Thursday, January 29, 2009

A Terrible Thing To Waste

The indomitable Thomas Sowell is wondering why it is that the Obama administration and the Democrats in Congress have been in such a goshdarn hurry to pass an emergency stimulus package, the overwhelming majority of which won't be paid out for years. What exactly are they buying?
They are buying what politicians are most interested in—power. In the name of protecting the taxpayers’ investment, they are buying the power to tell General Motors how to make cars, banks how to bank, and, before it is all over with, all sorts of other people how to do the work they specialize in, and for which members of Congress have no competence, much less expertise.
Like doctors, for example, who could face tax penalties if they insist on offering their patients procedures that haven't yet met the approval of yet another federal medical gatekeeper. Because clearly the problem with American medicine is that the federal government doesn't hold enough sway in your physician's office. For all the talk of helping out Main Street and saving us all from the next Great Depression, let's not forget what Rahm Emmanuel so helpfully reminded us, "a crisis is a terrible thing to waste".


Shane said...

It may actually be (gasp!) politics as usual. The more I watch Obama's team (especially that Rahm Emmanuel), the more I'm convinced that HUGE change is coming. These guys are too politically savvy, with too much political capital amassed, to achieve anything less than comprehensive restructuring of the federal government/bureaucracy.

But I think the immediate need for SOMETHING to happen is not overstated by the Democrats. With non-exchange (over the counter) traded securities, confidence really does affect the real health of big finance's balance sheets.

ALSO, let's not forget how future cash flows are noted in accounting. Passing legislation that plans spending years down the line is factored into Net Present Value calculations, and may adjust the books enough to stave off margin calls (which are just runs on the non-FDIC-insured "bank").

I'm not saying that this is what's going on, because a) I'm not a finance expert and b) I'm currently in transit from Iraq to the U.S. and don't have time to read up on this particular bill, but I am saying that spending far into the future does not necessarily entail a lower need for immediate passage.

Shane said...

And here comes Tyler Cowen to knock one of the legs off of my argument:

First, to the extent that the real problem is fear, this militates in favour of placebo policies. By that I mean initiatives which appear bold and have great symbolic value, but which don't necessarily cost us very much. I haven't seen us make a major attempt to identify such proposals, but it is unlikely that an $800 billion stimulus fits the bill.

Yup. He's a renowned economist, and I am not.