Out of Control Policy Blog

Stimulus proposal approaches $850 billion

The Washington Post is reporting that the stimulus package that will be proposed by President-elect Obama will likely be in the range of $850 billion. About $350 billion will be for public infrastructure projects. Another $100 billion will be to plug pot holes in state budgets, focused on meeting the rising demands of low-income families on Medicaid. The package would be about 6% of the size of the national economy and exceed the size of the Pentagon's budget.

The potential for massive new spending has touched off a frenzy among interest groups eager to claim their share of the expanding stimulus pie. The profusion of requests from governors, transportation groups, environmental activists and business organizations is spawning fears that the package could be loaded with provisions that satisfy important Democratic constituencies but fail to provide the jolt needed to pull the nation out of a deepening recession.

"It's everybody's wish list, everybody's favorite program. And I think that's a big mistake," said Alice Rivlin, a Brookings Institute economist and former budget director for President Bill Clinton who has been advising Democrats. "I agree with the Obama team that we need a big increase in public investment, but it should be done very, very wisely," rather than through a rushed process that risks being "seen as scattering money to the wind."

Of course, what is "wisely"? This is classic progressive politics at its best: Putting the right people in charge will generate the right outcomes. Of course, progressive's don't count on Democracy running rough shod over their notions of scientific management of both government and the economy.

Simon Johnson, an economist at the Massachusetts Institute of Technology, said he shares Rivlin's concern that such a huge pot of money would probably be misspent.

"My personal opinion is you can spend $450 billion quite sensibly," Simon said. "But if you start raising it up, you have to ask whether you're getting good value for the money."

Acknowledging the tough task ahead, a coalition of 20 liberal organizations and unions -- including the Sierra Club, AFSCME, the AFL-CIO and ACORN -- yesterday launched a $5 million grass-roots and public relations campaign to support the evolving package and avert a filibuster in the Senate.

"Our goal is to help move it along as fast as humanly possible so Obama doesn't have to waste a lot of his capital on it as president," said Brad Woodhouse, president of Americans United for Change, which is coordinating the effort. "There are going to be big fights ahead on health care and completely trying to revamp our approach to energy. If you have to do a lot of horse-trading on this thing, it makes what comes afterward a lot more difficult."

Samuel Staley is Research Fellow


« LaHood offerred transportation secretary position | Main | The "ideal" stimulus plan »




Out of Control Policy Archives