House and Senate Agree on Stimulus Package: Now, Will It Work?

It has been pared down to a mere $789 billion, but the stimulus plan that has been approved by a bunch of Democrats and three Republicans appears to be on its way to President Obama’s desk for signing, since an agreement was thrashed out in the House/Senate committee.

But we still have to formalize it with a vote, and anything still goes.

Republicans have one last chance to get on board with a plan, rather than look like a bunch of obstructionist zombies.

Now the two questions I have to ask myself are these:

1. When will I know that the stimulus is working?
2. What will Republicans dream up to demonstrate that it isn’t?
   

Here is what I could find to answer the first question.

From Business Week:

“At his first prime-time press conference, President Obama was asked a central question about the $800 billion-plus economic stimulus package: How will Americans know if it's working? ‘My initial measure of success is creating or saving 4 million jobs,’ Obama answered.”

I guess that’s a safe bet, but still . . . what are going to be the early indicators?

But the first thing we should see is that people are getting the support that they need to overcome the immediate effects of unemployment. Receiving extended unemployment benefits and food stamps.

“‘What you'll see [in benefit] and when you see it depends on who you are,’ says Steve Ellis, vice-president at Taxpayers for Common Sense, a taxpayer advocacy group. ‘If you are living hand-to-mouth, you should have greater access to food stamps and other assistance right away.’”

What about interest rates?

“"If interest rates stay extremely low, the plan is definitely working," says [J. Bradford DeLong, an economics professor]. "If Treasury interest rates do start to rise by more than normal levels, then we worry that [the spending] is crowding out private economic activity and discouraging investment.”

But here is the big problem. We aren’t living in a science lab. We don’t have a “control group” or a group being given only a placebo. So whatever effect we see we won’t really know if it is because the stimulus plan is working, because we don’t know what the world would look like in a reality where no stimulus bill was ever passed.

And this, I think, answers my second question.