Friday, October 24, 2008

More myths about deficits and gold-standard-thinking

Indeed, earlier in the day, Martin Neil Baily, an economist for the Brookings Institution, told the same congressional panel that a stimulus package would have to be anywhere between $150 billion to $300 billion to have any significant impact. He said that direct relief to ailing states with revenue shortfalls was necessary.

But Pelosi said she wasn't ready to scale the package that large because of concerns of what it would do to the escalating deficit.

Myths about deficits keep us from doing what we need
to do.

"One hundred and fifty billion would be closer to what the economy needs," she said. "I don't know if we can afford all that the economy needs."

Ditto: myths.

Pelosi has said that she would call the House into a lame-duck session following the elections if there are signs a package can be passed. House Republicans remain opposed to any stimulus legislation.

Hopefully they will be gone soon.

White House press secretary Dana Perino said the plan would have to be different than the one passed in September to merit the president's support.

"What we've seen put forward so far by the leaders in Congress, the Democrats, were elements of a package that we did not think would actually stimulate the economy," Perino said.

Oh, you mean like real spending in the economy??? It's textbook.

Congress also passed a $168 billion stimulus package in February that put money directly in the hands of millions of taxpayers, but critics said that did little to slow the economy's decline as nervous Americans saved rather than spent the money, or used it to pay down debt.

Congress this month passed a $750 billion rescue bill to bolster banks and improve the credit marks. Budget hawks warned Monday that a new stimulus package could send the federal budget deficit soaring toward $1 trillion.

And? So?? Would still only be about the size of the Reagan deficit, when looked at as a percentage of GDP.

"We're looking at easily a $750 billion deficit next year alone," said Rep. Paul Ryan (R-Wis.). "You throw a stimulus thing on this of 300 [billion], we're over a trillion-dollar budget deficit. Now, the question is … what does that do to the value of our dollar? What does that do to our borrowing costs?"

A bloated deficit could lead to inflation, but Kent Hughes, an economist with the Woodrow Wilson International Center for Scholars in Washington, said boosting the flailing economy was more important.

"That's the right risk to take," he said.

Kent Hughes is right.

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