Nate Silver's "Price Is Right" Column Is Spot On
Here is a portion from Nate at 538.com:
http://www.fivethirtyeight.com/2009/01/obamas-price-is-right-negotiating.html
"Now consider what Obama told CNBC the other day:
What does this mean? It means he wants the Senate Democrats to do his dirty work for him. All of the sudden, the administration, which is about to spend at least $800 billion, gets to play the role of the fiscally prudent tightwads, negotiating against the Senate Democrats. This has at least two benefits. One, it requires less of the administration's political capital to sell the package. And two, it completely co-opts the conservative opposition. Unless you're Paul Krugman or Greg Mankiw, you probably don't really have any idea whether $300 billion or $800 billion or $1.2 trillion is the right amount to spend; the numbers are too large, the scope of the stimulus too unprecedented, to provide for any absolute frame of reference. So the frame of reference is relative rather than absolute. If you're Mitch McConnell or Mary Landireu or Bob Corker and you see that John Kerry thinks that $800 billion is too little -- well then, 'gal darn it, this Obama fella must be doing something right..."
http://www.fivethirtyeight.com/2009/01/obamas-price-is-right-negotiating.html
"Now consider what Obama told CNBC the other day:
Obama also confirmed that he plans to lay out a roughly $775 billion economic stimulus plan on Thursday but indicated that the amount could grow once it gets taken up by Congress.Obama isn't picking these numbers out on accident. This range -- $800 billion to $1.3 trillion -- is most likely the range of outcomes that his administration considers acceptable. He says that "given the legislative process", he's deliberately chosen a number on the lower end of that range."We've seen ranges from $800 (billion) to $1.3 trillion," he said. "And our attitude was that given the legislative process, if we start towards the low end of that, we'll see how it develops."
What does this mean? It means he wants the Senate Democrats to do his dirty work for him. All of the sudden, the administration, which is about to spend at least $800 billion, gets to play the role of the fiscally prudent tightwads, negotiating against the Senate Democrats. This has at least two benefits. One, it requires less of the administration's political capital to sell the package. And two, it completely co-opts the conservative opposition. Unless you're Paul Krugman or Greg Mankiw, you probably don't really have any idea whether $300 billion or $800 billion or $1.2 trillion is the right amount to spend; the numbers are too large, the scope of the stimulus too unprecedented, to provide for any absolute frame of reference. So the frame of reference is relative rather than absolute. If you're Mitch McConnell or Mary Landireu or Bob Corker and you see that John Kerry thinks that $800 billion is too little -- well then, 'gal darn it, this Obama fella must be doing something right..."
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Yeah, about sixteen chess games going on at once and a few poker tables working full.
January 10, 2009 3:08 PM | Reply | Permalink
From the moment I heard the $775B I thought to myself that he's aiming low and eventually it will go up. Before he announced the cost, there was a lot of speculation that it was going to cost 1 trillion dollars and I started to hear some whining from the Republicans. I knew in my gut that Obama wouldn't jump in right away with $1 trillion, it didn't make sense to me to start that high - it really is a shocking number to hear especially when the public is being told that we are already in trillion dollar plus deficit. It really annoys me to read articles or comments that Obama doesn't understand the scope of the problems that face us - bullshit! I say to those people that they don't understand how the legislative process works. There is a reason why during his speech on Thursday, Obama made it clear that Congress needs to put their egos and ideology aside - he knows what he is up against. Thank you for sharing this Nate article, I thought I was the only one that thought along these lines.
January 10, 2009 5:14 PM | Reply | Permalink
Please stop mythologizing Krugman. He has no more answers than the rest of the economists. If he has a really good, specific idea, he - unlike you or I - can get in contact with the White House staff pretty much immediately. Obama said as much this morning.
Like most academics, Krugman has all the answers, so long as he is in the lecture hall.
January 10, 2009 5:37 PM | Reply | Permalink
I have to echo this. During the Bush years the country slept, criticism disappeared from our discourse, the media kissed ass, and most academics said nothing. Now that Obama has been elected everyone is a flippin' critic (despite the fact he hasn't even been inaugurated) and many are declaring his presidency a failure before it has even begun. Krugman strongly dislikes Obama, but he has now been invited to speak directly to him with his suggestions. We'll see if he accepts the invitation or just keeps criticizing from the comfy sidelines.
January 10, 2009 6:40 PM | Reply | Permalink
It's not that he doesn't have answers, it's that his expertise is at the 10,000 ft level of economic policy--like most of the economists out there. He has an idea how big public spending will have to be to close the GDP gap, but the particular way to engineer the project is outside of his area of expertise. Keynes was much the same way--when asked what government spending would be necessary to counter the depression, he famously suggested burying stacks of bills in unused mines and digging them out again.
There's a whole class of people that deal with normative aspects of economic policy and engineering large government spending projects--congressional aides, treasury officials with backgrounds in business--who will have to fill in the gap.
January 10, 2009 5:59 PM | Reply | Permalink
Your point is illustrated quite well in this video.
January 10, 2009 7:10 PM | Reply | Permalink
Obama is a brilliant strategist. I think the path he is taking to get the stimulus package passed is a good one.
January 10, 2009 8:00 PM | Reply | Permalink
I'll take a contrarian view to give us something to think about. If we stipulate Obama's stimulus proposal is too small at $775 billion I don't see how shooting to low and missing the target makes him look good. I also don't see how his taking the role of the blue dog/Republicans pitting himself against the Dem majority on a bigger spending package helps anyone on our side. It leaves the Dem congress open to charges of profligate spending if they expand it like he says and opens Obama up to charges he can't control his own congress.
I'm sure Obama can finesse all this but I wonder if a straightforward approach wouldn't work better. I suppose this way the responsibility gets spread around and when you're entering uncharted territory with such huge stakes it's better in the end for everybody to get the credit or blame if it succeeds or fails.
January 11, 2009 11:15 AM | Reply | Permalink