As President Obama signs the much anticipated stimulus package into law, William Gale, vice president and director of Economic Studies at Brookings, says the economy will likely respond as anticipated. But, Gale says, one of the critical elements for the nation’s economic solvency is to ensure that there’s an end in sight for this unprecedented spending bill.
“The stimulus package is really only the first component of an overall recovery package. I see four components overall. The stimulus package, housing fix, a finance fix, and some sort of global coordination with other countries. I think the administration, now that it has passed the first of those it’s focused on the second and third, but we cannot forget that we are part of the global economy. If the global economy doesn’t recover that will not be good news for us, so we need to work with other countries on some sort of integrated package.”
“…One of the issues that is always a topic of conversation in Washington is who gains and who loses? The stimulus package has a huge number of provisions that effect particular groups, but I think this is a case where the overall impact is gonna dominate any specific group impact. If the fiscal package, the stimulus, can turn the economy around, get people back to work, get businesses hiring again, consumers spending that is going to have a much larger impact on families than any particular $400 tax cut.”
“…There is an obvious question when you have a package this big about the details, the accountability, the transparency can the states actually absorb this much money and use it intelligently and appropriately, and there is certainly no guarantees that this $800 billion dollar package has had all the i’s dotted and the t’s crossed. I think the best we can do in this circumstance is what the Administration has suggested, which is they are going to harp on the accountability, on how the money is used they are going to put up this website. It’s a completely reasonable and appropriate thing for people to monitor how this money is gets spent. $800 billion is a lot of money, and lot can go wrong in spending it. What I hope doesn’t happen though is that the inevitable couple of really dumb actions that come out of this or bad spending ideas come out of this. It would be a shame if that polluted or contaminated the public view of the whole package. Most of the package, I think is likely to turn out to be helpful, constructive. There is always going to be some stuff around the edges that isn’t quite right.”
“…One more thing that people should think about is how we turn off the stimulus package. Right now everyone says this is a two year package, and then we’ll go back to sort of normal budgetary spending and taxes. The history of spending and tax legislations suggests that may not be the case. Congress has a very hard time turning off spending, turning off expiring tax cuts. These things tend to get extended over time. Given how large this package is there is a real concern going forward about whether Congress will have the discipline, and taxpayers and constituents will have the sort of wisdom and understanding to know these things need to stop. If they don’t, if these things get extended then we have both massive expansion of government, and a massive undercutting of our revenue base, which will make the medium and long term fiscal issues and the deficit even larger issues than they are.”