The Democrats control both houses of Congress and the White House. They have produced commanding victories in two consecutive elections. Every national poll shows overwhelming support for the Democratic agenda and for Obama's economic recovery plans.

Given all of this, I fully expect Pelosi and Reid to step up to the cameras and endorse whatever Boehner and McConnell want. After all, just because 80% of the voting public wants Obama to succeed is no reason for Democrats to NOT cave in to Republican simpering.

On the one hand, I think this attempt at compromising with Republicans is a bad idea by the new administration. On the other, I guess if it teaches them right up front that Republicans can't be trusted to keep their word then that could be a good thing for the next 8 years. If Obama gets stabbed in the back and doesn't learn from it, I guess we're all screwed into a depression for the foreseeable future. Because they will stab him in the back, it's what they do.

I would expect Obama to come away from meetings with Republicans in the House and Senate with promise of support.. The Republicans will say in public, "we need to do something, but I want to look at the details", while pretending they are not part of the process. Then the obstruction begins, way too much gets conceded, and something passes in Feb or Mar by a 65-35 vote, with the yes votes coming from Sens elected this year (e.g. Collins) or not running again (Martinez?). Now Republicans are where they want to be, complaining about every project that seems trivial (like food safety or science).

Will we in fact do what's necessary to prevent Great Depression II?

In a word: NO. The United States no longer possesses the capacity to "build its way out of a Depression"; eight years of Bushylvanian economic malfeasance and thievery has seen to that, so let's call this one that's coming of a full-steam "the Mother of All Depressions."

We do not have the steel capacity to feed the infrastructure package that's needed; the bulk of green technology is dependent on foreign components; we've turned far too large a percentage of our agricultural potential into tract housing and McMansion gated communities; our schools are falling down; work-ethos abandoned. There are more neocon think-tanks seeking new ways to rob the Republic than there are watchdog groups with the teeth to counter the economic gang-rape.

It took a full year from the time we entered a recession mode to the day when the government acknowledged that we were, indeed, in a recession---and by then, the collapse had already entered the early stages of depression.

This, for lack of a better concept, looks like an economic rendition of Nevil Shute's apocalyptic book, On The Beach....

I suspect that Obama's been told, by Reid, that he's lucky to get 51 votes for any stimulus package that contains bricks-and-mortar spending, or anything besides tax cuts, rebates, prebates, etc, and that's why this mix is being floated.

Take 58 Senate Dems -- no Franken, no D-IL -- and subtract Lincoln, both Nelsons, Landrieu, Johnson, Baucus, Hagan -- all of a sudden you're scrambling just to find an ordinary majority, not a filibuster-proof one.

Senate Blue-doggery, not House Blue-doggery, not Republican intransigence, is going to be the hump to get over.

Davis X. Machina,

To begin with, I wouldn't count out Burris and Franken. I have a feeling both will be voting members by the time the stimulus package comes up.

And I'm not sold that a stimulus package won't pass easily. There's just too much pressure from every sector to get it done.

My hope is that Obama's prefacing all his preparation with his hope for bipartisan support so that, when the republicans do throw up roadblocks, he can throw up his hands, pass the bills anyway, and make the repub's look (accurately) obstructionist.

Obama should just try to steamroll the Republicans in the Senate. The stimlus package will pass the House with ease, and if the Republicans try to obstruct it in the Senate, the Dems just need to heavily publicize said obstruction.

The Dems will have 59 votes in the Senate, and given the pasting the Republicans have taken in the last two elections, it should not be difficult to swing the one or two moderates it will take to break a filibuster.

There aren't going to be too many Republicans out there who are going to want to spend their re-election campaigns in 2010 explaining why they voted against the stimulus package, especially those like Voinovich and Specter who will be running in states that have gotten hit very hard by the economic downturn.

Have faith. During the primary and general election, I always worried if Obama and his team would able to get it done on numerous occasions: the Jefferson-Jackson Dinner in IA, the nomination acceptance at the DNC, his response to the financial meltdown, the debates. They're clearly not perfect (see: New Hampshire primary), but they are clutch. And not only does Obama realize very clearly how much trouble the economy is in, but that his re-election chances ride on this to a great degree.

There aren't going to be too many Republicans out there who are going to want to spend their re-election campaigns in 2010 explaining why they voted against the stimulus package,

Especially if it's heavy with their panacea, tax cuts.

OK, this really belongs here:
I think Obama's big tax cut, even if it be middle-class oriented, is going to create too much debt unless offset - as it should be - with a substantial gas tax now that oil is low and we can take advantage to really move to other sources.

Moving this response where it belongs:

Obama's big tax cut, even if it be middle-class oriented: I think it's going to create too much debt

The federal government -- due largely to the present economic crisis -- can all but borrow money for free right now, so too much debt isn't, IMO, a real issue. I'm more concerned that its going to be very hard for a tax cut to be as stimulative as an equal amount of well-targetted spending would be, so what we get for the debt is going to be a big issue. If we load up on debt and fail to get the economy going, it becomes a big problem.

I have a feeling we will persuade several republicans to get on board day 1. They can posture all they want, their constituents without jobs and homes are going to clamor if their elected representatives start playing games.

Plus the Wonderboy, and I do mean that in the best light, is in charge and if there is one thing he can do, it's changing hearts and minds. I have complete faith in President Obama.

from the same Krugman article: Friedman’s claim that monetary policy could have prevented the Great Depression was an attempt to refute the analysis of John Maynard Keynes, who argued that monetary policy is ineffective under depression conditions and that fiscal policy — large-scale deficit spending by the government — is needed to fight mass unemployment. The failure of monetary policy in the current crisis shows that Keynes had it right the first time. And Keynesian thinking lies behind Mr. Obama’s plans to rescue the economy.

Unfortunately, both Friedman and Keynes might be wrong, and neither has been confirmed by any subsequent evidence. Before the Hoover/FDR style interventions, the economy recovered on its own from the repeated financial panics. It's possible that the Hoover/FDR budget deficits were responsible for turning the panic of 1929 into the worst recession since Jackson broke up the second national bank. Since the analysis of Keynes persuaded so many governments to intervene after financial panics or at the onset of recessions, no such intervention has ever been successful. After each such failure, Keynesian economists complain that the governments did not spend enough, or spent on the wrong projects.

Krugman engages in the usual economists' dodge: he omits mentioning what the right amount of borrowing is, what the right projects are, how he knows either, or how the government knows better than the private entrepreneurs. When Obama's policies fail, as all such large-scale government interventions have failed, Krugman will write to us of what went wrong. For now, he is afraid that the stimulus "might" not be enough.

Economics is not like thermodynamics where all of the fundamental laws have be subjected to stringent tests of many kinds. Economics is more like astrology and psychoanalysis where the truth of propositions can't ever be decided, and where there is no history of successful interventions.

cmdicely has written: I'm more concerned that its going to be very hard for a tax cut to be as stimulative as an equal amount of well-targetted spending would be, so what we get for the debt is going to be a big issue.

Where would you target the spending? It will be targeted to projects that entrepreneurs or government officials in members' districts support, which is likely to be more random than either focused or programmatic. If Obama uses the money to create permanent government jobs, as rumored in today's newspapers, that will create a permanent drain on the economy. Myself, I favor building lots of energy infrastructure, but I doubt that it will have any anti-recessionary effect (government spending never has)-- it will merely make energy cheap for some future economic expansion.

So much for "Country First"- when faced with an insurmountable solution to the economy, both sides are reduced to petty partisanship.
I say a purge of the rolls is in order. Let's start with Reid, Pelosi, McConnel, Boehner and all the other career floozies.

In addition to the fact that tax cuts give a very poor return (low bang for the buck) as cmdicely points out (@14:20), if they're middle class oriented, they'd be the last thing the Repubs would agree to.

Give the middle (and lower) classes a tax cut and they're gonna spend it on necessities, where "necessities" does not mean "filling the campaign coffers of the Congresscritters". Additionally, God forbid, they might learn to associate financial well-being with Dems, thus not only depriving the Repubs of cash but of votes as well. That won't do at all. At. All. So, Repubs will have to do a lot of "slalom politicking", a la Specter (say one thing in public, vote differently out of sight) as well as doing some soft obstruction (we need to take a deliberate -- read sloooow -- approach).

Obama would be wasting his time trying to compromise with them on the issue of tax cuts or the size of the package, since he'll never get co-operation from them. Give them a chance to get aboard -- sure. But on the "take it or leave it" terms.

Where would you target the spending?

I'd probably do massive block grants to the states (because, for both legal and credit market reasons, they can't borrow money as easily and cheaply as the feds can, and many are consequently responding to the crisis's effects on their revenues with cutbacks that will undermine any federal stimulus), infrastructure, and education (universal healthcare often does get mentioned, and should, IMO, be a focus of government policy, but even though it would be stimulative in both the short and long terms, its a fundamental change in policy, not a part of the emergency stimulus package for addressing the present crisis, as I see it.)

It will be targeted to projects that entrepreneurs or government officials in members' districts support, which is likely to be more random than either focused or programmatic.

As long as those are projects where the money can be expected to have a high velocity in the domestic economy, that's fine—and that's all the focus that is fundamentally necessary.

If Obama uses the money to create permanent government jobs, as rumored in today's newspapers, that will create a permanent drain on the economy.

No, it won't. Not if those workers are doing something that produces public value.

Myself, I favor building lots of energy infrastructure, but I doubt that it will have any anti-recessionary effect

That depends entirely on what the money used to do it would otherwise be doing. If it wouldn't be spent in the domestic economy—as is the case, e.g., of most money borrowed from foreign sources when there is no great attraction for the foreign holders of that money to buy from or invest in private industry in the US—then it clearly has a stimulative effect.

(government spending never has)

This statement is impossible to justify. While it is pretty hard to make "if not for this" comparisons since particular economic situations experienced in reality have enough variables that controlled (even statistically-controlled) experiments are difficult, and indiviudal situations are almost sui generis, there are certainly cases where it is at least arguable that massive spending efforts directly contributed to the end of serious recessions and sustained subsequent expansions (the increased efforts at the very end of the Hoover Administration and those at the very beginning of the Roosevelt Administration seem to have done so with regard to the first recession of the 'Great Depression', which turned into a strong recovery in aggregate terms, though it had poor distributional features.)

it will merely make energy cheap for some future economic expansion.

Which makes such an expansion likely to occur sooner and be stronger. Which is, itself, an "anti-recessionary" effect.

It's possible that the Hoover/FDR budget deficits were responsible for turning the panic of 1929 into the worst recession since Jackson broke up the second national bank.

Its actually not even remotely possible that the "Hoover/FDR" budget deficits were responsible for any such thing, since the recession that started in 1929 ended in March of 1933. Its quite likely that the 1930 Smoot-Hawley Tariff Act made the 1929 recession longer and deeper than it otherwise would have been (and indeed, the very consideration of such an act may have been a factor in creating the 1929 crash and the subsequent recession), but that's another issue.

Since the analysis of Keynes persuaded so many governments to intervene after financial panics or at the onset of recessions, no such intervention has ever been successful.

The belated effort at serious stimulus at the end of the Hoover administration and the even more serious stimulus which started on Day 1 of the FDR administration at least arguably was successful in ending the recession of 1929-1933 and turning the economy around into strong aggregate growth; it was not successful in dealing with unemployment which remained high throughout the 1933-1937 expansion, but again, there is a lot better case to be made for the trade environment being the problem than for budget deficits being the problem (as tariffs on all sides have a clear link to inhibiting trade and employment, whereas there is no particularly credible mechanism by which government deficits qua deficits either impair economic growth or reduce employment.)

Bush gave him an eight year headstart on tax breaks and deficit spending, so with the quadrupled profligacy of Obama the economy is poised to take off like a rocket.

Real wages are up about 15%. The wealth distribution is better balanced.

Only progressives would complain when the lower middle class is doing better.

What is out of balance are the state budgets. So we should reverse the gains of the lower middle class just to cover state governments?

I say whatever we did to move toward balance in wealth, then do more of it. If that means spend less, than great.

We call it deflation, the poor person's revenge because the poor are not carrying all this debt, the poor are benefiting from lower prices.

What we are seeing is the benefits of extraordinary gains in information about our lives and the goods we have available. That new information flow translat4es in much better utilization of transportation andd inventory.

It is government itself which has its turn to benefit, do not try to help us, just help government gain the same efficiency as we.

cmdicely: the recession that started in 1929 ended in March of 1933

What happened in 1933 is not the goal toward which anyone is aiming a stimulus now ("do what's necessary to prevent Great Depression II".) If such macro-stagnation is the result of the Obama stimulus, it will not be considered to have been a success, just as Hoover was not considered to have been successful, either then or since.

International trade was declining before the protective tariffs were passed, and continued to decline at the same rate afterward. All those economic time series at the time of the Smoot-Hawley tariff show the same thing: ongoing decline without a change in rate of decline at the time of the tariff. Their influence, while possibly real, has been exaggerated.

I can see why Obama, Reid, Pelosi and all the other Democratic Congressmen & women want to portray themselves as trying to work together with the obnoxious Republicans...

BUT

Where are the other Democrats who are not elected into Congress who can be a convenient attack dog.

Gore, Edwards, Dean, current and former Governors, Any potential future politicians considering a race in 2010 on the Democratic ticket. There are plenty of spokes people who could tell it like it is on the talk shows.

Steve as if that is not disturbing enough, I highly recommend reading the NYTimes op-ed "The End of the Financial World as We Know It," written by Michael Lewis & David Einhorn. Through series of events to help us understand, in layman terms they explain in great length what went wrong and why.

What led to the eventual, but not inevitable (if certain mechanisms had been in place) financial crisis, the bail-out and how to avoid repeating any sort of version in the future is not presented in the usual he-said, she-said format.

At the outset, former investment officer, Harry Markopolus story emerges as the prime example from which all else stems. Although in vain, for almost a decade Markopolus tried to explain to the SEC that Madoff's scheme was improbable, mathematically impossible and a fraud. For 9-years his warnings went unheeded. Finally the SEC carried out a cursory investigation, despite evidence to the contrary, concluded no fraud had been committed. Madoff's ponzi scheme went unnoticed until $50 billion dollars went missing.

In a series of incidents, the authours, point-by-point, convincingly argue the problem is not a lack of confidence, but systemic.

Aside from ineptitude and bad behaviour, in the absence of checks-and-balances financial innovators created new products and markets for short-term gains without having to consider the long-term consequences. Effectively our economic security is in the hands of people who have little incentive to regulate financial firms and Wall Street's elite. Conversely the incentive, if they expect to be hired by the very firms they are supposed to be overseeing, drives them to curry favour instead. This web of inter-connective relationships between the SEC, the Treasury, financial firms, Wall Street and credit-ratings agencies need to be untangled.

Meanwhile hundreds of billions of dollars later, Paulson somehow managed to grant himself the power to dispense unlimited sums of money without Congressional oversight. So we have no idea what guarantees have been made muchless have an accurate account of how much money taxpayers are on the hook for -- it could be trillions. We just don't know. How this ends is anyone's guess.

The "no one could have seen this coming" excuse -- to explain the missing WMD, flawed intelligence, the attacks on 911, Hurricane Katrina, etc... lost credibility and meaning long ago. Attempts to revive it as an excuse to explain the financial collapse, won't fly. Not this time.

Ultimately why preventative mechanisms were not in place, why warning signs went unheeded and why Paulson has access to unlimited taxpayer dollars and no accountability will need to be answered.

Sooner rather than later.

The article:

http://www.nytimes.com/2009/01/04/opinion/04lewiseinhorn.html