Of Keynes, Kierkegaard, pragmatism and faith

My how things can change. It hasn't been long since I wrote that Republicans were going the wrong way and putting themselves on a virtual suicide watch. Meanwhile the NY Times' resident intellectual historian of 20th-century American politics, Sam Tanenhaus, was pronouncing as "dead" at least the once-prominent movement portion of modern conservatism, and even cerebral traditionalists such as Andrew Sullivan have been regularly checking the party's pulse and woefully diagnosing the whys and wherefores of their philosophical decline.

But who stopped to think that Democrats, although yet far from putting themselves on a suicide watch, would cut their counterparts such generous slack by heading the wrong direction themselves?

Yet that, in what is probably a contrarian political opinion (though definitely not a contrarian economic one), is what they've done with the ever-mutating stimulus bill.

What began in the fall as a roughly $300 billion suspicion rapidly grew to something much closer to a trillion-dollar certainty, as even worse economic news piled itself daily on heaps of already bad news. As things stand now, we're looking at an anticipated $1 trillion GDP gap this year, and a strikingly comparable hole next year again -- and the economic news just keeps getting worse with each and every hair-raising groundhog day. The situation is devolving literally that fast.

Amidst this accumulating rubble there has grown up a superabundance of macroeconomists who, with their own hair both straightened and on fire, have been warning about political timidity. Whatever you do, they have lectured the pols with repeated emphasis, do not make the mistakes of FDR and, more recently, Japan: Do not, that is, enter the stimulus mix either too late or with too little.

Roosevelt, operating during Keynesianism's infancy, could not have known better, but Japan perhaps should have. Whatever. We, at least, have reason to believe we do know better -- and what we more or less know is that this magnitude of an economic earthquake demands immediate and overwhelming countervailing force.

Hit back and hit back hard, economists from across the philosophical spectrum advised, and that means with something along the aforementioned lines of a trillion dollars -- in spending.

At one point the Senate did make it to $838 billion, however much the poor legislative creature was freighted with compromising compromises. The House, you'll recall, came in at $819 billion.

So they put their upper- and lower-chamber minds together and came up with -- what else? -- a $789 billion bill, precisely the wrong directional figure in the hyperventilating presence of the right economic advice.

And even that assessment requires a nervous modification, because Max Baucus, the Senate's Finance Committee chairman, announced yesterday that approximately 35 percent, or $276 billion, of the final stimulus package would arrive in the form of "pure" tax cuts, which the justifiably nervous among economics mavens had hoped would be substantially whittled down, replaced, sensibly enough, by outright spending.

Now, let's go to the chalkboard and do a little math. We start by writing down 789, then subtracting 276, leaving the spending portion of what should have been a "pure" spending bill at 513 -- billion dollars, of course. But oh, I hear some curvaceous Laffer fundamentalist cry, tax cuts are stimulating, too. Well, to an extent that's true, but only to about a 40-percent extent of an actual dollar spent. Which means 60 percent ($165 billion) of the $276 billion is pretty much wasted, thereby adding only $110 billion in stimulus to the $513 billion in real spending and leaving ... drumroll ... a grand total of only $623 billion in effective spending from the $789 billion stimulus package to meet what is now at least a $1 trillion emergency.

I would say, Go figure, but we just did.

What's more, press reports say that in the conference committee there was some, but only some, "return of aid to states that totaled $79 billion in [the House] plan." Plus school construction aid may have taken another hit. Republican Senator Susan Collins, you see, doesn't like school construction aid. Oh, damn, please pardon our misplaced priorities. We'll cut that for you straightaway, especially since you're in the Congressional Republican majority of three.

Meantime, observed the Washington Post, here was the "bipartisan" payoff: "Congressional Republicans immediately denounced the agreement unveiled by Reid and other senators, reiterating complaints that the package is too expensive" -- that, as the bill fell short by around $377 billion.

And that, furthermore, is precisely what Republicans wanted: a bill insufficient to meet the economic emergency, so they can yammer and shriek in a year or so that Democrats blew it.

Did they, in fact? Who knows. At this point we can mostly just play the prediction game, and political predictions -- "Never make forecasts, especially about the future," advised Sam Goldwyn -- are as incorrigibly dicey as economic ones. And as for the latter, again, who knows -- maybe those feverish macroeconomists have it altogether wrong and most everything in two years will turn up roses, insufficient stimulus and all.

The only point here, if it isn't yet dismayingly clear, is that Democrats could have bettered the odds of a stimulating success by reaching for a more vigorous, pragmatic Keynesian cure -- which only days ago they seemed, maybe, not utterly disinclined to do -- via whatever fiscal dosage is (here's a shock) pragmatically necessary. Instead, despite thunderously increasing bad economic news, they went the other way.

They could have beat this thing, and by that I mean not only the economics of it, but, I'm reasonably confident, the resulting filibuster. They had the Big Mo and they failed to use it. 

About the only other thing we can do now is indulge a Kierkegaardian leap of faith and just pray.