Making Sense of Really Big Numbers

Pundits had laser-like criticism of Louisiana Gov. Bobby Jindal and his televised address on Tuesday.

They focused on his "folksy" style and his wobbly command of facts when criticizing parts of the stimulus bill, particularly those for 'volcano monitoring' and 'magnetic trains.' Of course, here in the Northwest, we don't find monitoring of volcanoes any more wasteful than a hurricane watch in the South, but much worse than Jindal's ridicule is his math.

$140 million for volcano monitoring is less than one tenth of one-percent of the spending bill. It doesn't deserve any greater portion of our attention.

Then what about the 'MagLev' train in Las Vegas? Its aim of linking working-class neighborhoods with jobs deserves better than Jindal's jibes, as you might expect given its support by the chairman of California's portion of the long rail line, Quentin Kopp.  Kopp, who served for years as San Francisco's most conservative council member, is whip-smart and one of my favorite politicians. He's been called a lot of things, including "biting," and "a force of nature," but he's never been accused of being a dreamy liberal.

And again, the best perspective of all comes from looking at the numbers. $8 billion for the train is just over 1% of the spending package.

When is the last time you saw any large project, public or private, that was more than 99% efficient?

Does Jindal really mean to imply that he agrees with nearly all of it? If not, why doesn't he address the big-number items?

I expect it's because it is hard to disagree with most of the stimulus package (whose components you can see clearly laid out in my earlier post, Components of the Stimulus.

Complaining about waste in 1% of the bill is like complaining about "pork" in politics. Yes, it's there, but only as a small fraction of the total (see my earlier post,  Where Do Taxes Go? ).

Let's call a spade a spade: $785 billion in stimulus is a lot of money, no doubt. But it's not too much to keep in proper perspective.

One Port in a Storm

Where do we run in a crisis?

Home, of course. Under fire, people fall back on beliefs they have long held, and that's exactly what they're doing in this economic crisis.

The same people who cried out for lower taxes three, five, and ten years ago say that's exactly what what we need now. And the same people who have long demanded more government entitlement programs say that's just what we need today.

They may or may not be good ideas in themselves, but that doesn't make them the right medicine for the current problem. There's a strong tendency to use a crisis in support of an agenda. As Mark Twain noted, 'To a man with a hammer, everything looks a nail.'

We're far more likely to get out of this mess if we focus on the actual, live problem in front of us, the collapse of consumer confidence and the resulting jobs lost.

We may never agree on who caused the crisis - subprime lenders? eager homeowners? profligate consumers?  greedy bankers?- but we'll know it's behind us once consumers buy without fear, allowing businesses to add the jobs that provide all goods and services.

That should be our aim, breaking the cycle of fearful retreat. From there we can move forward, toward whatever agenda we please.

Next Monday's post will be on Making Sense of Really Big Numbers.

The Smartest Spending of All

So why not boost spending with $2000 gift card for each American?

Here are the most common objections and questions I've received about my article in this weekend's Washington Post:

  - Didn't spending get us into this mess? We need jobs, not cash!

We do need jobs, and the gift card helps us get there, during the months that job programs get underway. This week and next, there's only one thing that keeps businesses from folding, and that's consumer demand.

To help in the short-term, the Senate has proposed nothing but tax cuts, and that's disingenuous. While some other problems may be averted with appropriate breaks, like expanding exemptions from the Alternative Minimum Tax, we shouldn't confuse those with immediate stimulus.

When your house is on fire, there are things to do before choosing a new sprinkler system. The 600,000 jobs lost last month represent only one sixth of the the total losses since the start of the recession. We need relief soon, while all other plans take root.

The $2,000 gift card isn't a full solution, but it's a strong tool we can put in the hands of every American right now, this week.

   - What if I just save the money?

Fine. If people save every penny of it, the program carries no cost: $2,000 goes to you, then back to the government years later. Even the interest goes to you and back. The Treasuries used to finance our debt are sold overwhelmingly to Americans. Despite the huge foreign reserves of Japan and China, we borrow mainly from ourselves.

But while rebate checks were saved at too high a rate to help boost the economy, the American Gift Card can do better, as it never sits in a bank. In our house, grapes get eaten a lot faster when they're out on a plate than when they sit in the bottom drawer of the 'fridge.

   - Won't the money just go to China?

Amazing at it seems, given that half the things on my desk were made in China, well over 80% of dollars are spent on domestic goods and services. Even without restrictions on the card, it really will help Americans.

   - Why not $2 million, so we're all rich?

$2000 is a good figure: $200 is too little and $20,000 is excessive. It's also the right amount to replace the $275 billion in proposed corporate and other tax cuts, some of which have merit but none of which have a stimulus effect with the promised speed.

$2000 per taxpayer provides a solid short-term stimulus while other programs begin, even though the mere issuing of a card doesn't create wealth. It is indeed money we're borrowing from ourselves, and for these next few months, that's a good thing. While there may be benefits to a higher rate of saving in America over the long term, the sudden drop in spending is causing substantial pain.

We can start cheering about reduced consumption after people stop losing their jobs.

- Can't we keep the government from telling us what to do or giving handouts?

Unlike other spending projects, the Gift Card program doesn't rely on the government to decide which business or industry should receive the money. You do.

There's no handout. Stores still have to attract your business if they want a boost in their bottom line. The difference between this an industry bailout is that you get to decide where the money goes.

And that's the smartest spending of all.

Boost the Economy, Today

Thanks for the many positive notes about my article in today's Washington Post, suggesting a short-term stimulus through a $2000 federal Gift Card.

It's a short-term boost, not a fix for all the long-term problems with the economy, nor to replace useful infrastructure spending or appropriate financial regulation.

Tax cuts can help avoid some problems, particularly if we wisely expand exemptions from the misguided Alternative Minimum Tax,  but we shouldn't confuse tax breaks with immediate stimulus.

The store on the corner struggles when there is a fall in consumer demand. That's true whether taxes are high or low, whether subprime lenders are spinning their evil ways, or whether or not the financial markets need more regulation.

And so do the store employees. The 600,000 jobs lost last month are most remarkable in that they represent only one sixth of the the total losses since the start of the recession. We need relief now, while all other plans take root.

The $2,000 gift card isn't a full solution and isn't meant to be. It's a tool we can put in the hands of every American, right now, this month.


On Monday, I'll post answers to the most common questions about the idea, plus a response to some objections. Or you can read hundreds of differing opinions on the idea at several blogs including that of MadDogMedia, Reddit, Scott Loftesness, and The Washington Post comment board.