“In my view it has to be between five and seven hundred billion dollars,” proclaimed Senator Charles Schumer Sunday on ABC’s “This Week.” The “it” is the economic stimulus package the new Congress intends to send to the new president, Barack Obama, in January.
The truth is, Schumer hasn’t a well-grounded view, or even a well-informed clue, as to how large the stimulus package “has to be.” I’d be amazed if he could give a coherent explanation of why it should be $500 billion to $700 billion instead of, say, $300 billion or $900 billion. On TV, he simply invoked the authority of “most economists,” who, according to Schumer, “say, to make this work, you need about 5 percent of G.D.P., which would be $700 billion.” Nor do I think Schumer could begin to explain why a demand-side stimulus package oriented toward employment, infrastructure and consumer spending will “work” in dealing with an economic crisis whose origins seem to be in the collapse of a housing bubble and the deleveraging of overstretched financial institutions.
Now I hasten to add — wait a second, Senator Schumer, put down the phone, no need to call me at home this early in the morning! — that I don’t mean to pick in any way on Chuck Schumer, who is surely among the more economically literate members of Congress. It’s not as if his colleagues have a better understanding of what has happened, or of what should be done. And it’s not as if the rest of us do.
In his interview, Schumer appealed to the authority of economists. Economists still do have considerable sway in our public life — even though it doesn’t seem that a large number of them have been particularly prescient in warning about, or strikingly persuasive in explaining, the current economic situation.
In any case, the Obama economic adviser Austan Goolsbee also weighed in Sunday on television and said: “I don’t know what the number is going to be, but it’s going to be a big number. It has to be. The point is to, kind of, get people back on track and startle the thing into submission.”
So a key member of Obama’s economic team hopes a big federal spending number will “startle the thing into submission.” That’s reassuring. On the other hand, it’s not as if the analysis of many conservative economists is much more persuasive. At least the liberals, being more or less Keynesians, tend to agree on what should be done. The more idiosyncratic conservatives tend to be all over the lot. But, basically, it seems to me, we’re all flying blind. The markets are spiraling down, and our leading experts don’t have much of a clue as to what to do.
Given that, one has to welcome the expected appointment to senior positions in the Obama administration of economists like Lawrence Summers, Timothy Geithner, Jason Furman, Peter Orszag, and Goolsbee himself. They’re sober and competent people who know we face a real crisis — and who, importantly, may be more willing than many of their colleagues to adjust their thinking early and often.
Indeed, one hopes they’re not too invested in the findings of the economics profession of which they’re such distinguished products — because one suspects many of the conventional answers of that profession aren’t much applicable to the current situation. After all, wasn’t it excessive confidence in complex economic models and sophisticated financial instruments on the part of people well educated in modern economics that helped get us into the current mess?
So I hope the best and the brightest who will be joining the new president will at least entertain the possibility that a lot of what they think they know is wrong. I trust they’ll remember that successful economic policies in the past have pulled together elements from unlikely sources, and that they’re as likely to find wisdom from reading political economists like Friedrich Hayek or Joseph Schumpeter, or Keynes himself, as from poring over the latest academic paper in a peer-refereed economics journal.
During his two years on the campaign trail, Barack Obama has often cited Abraham Lincoln. Well, it turns out Obama could be taking over the presidency at something more closely resembling (though still far short of) a Lincolnian moment than one would have expected. And it was Lincoln who wrote, in his second annual message to Congress, in December 1862: “The dogmas of the quiet past are inadequate to the stormy present. The occasion is piled high with difficulty, and we must rise with the occasion. As our case is new, so we must think anew, and act anew. We must disenthrall ourselves, and then we shall save our country.”
I’ve worked in government. It’s hard to do much thinking there at all, let alone thinking anew. But Obama and his team will have to think anew, and those on the outside who wish to help will have to think anew too, if we’re to have a chance of rising to this daunting occasion.
Paul Krugman is off today.
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