krugman and other economists predicted at the time that Obama's stimulus package was too small, and even it was further shrunk to attract three lousy GOP votes: Collins, Snowe, and that PA guy who switched parties [Arlen Specter]. The latest economic news seems to be proving them right, with the consequences Krugman predicted:

And that gets us to politics. This really does look like a plan that falls well short of what advocates of strong stimulus were hoping for — and it seems as if that was done in order to win Republican votes. Yet even if the plan gets the hoped-for 80 votes in the Senate, which seems doubtful, responsibility for the plan’s perceived failure, if it’s spun that way, will be placed on Democrats.

I see the following scenario: a weak stimulus plan, perhaps even weaker than what we’re talking about now, is crafted to win those extra GOP votes. The plan limits the rise in unemployment, but things are still pretty bad, with the rate peaking at something like 9 percent and coming down only slowly. And then Mitch McConnell says “See, government spending doesn’t work.”

Let’s hope I’ve got this wrong.

And now, Krugman today:

Alas, I didn’t have it wrong — except that unemployment will, if we’re lucky, peak around 10 percent, not 9.

There was a lot of talk about health care being Obama’s Waterloo. It won’t, I think and hope. But stimulus is starting to look like Obama’s Anzio — the battle in which the American commander got himself into terrible trouble by being too cautious.

And right now Obama is pinned down in his too-small beachhead, taking heavy casualties.

And the Republicans see another attack chance - and you can be sure that they will work furiously to defeat anything that might actually help fix the economy.