Economic Stimulus: A primer

Ideal Candidate is glad that some visitors to the site are participating in the poll question about economic stimulus. Some of you may still be confused about what a "stimulus package" entails and why it is an important issue now, as opposed to when the 111th Congress convenes in 2009.

The type of economic stimulus package being debated right now (of the type endorsed by Fed Chairman Ben Bernacke) is not designed to right all the economic wrongs that have accumulated over the past 30 years. Rather, it is a narrowly tailored policy that is required today to slow or stop the economy's decent into a recession (defined as two or more quarters of negative growth). This should be distinguished from a policy of fixing long-term structural problems that may be needed to (1) reverse the growing gap between rich and poor (2) rebuild the nation's infrastructure or (3) save the US manufacturing sector.

A rough consensus among experts is emerging around the halmarks of an effective stimulus package. It needs to be "timely, targeted and temporary." These requirements were spelled out clearly at a recent forum sponsored by former Treasury Secretary Robert Rubin's group at the Brookings Institution-- The Hamilton Project.

Although Rubin's approach is to build consensus among technocrats without regard to party or ideology, the ideological opponents are already lining up in the usual places, i.e. the editorial page of the Wall Street Journal.

Ideal Candidate believes election campaigns are a great time to educate the voting public about economic issues and advocacy and debate around the design of an effective stimulus package is a good "teachable moment" about the uses and misuses of economic policy. In the 19th century election-year speeches and editorials rang with rhetorical appeals for and against protective tariffs, national banks and federal support for "internal improvements." As a consequence the average well-informed citizen felt a high degree of involvement in economic issues.

Maybe we've been spoiled by the 20th century. The US was the center of the economic universe and even since living standards stopped growing as fast since 1973, most Americans had faith enough in their pensions, in Wall Street, in the values of their homes or Alan Greenspan that they didn't need to worry. Those days may be gone.

That's while Ideal Candidate will be stressing economics in this election campaign.