A Second Stimulus Needs to Take A Different Form

Felix Salmon seconds Paul Krugman’s contention that the AIG bailout and bank bailouts in general have confused and soured the populace on any further stimulus bill. I think that’s just part of the burr under the saddle of the electorate.

Here are a couple of other things that people are chafed about.

It was one thing to rescue the banks, it’s quite another to see them profiting handsomely as a result of the rescue. The prospect of yearly bonuses in amounts greater than most Americans will make in a lifetime being doled out to bankers who fouled their own nest has quite reasonably passed the point of tolerance. Essentially, the perception that the system is rigged is being validated by this outcome.

The bailout of the auto company and their suppliers may play well in the affected states but it’s viewed elsewhere as a political payoff. For every union auto worker who benefited there’s another non-union auto worker who sees it as an assault on his welfare. The bulk of the electorate never bought into the idea that the nationalization of these companies was essential for recovery.

The seemingly endless support for the housing industry is wearing thin. In fact, a great deal of money is being spent on a group of people that many consider to have been irresponsible. Those who rent and those who are paying their mortgages on time are beginning to wonder when their stimulus might arrive. It’s worth noting that number is probably somewhere in the range of 85% to 90% of the general population.

We probably do need more stimulus but it has to reach more broadly across the economy than the initial efforts have. Michael Boskin had an excellent article in yesterday’s WSJ in which he argues in favor cutting the payroll tax. Yes, it can be gamed but I would ask if it can be gamed any more egregiously than we have seen with the current stimulus program.

Unfortunately, the Obama administration seems committed to a micromanagement philosophy. Their apparent inclination to reauthorize TARP amounts to little more than a ploy to maintain a slush fund to be utilized when and where they choose without any debate on the merits of the expenditures. The trial balloon floating around about “Cash For Caulkers” (Daniel Indiviglio does a nice job on deconstructing this one) is yet one more example of stimulus with a politically correct stamp on it.

I don’t think the American public is so much adverse to more stimulus as they are not willing to continue to pony up money for the political class to spend in furtherance of their own interests.

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About Tom Lindmark 401 Articles

I’m not sure that credentials mean much when it comes to writing about things but people seem to want to see them, so briefly here are mine. I have an undergraduate degree in economics from an undistinguished Midwestern university and masters in international business from an equally undistinguished Southwestern University. I spent a number of years working for large banks lending to lots of different industries. For the past few years, I’ve been engaged in real estate finance – primarily for commercial projects. Like a lot of other finance guys, I’m looking for a job at this point in time.

Given all of that, I suggest that you take what I write with the appropriate grain of salt. I try and figure out what’s behind the news but suspect that I’m often delusional. Nevertheless, I keep throwing things out there and occasionally it sticks. I do read the comments that readers leave and to the extent I can reply to them. I also reply to all emails so feel free to contact me if you want to discuss something at more length. Oh, I also have a very thick skin, so if you disagree feel free to say so.

Enjoy what I write and let me know when I’m off base – I probably won’t agree with you but don’t be shy.

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