[Updated w/ Video] Brad Delong Prefers Obama Stimulus Plan

As MollieBradford diaried here yesterday, Paul Krugman recently criticized Obama's recent stimulus package--characterizing it as "tilted to the right" and citing it as further evidence that Obama "really is less progressive than his rivals on domestic policy."

Krugman unfortunately only spends a single sentence setting forth the basis of these conclusions:

For example, the Obama plan appears to contain none of the alternative energy initiatives that are in both the Edwards and Clinton proposals, and emphasizes across-the-board tax cuts over both aid to the hardest-hit families and help for state and local governments.

I responded in the comment thread of that diary that Krugman's criticisms seemed inattentive to the narrowly defined purpose of these kinds of packages. Specifically, I wasn't persuaded that alternative energy initiatives belong in a stimulus package, given the fact that stimulus packages are typically designed to address immediate and temporary economic needs, as opposed to more farsighted objectives.

Today, I read economist Brad Delong's evaluation of the stimulus packages proposed by the respective candidates (For those who may not be familiar with Delong,  he is an economist at Berkeley and generally considered left-leaning). As my headline suggests, he disagrees with Krugman and expresses a preference for Obama's approach. Specifically, he writes:

The plan is clean: there is no place for lobbyists to hang ornaments on it--which means that quick passage is possible. The first $45 billion of checks could be cut and sent out with this April's tax refunds. It meets   Elmendorf and Furman's requirements that a fiscal stimulus be timely and temporary. It does not do so well on "targeted"--it doesn't do a great job at making sure the money gets to people who will spend it and thus boost aggregate demand--but this is at least partly offset by its simplicity, which is indeed essential if we are going to get the timely and the temporary right.

More in the extended entry.

Obama's top economic advisor, Austan Goolsbee (if nothing else, the funniest economist you're likely to encounter), made a similar point when asked to distinguish Obama's plan:

"The primary difference between the Obama approach and the Clinton approach is that if you are going to have fiscal stimulus," said Austan Goolsbee, the Obama campaign's top economic-policy adviser, "the absolutely most imperative thing is to get the money into people's hand immediately so they can use it and prevent the slowdown." Several pieces of Clinton's plan, including the home-heating subsidy, wouldn't reach people for up to a year, Goolsbee said. "Anything like that is not a stimulus."

Addressing Clinton and Edwards' plans, Delong notes the following:

These are all worthy causes--things that the government should be spending more money on. But this is not a bill that can be passed quickly--the housing provisions, at least, are one of those things where the devil is in the details of the drafting and where quick, clean passage and implementation is almost impossible. Funds to train and put to work people making public buildings more energy efficient--well, those aren't timely. The proposal is not Obama's: we are going to stimulate demand by cutting a lot of identical checks via a refundable tax credit--a thing that the government can do well and quickly.  And this, I think, matters a lot.

As for why this matters, Delong refers to a recent note from Stan Collender:

Christmas 2008 May Be Coming Early For Lobbyists | Capital Gains and Games: A tax lobbyist friend told me yesterday that he's gone into the economic stimulus business. In response to my inquiring look that begged for more information, he said that I'd be surprised how many industries and professions have tax reductions that they want in any economic stimulus package that is considered this year and are looking to him to come up with arguments that confirm they will, indeed, be stimulative. In other words, even though it hasn't yet been introduced, the economic stimulus that has become all the rage in Washington these days has already become a Christmas tree with everyone and anyone who has something they want to do trying to reframe that proposal in terms of its positive impact on the economy. In case anyone hasn't noticed, this includes the White House, with the president all but saying that the reason the economy may be slowing is because of uncertainty about whether the tax cuts enacted during his administration will be extended when they expire in 2010. None of this is suprising. Even though its chances of being enacted are small, an economic stimulus bill may be the only thing that actually moves through the legislative process this year. In lobbyist parlance: it may be the only train leaving the station in 2008. But no matter how good the messaging, loading up the bill with a variety of provisions is one of the things most likely to lead to its demise. It will be too big, too political, too expensive, and take far too long to debate and pass.

Accordingly, Delong writes:

The best way to keep a stimulus bill from becoming a lobbyist-pleasing ineffective and destructive Christmas tree in which a lot of the money goes to people who won't spend it and a lot more to people who shouldn't get it is to keep the legislative vehicle simple and clean. Boosting employment in the short term by cutting a lot of identical checks by April if we need to is something congress and the IRS can do. And Obama's plan seems to me to have the best chance of doing that--if he can sign Pelosi and Reid up to move a clean, focused bill.

John Edwards and Hillary Rodham Clinton and their staffs--they don't seem to have grasped that governance is best when you ask congress to do things that are within its competence, and ask the administrative branch to do things that are within its competence.

Reasonable people can disagree, I think, about the merits of these various proposals. I offer this primarily as an alternative view from an economist with liberal sympathies. Similarly, Robert Reich has written that he favors Obama's proposal.

Notably, Delong doesn't frame his evaluation in terms of whose proposal is more progressive in the way that Krugman does, so these two opinions aren't necessarily in conflict. Rather, Delong is thinking more pragmatically, which I believe is a more appropriate perspective for appraisals of government action like this, viz., legislation with such highly specific utilitarian objectives. And, I freely admit that I tend to agree more with Delong's (and Goolsbee's) economic views than Krugman. Again, I'm just trying to add some other left-sympathetic perspectives to the discussion.

Lastly, I would like to add that often it seems that many folks apply ideological terms like "progressive" and "liberal" to uncritically. I don't think there is a clear, uncontroversial solution to our economic circumstances that follows obviously from a broader liberal or progressive political philosophy. Indeed, I think there are a variety of economic approaches that are plausibly consistent with a more general liberal political philosophy, so long as those economic approaches aim to distribute the benefits and burdens of our economy in a just manner. 

Update:I noticed this video blog from Brad this morning, in which he basically says the same thing he wrote in his blog post. So for you illiterate folks:

Tags: clinton, Edwards, obama, stimulus package (all tags)

Comments

39 Comments

Brad is in the tank for Obama

So his opinion on Barry's positively Republican package isn't a surprise.  I am sure Barry will bury some goodies in their for his Wall St. buds and big coal, big banks, and big pharma as well.

Barry takes care of his friends.

by dpANDREWS 2008-01-15 02:34PM | 0 recs
Re: Brad is in the tank for Obama

Well, if he's "in the tank for Obama," as you allege, then that can be interpreted as a more broad stamp of approval of Obama's domestic policies. All the better in my mind.

However, I haven't seen any reason to think Delong is firmly in any camp, although he's been more critical of Clinton, generally.

by DPW 2008-01-15 02:40PM | 0 recs
Re: Brad is in the tank for Obama

Obama is being financed by lobbyists, including Sumner Redstone (National Amusements) and the Chicago Pritzker family.

So, the author loses credibility right off the bat by not acknowledging lobbyists will be a factor in Obama's policy making.

You cannot make accurate decisions when you see things as you wish they were, instead of how they really are, just ask the Bush administration.

by Marsha1 2008-01-16 04:26AM | 0 recs
Re: Brad is in the tank for Obama

such a crap comment!  even when responding to a substantive diary, all you can do is bash!

by bluedavid 2008-01-15 03:21PM | 0 recs
Re: Brad is in the tank for Obama

I don't know who this barry you speak of is... is he a member of the democrat party (it isn't cool when bush plays stupid name games and neither it is when you do)

by labor nrrd 2008-01-15 05:49PM | 0 recs
Whoz Berry?

Inquiring minds what to know (not really).

by JoeCoaster 2008-01-15 06:12PM | 0 recs
Re: Brad is in the tank for Obama

Not as much as Shrillary takes care of her buddies.

by Pravin 2008-01-16 02:45AM | 0 recs
Why do
you reduce your comments to insults?
It shows you are very weak on making a real point.
by Moonwood 2008-01-16 05:03AM | 0 recs
Re: Brad is in the tank for Obama

Your utter partisanhip shines through again!

Do you have an ounce of substance in you? Or is it all left/right, repub/democrat?

Your head's gonna explode when Barack (or Barry as you say) wins the nomination.

by rapcetera 2008-01-16 09:50AM | 0 recs
Barry is Republican Lite

Bush gave people a $600 tax rebate to win cheap and easy support for his disasterous economic plan.   Obama is only promising $250.

C'mon Barry.  Do better.   Edwards would probably give us all $10,000 and a free car.

by dpANDREWS 2008-01-15 02:39PM | 0 recs
Re: Barry is Republican Lite

and a chicken in every pot!

Clinton is going to tell us to eat our peas on the other hand.... I like that in a democrat!

by MollieBradford 2008-01-15 04:05PM | 0 recs
Whoz Berry?

Is he you're imaginary friend...thats cute.

by JoeCoaster 2008-01-15 06:11PM | 0 recs
Dept. of Immaturity

Brad Lelong prefers Obama's Stimulus Package

There's a dirty joke in there somewhere.

by blueflorida 2008-01-15 02:40PM | 0 recs
D'oh!

mojo ... I love humor here!

by dpANDREWS 2008-01-15 02:42PM | 0 recs
Re: D'oh!
Hey, how does he know it's "tilted to the right!"?
:)
by robert ethan 2008-01-15 09:37PM | 0 recs
Re: Brad Lelong prefers Obama's Stimulus Package

Why does Delong favor Obama's package. Because he thinks it can get passed without pork.

The best way to keep a stimulus bill from becoming a lobbyist-pleasing ineffective and destructive Christmas tree in which a lot of the money goes to people who won't spend it and a lot more to people who shouldn't get it is to keep the legislative vehicle simple and clean. Boosting employment in the short term by cutting a lot of identical checks by April if we need to is something congress and the IRS can do. And Obama's plan seems to me to have the best chance of doing that--if he can sign Pelosi and Reid up to move a clean, focused bill.

Seems like a silly argument from an Economist.

by world dictator 2008-01-15 02:42PM | 0 recs
Re: Brad Lelong prefers Obama's Stimulus Package

No, because it can get passed quickly. It is critical that any stimulus package be timely, as Delong states pretty clearly--even linking to a more substantial paper on the matter.

by DPW 2008-01-15 02:49PM | 0 recs
Re: Brad Lelong prefers non-stimulus

That's total BS.  This isn't even a stimulus package, it's a justification for his pre-existing rather pandering little tax cut, per Angry Bear:

For Senator Obama to be playing this supposed omniscient game with a tax cut that was not perfectly designed to combat a recession strikes me as rather bad politics if one wishes to capture the Democratic nomination. After all - we should leave the praising of past GOP Administrations to those clowns who think the road map to the White House starts at the alter of Saint Ronald.

by MassEyesandEars 2008-01-16 04:01AM | 0 recs
Re: Brad Lelong prefers Obama's Stimulus Package

I'm not sure what image people have in their heads regarding the economy.  I mean, the Intrade contract that says the economy will go into recession "sometime in 2008" still trades at only 70 cents on the dollar, even after the events of recent weeks.  So I don't feel there's this need to panic as if we need to stimulate the economy NOW NOW NOW or the whole house of cards will come crashing down.

I also don't think stimulating consumer spending is the right answer because it really doesn't get at the heart of what's driving this recession, that being problems in the housing market and the credit crunch.  There are times for "trickle-up," which I generally support, but I can't see it working here.  You give more money to consumers, they spend it on stuff, and now what does the business community do with the influx of cash?  They're not likely to spend it on new investments or job creation, because there's just too much anxiety and not enough available credit.

I think the only sensible answer is for the government to get involved in direct job creation, because businesses won't be creating those jobs if the only incentive you give them is extra cash in their pockets.  Edwards' plan suggested creating these jobs and furthering the cause of clean energy at the same time by funding projects like light rail that can get off the ground within the next 90 days.  Clinton's plan suggested putting the money into a crash weatherization effort for low-income homeowners that could help them out this very winter.  I think these are good ideas.

The fundamental problem, and this ties into the logistical issue DeLong identified, is that none of these people are President.  If I were in charge of the Executive Branch, I'd ask Congress to allocate some emergency funds, and then I'd instruct the appropriate Executive Branch agency to find the appropriate recipients (like Edwards' light rail projects).  But if all you control is Congress, you can't really do that, and if you try to get involved in the details of who should receive the funds you'll get nothing but a bunch of pointless earmarks.  Give Bush the money and it will turn out Neil Bush has a weatherization company.  So in that sense it's all futile.

The issue I have with Obama's plan is that it really does put the emphasis on tax cuts, which I don't believe will work for the reasons identified above.  As we all know, it's a very Republican thing to point to tax cuts as the cure for all ills; when the economy is bad, we need tax cuts for stimulus, and when the economy is good, that proves the last bunch of tax cuts worked and thus we should have more.

I'm reminded of Bill Clinton's 1992 campaign in which he promised a middle-class tax cut, something that now seems to be a staple of most Democratic campaigns.  After he got elected, his economic team realized that the tax cut would be a big giveaway that would seriously interfere with their ability to implement a lot of other campaign promises (without expanding the budget deficit, something that wasn't an option).  Fortunately, the polling team found out that no one really remembered the middle-class tax cut and didn't expect it anyway, so they ditched the idea.  The lesson, I guess, is that it's a fun thing to promise but it's not necessarily the greatest policy idea.

Parenthetically, I recall that DeLong has had some pretty unflattering things to say about Hillary's managerial skills from his time in the Clinton Administration, although he's certainly a guy I trust on economic issues.

by Steve M 2008-01-15 02:54PM | 0 recs
Re: Brad Lelong prefers Obama's Stimulus Package

First, Delong agrees with you that it isn't clear that a stimulus package is needed just yet. He sorta proceeds on the assumption that we are at that point now or will be soon. Since the packages seem to proceed on a similar assumption, that makes sense.

Secondly, the tax cuts in Obama's plan are cuts that he had already proposed in his previous tax fairness plan, which essentially provides tax cuts to lower- and middle-class folks while rolling back the Bush tax cuts. Basically, he restores progressivity to the tax burden; I would add that it's difficult to say how his plan will affect overall revenue because certain details are spelled out with sufficient specificity (recall, as well, that Obama's tax plan aims to collect taxes from those who currently evade taxes through various means).

In any case, the checks contemplated in his stimulus package are essentially an advance on the refund these lower-/middle-class people would receive at the end of the year (that's my understanding at least; I should probably re-check that). In short, his "tax-cut" could just be seen as a more instantaneous distribution rather than an across-the-board tax cut. That may not make a difference to your concerns--in fact, if I read you correctly, I don't think it would--but, it's not exactly a republican approach.

Thirdly, I'm sure you're aware from prior discussions that Obama's package includes other dimensions, namely extension and expansion of unemployment insurance; money for local governments hit hardest by economic circumstances; and a huge fund to help many of those facing foreclosure.

As far as the job creation is concerned, I believe Obama addresses that in other legislation, so this package shouldn't be evaluated in isolation as it concerns investment in job growth. A question remains in relation to Obama's priorities regarding job creation, however I'm not inclined to assume that he assigns it low priority.

Finally, you're right that Delong has been unkind to Clinton on occasion in the past. There is probably some bad blood or something, which should be taken into account as one considers his opinion of her proposal.

by DPW 2008-01-15 03:16PM | 0 recs
Re: Brad Lelong prefers Obama's Stimulus Package

These are interesting points and it's always nice to have a real policy discussion around here.

I sure hope Clinton and Obama will try to translate their proposals into solid legislation when Congress gets going again, as action in this area is important for the Democratic brand leading up to the next election.  You already see the usual suspects getting agitated over Democratic "tax-and-spend" policies, but in tough economic times this is a winning playing field for us.

by Steve M 2008-01-15 03:28PM | 0 recs
Re: Brad Lelong prefers Obama's Stimulus Package

should say "because certain detail are NOT spelled out . . ."

by DPW 2008-01-15 03:30PM | 0 recs
Re: Brad Lelong prefers Obama's Stimulus Package

Sorry for all these typos. Should also say "instantaneous REdistribution . . ."

by DPW 2008-01-15 03:34PM | 0 recs
Re: Brad Lelong prefers Obama's Stimulus Package

You know, you can't really blame obama (or hillary or anyone else for that matter) for bush's failed tax policy.  

in fact, when a recession is a looming is exactly the time for a tax cut and/or deficit spending.  unfortunately, bush and his enablers cut taxes and drove up the deficit when the economy was booming (at the top anyway).

it's also my understanding that most economists now agree that if we are not already in a recession, we will be sometime this year.  i don't really understand why you rely on Intrade to discredit this assumption.  

the other things in clinton and edwards plans definitely deserve to be enacted, but would have a limited stimulative effect because they just take too long to get off the ground.  obama's plans strength, in my opinion, is its simplicity.

by bluedavid 2008-01-15 03:35PM | 0 recs
Re: Brad Lelong prefers Obama's Stimulus Package

Well, a tax cut in advance of a recession may be Macroeconomics 101, but I don't agree with it in the context of this particular recession, for the reasons I discussed.

Deficit spending I'm on board with, of course, as long as it's properly targeted.

by Steve M 2008-01-15 06:19PM | 0 recs
Re: Brad Lelong prefers Obama's Stimulus Package

But practically speaking (meaning considering the congress and president that we now have), doesn't a straight tax rebate seem like the best possible shot at getting anything done?  I mean, by the time any of the candidates would be in the white house,  the time for this kind of stimulus package will have come and gone.  Since time is of the essence and we've got to make do with what we have, i think a straight rebate is the best chance to lessen the impact and put some money into the pockets of folks it will hurt the most...

by bluedavid 2008-01-15 06:52PM | 0 recs
Re: Brad Lelong prefers Obama's Stimulus Package

I'm honestly not sure if I'm supposed to be judging these proposals based on what we should do now with this president, or what the candidates would do right now if they were president, or what...

If the issue is the entirely practical one of what we should be doing now, well, two of these candidates are sitting Senators.  They should be hurrying back to Washington to introduce a bill, not issuing white papers!

by Steve M 2008-01-15 07:36PM | 0 recs
Re: Brad Lelong prefers Obama's Stimulus Package

agreed!

by bluedavid 2008-01-15 07:55PM | 0 recs
Re: Brad Lelong prefers Obama's Stimulus Package

I dont see why Democrats shouldn't be selling the tax cut card. That would neutralize a Republican selling point. I think it would be far more progressive to have Democrats cut taxes for the middle class and crack down on government pork and huge money suckers like the military industrial contract. The fight with the Republicans should not be about taxes in general but about priortizing of spending. If we join their mantra with the Repubs about cutting taxes, even if it means we want to cut taxes only for the middle classes and use AMT reform as a rallying cry, we effectively render the Republicans cry for an upper class tax cut moot in terms of a rallying point with the general public.

We should adopt simplistic talking points to gain points with the public - CUT TAXES. We do not have to go into the fine print in every speech (but only for the middle class). Make the republicans nitpick.  

by Pravin 2008-01-16 02:52AM | 0 recs
Re: Brad Lelong prefers Obama's Stimulus Package

I'm pretty much with you here. Of course, we can't always run on tax cuts (for lower- and middle-class taxpayers), but in the upcoming election I think it is a sensible part of the platform. Also, I personally would advocate certain kinds of spending cuts--like NASA and certain military matters--but I'm quite aware that those aren't likely to sell so well to the general public. Still, the democratic party can still incorporate anti-pork rhetoric, so long as we don't go overboard and encourage hostility to government in general.

by DPW 2008-01-16 02:20PM | 0 recs
Re: Brad Lelong prefers Obama's Stimulus Package

I enjoy reading Brad DeLong quite a bit, but he is a centrist Democrat and a big defender of Bob Rubin against attacks from the left. Krugman is very much to DeLong's left.

But in any case DeLong is not making an ideological case for Obama's plan, he is making a technocratic case. As for Reich, he doesn't defend Obama on ideological grounds either here so he doesn't support your point.

by souvarine 2008-01-15 02:56PM | 0 recs
Re: Brad Lelong prefers Obama's Stimulus Package

My point isn't specifically to defend Obama's strategy on broader ideological grounds (although, I don't see anythink un-progressive about his proposal, since it is part of Obama's larger tax fairness plan, which combats the regressivity of the current tax burden). Indeed, I'm skeptical of attempts to characterize the various proposals along such lines--at least, without some kind of substantial argument from core liberal/progressive economic principles. Because these kind of proposals are designed to address such specific needs, it is difficult to argue that more general principles argue decisively in favor of one approach versus another.

by DPW 2008-01-15 03:22PM | 0 recs
Re: Brad Lelong prefers Obama's Stimulus Package

You make reasonable points, and perhaps I read too much into the appellation "left-leaning". But after a little more reflection I think you are reinforcing Krugman's point. For all DeLong's or Goolsbee's good intentions even a narrow stimulus package would come into effect long after it could help. Republicans regularly use these crises to pass their preferred economic policy agenda, tax cuts, so why shouldn't Democrats? In that light Obama proposes his predictably conservative solution while Edwards suggests the expected progressive ideas, Clinton surprises those who think her conservative by proposing a broader version of Edwards's plan. This is the sort of political (rather than technocratic) argument one might hear from Reich, so I am curious to see more of his reasoning.

by souvarine 2008-01-15 04:14PM | 0 recs
Re: Brad Lelong prefers Obama's Stimulus Package

Many thanks for the thoughtful diary.  I think that as poor economic news arrives over the 2 months, this proposal is going to look even more on target.  The unemployment rate just reversed and rose .6% and it hasn't done that within the last 60 years without the economy being in or near a recession.  Long term stimulus is obviously needed too but in an economy driven by consumer spending up to $500 for every family can help.

by Satya 2008-01-15 07:12PM | 0 recs
Re: Brad Lelong prefers Obama's Stimulus Package
money in our pockets..(not in any order
Out of Iraq
Min wage over $9.00
WPA like program to rebuild United States
infrastructure.
Strengthen Unions
Universal Health Care
Reduce carbon
...for a start...
go to the John Edwards site and read his specific plans for this and more..
by nogo war 2008-01-16 05:57AM | 0 recs
Re: I Oppose Any "Stimulus" Package

Okay, we spend $100 Billion to send people $500. They're going to spend it on what? Heating bills, credit card bills, and gas to get to work. That benefits Big Finance and Big Oil. It's not a 'stimulus' package. It's a giveaway to corporations--at taxpayer's expense--putting us deeper into a hole.

This will take a long time to unravel. There won't be any way to avoid pain. It will take time, there's no quick fix for it.

Ending the war in Iraq is the best stimulus package.

by Tennessean 2008-01-16 06:48AM | 0 recs
Re: I Oppose Any "Stimulus" Package

Well, that's a clearer version of some of the mumbo-jumbo, I said above.

If Big Finance and Big Oil were going to take the money and use it to create new jobs, that would be awesome for the economy.  It would be a perfect case of "trickle-up economics."  But in today's economic climate, there's too much anxiety in the business community, and too little available credit, for anyone to start making new investments.  So I don't see a benefit to the economy at the end of the day.

by Steve M 2008-01-16 07:10AM | 0 recs
Re: I Oppose Any "Stimulus" Package

Presumably, all these people would be paying their heating bills, cc bills, and gas expenses in any event. Sure, they could use some of the money to spend more liberally on petroleum products, but it don't have reason to believe that a large portion of the additional cash on-hand would be spent on oil. In any case, it's not going to make an immediate material difference in most people's individual lives, but it's not intended to. Rather, by permitting each person to increase his consumption of goods and services in small amounts, there is projected to be, in the aggregate, a significant boost in demand across the economy.

by DPW 2008-01-16 07:27AM | 0 recs
It's Brad Delong.
From Wikipedia, the free encyclopedia
"James Bradford DeLong (b. June 24, 1960, Boston) is a professor of economics at the University of California, Berkeley and a former Deputy Assistant Secretary of the United States Department of the Treasury in the Clinton Administration. He is also a research associate of the National Bureau of Economic Research, and is a visiting scholar at the Federal Reserve Bank of San Francisco."
If he is "in the tank" with Obama, then that does says a lot.
Yes, we do need economic stimulus now, and a candidate the doesn't address the economy, now, will be in big trouble in November. And a bi-partisan solution is the only way we are going to get economic stimulus.
by fetboy 2008-01-16 07:36AM | 0 recs

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