Saturday, August 28, 2010
The Stabilization Bill's effect: ... Part II
Reader AM writes in about yesterday's post:
Reader AM writes in about yesterday's post:
I agree that there's been much more stabilization than stimulus, but I think you're being a bit less than fair here.My only real quibbles are that TARP was specifically for Wall Street, not Main Street, and it certainly didn't "stabilize the private sector," which proceeded to nosedive into a severe recession after (though not because of) TARP; and only one out of eight dollars went to what might loosely be called construction-related fields.
First off, we did stabilize the private sector -- that's what TARP was. The top priority was the financial system, and then the two auto companies were added. (As it happens, this took the form of temporary "nationalization" in a few cases, but private sector stabilization was the goal.)
Second, public sector stabilization was where the votes were. It's relatively difficult for members of Congress to resist entreaties from officials back home, and public sector spending looks less like a giveaway. (Capuano couldn't get $ for independent as well as public universities.) There wasn't anyone advocating for directing money to the private side instead of the public side.
Third, a good deal of the public sector money went to construction, public projects but private employment.
Fourth, when the bill was passed the economy was in free fall, so stability was progress; of course it doesn't look the same in the recovery phase.
Finally, most liberal economists (and some less liberal) said all along that the stimulus was inadequate. We would have heard a lot more about that from the start had it been obvious that there wouldn't be more to come.
