Amid the many TARPs, stimuli, bailouts and nationalizations that are either being floated, implemented (badly) or bastardized beyond recognition in Congress, the key word seems to be tradeoff. TARP all the bad assets and recapitalize the banks, and you've "privatized the profits and socialized the losses," creating a "moral hazard." Put a moratorium on foreclosures and force banks to accept "cramdowns," and you've left the banks with shittier assets on their hands, lowered revenue streams, and created a "moral hazard" (in the other direction). Plus, you cause other banks to have to write down their loans, causing contraction in lending markets which you don't want... A stimulus package targeted at infrastructure is limited by the number and size of "shovel-ready" projects, meaning that some of the monies won't reach the economy until 18mos-2yrs from now, if then. You may also "crowd-out" private investment, although nobody really knows whether that's true, and certainly not to what degree. Lowering taxes provides a shot in the arm, but it's unclear what size multiplier you get, and you certainly decrease government revenues in the future (the Laffer curve remains a joke). Plus, you have to fight Republicans if you ever want to raise them again. Nationalize the banks and you've get the upside of TARP (taking the losses off the banks' balance sheets) without the attendant moral hazard (because the consumers keep the "good bank" assets as well), but you've given up on a central tenet of capitalism as we understand it (that markets should set at least most prices; now we'd have the Fed or its equivalent setting both the price of risk and the price of liquidity.)
So, fine, I don't have any real suggestions/opinions that haven't been raised elsewhere, other than that Greg Mankiw is intellectually dishonest, and high speed rail is great. Except, legalize weed. It's the mythical free lunch, which, if served, we'll all be hungry enough to devour. First, you move a huge black market (isn't MJ the number one cash crop in the US? Why, yes.) into the actual market, enabling it to be taxed. Hooray, revenues! Since the revenues from the current indirect weed tax (the cost of dealing with illegality, from people arrested for smoking, to businesses having their employees face the possibility of getting arrested/shot) accrue to "criminal" enterprises, legalizing weed functionally amounts to a tax on crime (the government takes their revenue stream). Of course, the other benefits of legalization are myriad and would also probably act as a stimulus. The prison guards wouldn't like it, but the cost savings in the form of lowered imprisonment would certainly ease the burden on already stretched state budgets. We could pare back the DEA, significantly. We would lower court costs across the board, and likely see better results as prosecutors, public defenders, judges, and cops see a massive time-sink disappear off their collective calendars. Anyway, weed legalization being a good thing isn't a new idea, but I haven't seen anyone mentioning it as a stimulus-y idea. I would also make the point that Yglesias does, that good policies should virtually always be implemented, regardless of the economic climate. The current economic climate makes some ideas that are in normal times bad ones (bank nationalizations) potential good ones. But a good idea that isn't stimulus-y enough for the current bill (like high speed rail, apparently) should still be implemented.
It's also very much related to another idea that I'll do a post about, which is the counter-intuitive one that WARS ARE INCREDIBLY EXPENSIVE.
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