David Leonhardt on Obama’s new "stimulus plan"

Marketplace Staff Dec 7, 2010
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David Leonhardt on Obama’s new "stimulus plan"

Marketplace Staff Dec 7, 2010
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TEXT OF INTERVIEW

STEVE CHIOTAKIS: President Obama said last night, in exchange for extending unemployment benefits and deepening tax cuts for the middle class, he’ll allow tax cuts for the highest-earning Americans to continue for two years.

BARACK OBAMA: It’s the right thing to do for jobs. It’s the right thing to do for the middle class. It is the right thing to do for business. And it’s the right thing to do for our economy.

While Republicans are claiming victory — they got the tax cuts they wanted, for everyone — some Democrats are fuming, saying the President caved without a fight. But what if this were part of a bigger picture? That the plan is a sort-of second stimulus. That’s precisely what David Leonhardt blogs about today in the New York Times and David’s with us now. Good morning.

DAVID LEONHARDT: Good morning.

CHIOTAKIS: How much of a stimulus program would this be? What’s the price tag?

LEONHARDT: Now most people think that ultimately they were going to extend at the very least, the Bush tax cuts for people under $250,000. In fact most people think they were always going to extend all of them, because the political hand that the Republicans held. So basically I think you’re left with $350 billion in stimulus that before we heard this deal, we weren’t sure we were going to get. And that’s a combination of tax cuts, unemployment insurance, and tax cuts for businesses.

CHIOTAKIS: The unofficial definition, David, of stimulus is some sort of program that puts money into the economy immediately. How is this supposed stimulus — as you call it — going to do that?

LEONHARDT: The advantage of a stimulus program like this is that it actually does get spent quite quickly. You start sending out new unemployment checks. You start cutting peoples taxes. It happens very quickly. The disadvantage is that some amount of the money will get saved. Unemployment benefits are probably not going to get saved, because people who are unemployed need that money. But other people will get their tax cuts, and they may well decided, “You know what, I’m going to spend half of this, or I’m going to spend two thirds of it.” And the money that goes into their bank account really will not be stimulus.

CHIOTAKIS: If this is a stimulus David, why don’t democratic leaders just call it that, and claim some sort of victory. I mean, they feel very defeated right now. So they could come out and say, “Hey, well this really is kind of a stimulus program. It sort of worked in our favor and we championed the middle class.”

LEONHARDT: Stimulus has become something of a dirty word politically. It is not economically — I mean the congressional budget office, Ben Bernanke the Chairman of the Fed who’s a republican, all the private firms that have looked at it — all say that the stimulus program made a huge difference. But politically, it’s very hard to split hairs nad say, “Yes but things would’ve been even worse without the bill.” And so Democrats have decided they don’t like the word “stimulus.” They are going to instead talk about this as a jobs bill. But economically speaking there’s no difference between stimulus and jobs.

CHIOTAKIS: David Leonhardt from the New York Times. Thank you.

LEONHARDT: Thank you.

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