Stimulis

This is great, but Cialis, et al. really work! This should probably be based on an Enzyte “male enhancement” spot.

Don't Panic! OK, Panic! And Now… Take a Deep Breath and Look Into My Eyes

So the President has taken to the pages of the Washington Post to freak people out over the terrifying, irreversible devastation that will befall us if the world-sized deficit spending bill doesn’t clear the Congress. If you’re into the macroeconomics-as-mind-control game, this is a bit of a paradox, isn’t it?

In order to “restore confidence” we are alleged to require interventions contained in the deficit spending bill. But the bill won’t clear Congress unless the President succeeds in terrifying the public into clamoring once more for his spending extravaganza kludge. So, the idea seems to be that in order to save the economy, you’ve got to get people to flip out first, so that you can do what it takes to calm them down later. This may seem a bit like dumping gas on a person on fire so that they can more easily burn through the wall standing between them and the lake. But I’m sure this feat of psychological needle-threading can be achieved with laser-like accuracy by deploying the virtuoso mood-management skills of Obama’s first-rate team of applied mathematicians. 

Kevin Grier’s comment on the following section of Obama’s lamentation is pretty special:

This recession might linger for years. Our economy will lose 5 million more jobs. Unemployment will approach double digits. Our nation will sink deeper into a crisis that, at some point, we may not be able to reverse. …

People, an irreversible recession means that GDP will shrink to zero and the USA will cease to exist. Can it really be that Porkulus is the only thing standing between us and extinction?

It’s Porkulus or starvation, nation. Choose sides carefully.

Soothe Me Baby, Soothe Me

Mario Rizzo makes an important point. If, like Olivier Blanchard, you think the economic problem is pervasive “Knightian uncertainty” (i.e., folks don’t even know how to construct the relevant probability distributions, and so can’t begin to think about the expected return of various economic bets), then how is, say, federal fiscal policy supposed to help?

TARP money was going to be spent this way, and then that way, and then this way again. I was pretty sure the so-called “stimulus” package was going to pass the Senate, but then it didn’t! Now they’re changing the composition of spending and tax cuts. Once a bill is passed, how am I supposed to know it’s going to be reliably implemented? Maybe things get hung up because every single member of the Obama administration turns out to be a tax-evader and/or lobbyist. I mean, it looks to me like politics is pretty chaotic.

I know this fact has got to be supremely annoying if you’re a very confident technocratic macroeconomist type who knows what to do to abolish Knightian uncertainty. But it turns out that even the brightest and best of the best and the brightest, like Blanchard, are mere sideshows in the colorful, helter skelter carnival of American democracy. Precisely calculated monetary targets can be established and then ignored. Rigorous cost-benefit analysis may indicate the wisdom of a new bridge, which may be promised, and then left unbuilt. I realize that it is not helpful to sow uncertainty when we all need to take a deep breath, get in line behind the big boys, and calmly follow their advice. But it’s also not clear to me why the big boys think government economic policy is to uncertain souls what Baby Gold Bond is to diaper rash.