Flying Pink Unicorns

More Euphoria over comments by democrats.

Various democrats have tossed around gigantic amounts as the amount of money to be in Obama's stimulus package.

At a press conference today, Obama praised Summers as one of the great economic minds of our times. Even his harshest detractors will concede that.

A few months back, Summers called for a big stimulus package. Specifically, in September he testified before the House Budget Committee in favor of a second fiscal stimulus. This was before the worst of the economic/financial crisis. In October, he wrote in the Financial Times, "In the current circumstances, the case for fiscal stimulus -- policy actions that increase short-term deficits -- is stronger than at any time in my professional lifetime."

In his House testimony, he advocated infrastructure spending, aid to state and local governments, assistance with affording heating in the winter, investments in energy and renewable energy and aid to lower income families, like increased food stamps and unemployment insurance extensions.

And recently, at a conference, Summers cited a report by Goldman Sachs that suggested that the stimulus should be in the range of $500 to $700 billion, a range that I favor.

The only bad news is that in the past Summers has advocated much smaller dollar amounts than I would like, much much smaller. Since the economy and financial system is very much worse off than when he was advocating smaller amounts, I am highly confident he will quickly adapt to the new reality and be an advocate of a large stimulus.

Summers will apparently be the main architect of Obama's plan. I'm in heaven.

In another sign of panic appropriately spreading to democrats, Chuck Schumer, New York's senior Senator, said on ABC's Sunday morning talk show, said that he thinks the stimulus package has to be big, "has to be between $500 and $700 billion, and that's because our economy is in serious, serious trouble."

Wow, he gets it. Schumer's never impressed me, but these are just the numbers we should be talking about. Particularly since a smaller compromise number may in the end be necessary, we should sure as hell start big. And $500- $700 billion is big. Really big. Big enough to actually help, especially given that it will take a long time to spend that kind of money, as a fair bit of it will be for construction projects that simply cannot begin instantly.

My friends, recovery may not be right around the corner, but we can begin to glimpse its outline. Ben Bernanke, at my urging, dropped rates far and fast. I disapproved of his recent interest rate cuts on the grounds that he should keep some ammunition lying around rather than make all the cuts he can, but given the market instability, it appears that he was right and I was wrong. I would now, were I voting member, vote for an additional quarter point cut, and would thus retroactively endorse the earlier cuts.

In any event, massive monetary stimulus (as yet wholly unfelt because the financial system is all gummed up), massive assistance to the financial system (already being felt, but the job is nowhere near done) and, if all goes well, massive fiscal stimulus. The only thing that would prevent a serious recovery beginning between late Spring-Summer 2009 and Winter 2009 would be if the financial system goes from awful to god-awful. Heaven knows that's possible!!!! But if it doesn't, I'm confident we can begin a recovery. The shape it will take I know not, because it cannot be consumer driven, as many past recoveries were, is unlikely to be housing driven, as the recovery of 2003-2007 was, and the government will have to retrench after 2010. But the odds of a depression, higher than at any time since 1945 in recent weeks, are dropping fast. The appointment to the Treasury, and Summers advising Obama, materially lower those odds.