With conventional tools off the table, it might take a "Hail Mary" pass from policy makers to recharge the economy if an anemic recovery slows even further.
Great. The WSJ has resorted to using football analogies to describe what's coming next. No wonder consumers are overflowing with confidence! Here are a few kitchen sinks for us to ponder:
Most ideas have drawbacks. Infrastructure spending, for instance, has appeal in the Obama administration, because many of the nation's roads, bridges and tunnels need updating and because so many construction workers are dormant. But new spending would spark an outcry in the face of trillion-dollar budget deficits and no plan in place to reduce them. Republicans prefer tax cuts—permanent ones—but they also face deficit constraints.
Infrastructure spending? This program has been paving private driveways and roads leading to cow pastures and farms along one of our local highways. They have a big sign and everything! The paving equipment is BIG, and is tearing up the highway as they work on the highway's dirt accesses. I've seen very few actual people at the work sites, though. We've spent the ARRA money so wisely that who couldn't love another program just like it? Eh. Let's look at another kitchen sink:
Laura Tyson, a professor at University of California, Berkeley's Haas School of Business who served as President Bill Clinton's chief economic adviser, favors a big, long-term investment program funded through Build America bonds, federally subsidized taxable municipal bonds, and a national infrastructure bank, something President Barack Obama has proposed. The government would put in capital and the bank would raise its own debt to fund projects, sometimes partnering with private businesses. The catch: This also adds to government debt, only indirectly.
Hey, another shell game! We're good at those. Lots of practice lately. How about this idea:
Robert Reich, who served as Mr. Clinton's labor secretary, proposes a payroll-tax holiday on the first $20,000 of workers' income, funded by a new social-security tax on workers' annual income of more than $250,000. Economic theory says low-income people are more likely to spend a dollar of added income than high-income people, so getting money in their hands gooses output.
Blatant, buck-nekkid wealth redistribution. Low income people may be tempted to spend that extra couple of bucks, which would boost sales at discount stores like WalMart, which would create more jobs. Also, it may inspire a few more people to climb out of the unemployment wagon if they can bank more working than they do from UE benefits. Higher wage earners get bent over the barrel. Again. Let's see what Marty has to say:
Martin Feldstein, a Harvard professor who was President Ronald Reagan's chief economic adviser, wants to help small banks by making it easier for them to sell poorly performing loans to the U.S. Treasury's Public Private Investment Partnership by giving them extra time to write off the losses they would incur from these sales.
Great idea dude! Not. And let's not devalue mortgages either. You'd really see the torches and pitchforks if you try THAT little maneuver. Freddie has raised his hand:
Frederic Mishkin, a Columbia University professor and former U.S. Federal Reserve governor, says the real Hail Mary move would be taking concrete steps to address future deficits right now. If the Obama administration and Congress first come up with a credible plan to reduce the deficit over the long run, they will have more freedom to run deficits in the short run if needed.
The REAL Hail Mary! Finally! Wow, that's one ugly kitchen sink, Fred. (He loves it when I call him Fred. It gets his tweeds in a bunch.)
These people have no earthly idea what they're doing. I can smell the panic from here.
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