As long as we're about to spend gazillions to stimulate the economy, I'd like to suggest we throw in another $53.5 million for a cause dear to all business journalists: economic literacy. And what better place to start than right here in Washington.
My modest proposal is that lawmakers be authorized to hire personal economic trainers over the coming year to sit by their sides as they fashion the government's response to the economic crisis and prevent them from uttering the kind of nonsense that has characterized the debate over the stimulus bill during the last two weeks.
At a minimum, we'd be creating jobs for 535 unemployed PhDs. And if we improved government economic policy by a mere 1 percent of the trillions of dollars we're dealing with, it would pay for itself many times over.
Let's review some of the more silly arguments about the stimulus bill, starting with the notion that "only" 75 percent of the money can be spent in the next two years, and the rest is therefore "wasted."
As any economist will tell you, the economy tends to be forward-looking and emotional. So if businesses and households can see immediate benefits from a program while knowing that a bit more stimulus is on the way, they are likely to feel more confident that the recovery will be sustained. That confidence, in turn, will make them more likely to take the risk of buying big-ticket items now and investing in stocks or future ventures.
Moreover, much of the money that can't be spent right away is for capital improvements such as building and maintaining schools, roads, bridges and sewer systems, or replacing equipment -- stuff we'd have to do eventually. So another way to think of this kind of spending is that we've simply moved it up to a time, to a point when doing it has important economic benefits and when the price will be less.
Equally specious is the oft-heard complaint that even some of the immediate spending is not stimulative.
"This is not a stimulus plan, it's a spending plan," Nebraska's freshman senator, Mike Johanns (R), said Wednesday in a maiden floor speech full of budget-balancing orthodoxy that would have made Herbert Hoover proud. The stimulus bill, he declared, "won't create the promised jobs. It won't activate our economy."
Johanns was too busy yesterday to explain this radical departure from standard theory and practice. Where does the senator think the $800 billion will go? Down a rabbit hole? Even if the entire sum were to be stolen by federal employees and spent entirely on fast cars, fancy homes, gambling junkets and fancy clothes, it would still be an $800 billion increase in the demand for goods and services -- a pretty good working definition for economic stimulus. The only question is whether spending it on other things would create more long-term value, which it almost certainly would.