The House of Representatives voted today to pass an $819 billion stimulus package. Attention now turns to the Senate debate and vote, and then to reconciling the two chambers' versions. To illuminate the competing interests in the bill: between short-term stimulus and long-term investment; and to provide 10 policy principles to guide the debate, The Concord Coalition today released an issue brief entitled "Designing a Framework for Economic Recovery and Fiscal Sustainability."
There is little question that the economy is in dire shape and that deficit spending is an appropriate policy response. The tricky part is making sure that the deficit spending is for effective short-term stimulus. Long-term investments, which are also funded in the "recovery" bill, are important for long-run economic growth, however it is unclear that the current rushed effort at a short-term economic jolt is the appropriate place for initiating those investments. The more discerning annual budget process provides a better opportunity to plan for those investments and judge the trade-offs between funding them versus other spending programs.
The Concord Coalition believes that right now short-term recovery should be the number-one priority for policymakers. However, we have always encouraged our elected officials to keep long-term economic growth in their sights, and hastily funding "long-term" projects without adequate planning, whether paid for (bad) or deficit financed (worse) only makes the goal of long-term economic growth harder to achieve.
Hopefully, as Congress and the Obama administration continue to refine this legislation, they will keep these ideas in mind.