Stimulus

Like most conservative-leaning folks, I dislike the stimulus bill recently passed by Congress, which seems more focused on enactment of Democratic social policy than addressing our economic ills.

I suppose the Democrats believe deeply in this stuff, and imagine that taking care of lower-income folks and "investing" in efforts like education and the environment will benefit the country. Certainly these things sound desirable, but the efforts neglect the realities that created these conditions in the first place. If the private sector doesn't see returns in broadband or health care technology, isn't that a sign that government investment therein won't produce economic returns? It is hardly comforting that the rationale for the items starts with "jobs" but moves to various social goods upon questioning, and moves again to the economic climate when those goods are questioned.

But I don't think much of the Republican tax cut proposals, either. Increasing personal income is all well and good, but currently those increases would first be saved rather than spent. And while we should increase personal savings, we should also reduce government dis-saving. A deficit-financed tax cut only increases future taxation for repayment, and probably at progressive rates. Politically, tax cuts undermine the argument for government retrenchment, as progressives will complain about benefits for the wealthy while reducing "services" to the lower income.

It seems to me that our economy has been unbalanced by years of excess consumption, private and public, and that a large amount of capacity has been built to produce things that won't actually be required. That misallocation must be unwound and those resources rededicated more productively. But what they ought to produce won't be clear until we have first reached a more sustainable level of consumption, and can divine what things we should focus on producing better and what things people will want more of. No one is going to invest until they see the way forward. If we "stimulate" now, before resolving those uncertainties, investment won't respond because it _can't_. Unfortunately, we first have to see a bottom before we can go forward. Perhaps at that point, some time in the future, a demand injection would actually accelerate the recovery process. But I fear we are now retarding the destruction that must precede that recovery.

The Inaugural

My not-readers will not-care they must not-read my thoughts on President Obama's inaugural speech several days after the event.

It was an ungenerous speech. Obama has already won the election. Criticizing the false choices and bad science and indecision of the Bush Administration may please his base, but it irritates the still-large faction that supported and like President Bush, and does little to show the way forward.

It was an unthoughtful speech, full of small misstatements and half-truths, and without a clear vision how President Obama will govern.

I was glad to hear the defiance of terror and the promise of victory, and the touch of conservative tropes like virtue and responsibility.

I have worried that we don't know much about President Obama or how he will govern, and speculated that he would show his intentions upon taking office. But I doubt that even he knows what he intends to do. He is feeling his way without a clear set of principles, unconvinced that progressive conventions will serve but unsure of what ought to replace him. That gives hope that if he listens broadly and decides carefully, he may find his way to better approaches than expected of a Democrat. But it creates worry that if he simply tries to split the differences or log-roll majorities with a mish-mash of compromise elements will give us an indecisive policy of ill-thought and erratic measures.