Belmont Club

Pumping money

The President Elect has “expanded his goals for a massive federal stimulus package”, according to the Washington Post. The incoming administration is not only seeking ways to increase spending, but to focus it on certain types of controlled spending. The WaPo says, “Democratic lawmakers have also agreed to ban earmarks, which direct funds to individual lawmakers’ favored projects. ”

Because they are intended to pump cash quickly into the economy, stimulus measures are released from the usual budgetary constraints that require the cost of new programs and tax cuts to be covered by cutting spending or raising taxes elsewhere. Given a free pass to spend more than the nation spends on the Pentagon each year, the temptation to tack on favorite projects could be high.

Summers and other Obama advisers said they are keenly aware of the problem, and are already working to persuade lawmakers of the wisdom of limiting the package only to projects likely to create a large number of jobs quickly for as little money as possible. Obama’s team is already at work “scrubbing” various spending proposals for “basic soundness and for the speed with which they are able to be paid out,” Summers said.

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