The stimulus

From Ezra Klein at the Post:

The story on the stimulus is similarly depressing. At its base, the stimulus is Keynesian economics in practice. A recession hits, and individuals and businesses become scared that they're next on the chopping block, so they stop spending and start saving to protect themselves from the hard times to come. That drains demand from the economy, and without demand, the hard times get even harder. Government is the only player able to disrupt this vicious cycle. By sharply increasing its spending, it can generate demand, improving the economy until individuals and businesses are comfortable reentering the marketplace.

Key to this whole theory is that the government should act "counter-cyclically": In good times, it should save and store, and in bad times, it should spend and borrow. The exact opposite holds true for businesses and individuals, which makes the whole project pretty unintuitive.

Students in macroeconomics classes learn all this in the first week of September. After a year of trying to explain it to an economically distressed nation, however, Obama basically gave up. Instead, he bowed before the entrenched, incorrect, conventional wisdom. "Families across the country are tightening their belts and making tough decisions," he said. "The federal government should do the same.

Well, no. It shouldn't. The government should not tighten its belt until the people can loosen theirs. That's why the stimulus was a good idea, and why Obama is asking Congress for another stimulus, although this one's being called a "jobs bill." But the stimulus proved almost impossible to explain, and it was far too small, given the size of the recession. As a result, people are very worried about jobs, and they're very worried about deficits, and instead of trying to convince them that deficits make good sense until job growth is back to normal, the administration is trying to appease those fears so it can get on with the rest of its agenda.

I don't think the Obama administration tried hard enough, or smartly enough, or long enough to explain the necessity of the stimulus, or the bail outs for that matter. I've been complaining for almost a year now that they weren't fighting hard enough to promote, and then defend, the stimulus. It's not that the American people are inherently stupid. But in a vacuum, they'll believe the only idiot talking, even if he's a Republican who's spinning a lie.