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09 Jan 2009 08:20 am

A Trillion Dollar Gamble

Marc reports on stimulus happenings:

At the end of the day, Obama's name will be associated with an epically large stimulus package that may, in the end, do be too little, too late. Late last year, Obama hoped that the Democratic House and Senate would come to quick agreement on spending, and, by January 20, a bill would be on his desk. But aides say that the scale of the work exceeded their original expectations. It's just not that easy to figure out how to stimulate an economy in this condition. In a normal recession, small tax cuts might  boost savings, which, if the economy were growing, would be fine. But Obama needs Americans to spend, spend, spend, and not to save. And Americans, worried about mortgages, debts and the falling stock market, are keeping their cash in their mattresses. When people save a tax cut, aggregate demand is unaffected. But people, in this deep, deep recession, are demand-starved; they need money to pay for basics like their mortgage payments. The thinking, then, is that no one will save the money.

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