Mickey's Stimulus Package: Congress thinks it might be able to approve the "fast-moving" stimulus package "within a month." A month! Wow. Neck-snapping speed! Of course the fear is that even with such lightning-like Congressional reflexes, the stimulus will come to late to cure a recession, if it's already underway (and instead will only add to inflation during a recovery). From Steve Chapman:
Peter Orszag, director of the Congressional Budget Office, told The Wall Street Journal, "Most of the stimulus options under consideration would be difficult to actually get out the door in the first half of 2008." By the time a program spreads its healing balm, we may find the recession has died a natural death -- or was never born.p
Is there a way to avoid this inevitable, usually-fatal, lag? I don't see why not. We've tried to cure the lag, for monetary policy, by granting the Federal Reserve authority to raise or lower interest rates instantaneously. Why not have a similar arrangement for fiscal policy? We'd create a Pump-priming authority--call it PPA for short--and give it the power to instantly raise or lower the Social Security and Medicare payroll tax by a few percentage points--from about 15% to 10%, for example--when necessary to avoid a recession. (These are sample numbers; economists would work out the real ones.) The stimulus would immediately be injected into the economic bloodstream as withholding formulas adjusted to take a smaller tax bite from paychecks. No waiting a month for "fast-moving" Congressional action.
The catch, of course, would be that the PPA would have to make up the money by raising the tax rate above the normal level in economic good times. But that might have a salutary effect too--averting inflation by cooling down an overheated economy, much the way a Fed rate increase does.
Won't there be huge pressure on the PPA to keep priming the pump and never make up the shortfall? Sure--just as there's pressure on the Fed to keep cutting interest rates. But the Fed usually manages to resist those pressures, and you could design a PPA so it had a similar ability. (The usual technique involves appointing its members for fixed, overlapping terms, and bringing the weight of sober, prudent business opinion to bear on the President at appointment time.) Even elected officials--presidents, at least--would have an incentive to restrain irresponsible pro-stimulus impulses. They want to be seen as fighting unemployment, but they've also learned that inflation is electoral poison. And not only in the long run. Ask Jimmy Carter.
You could have the Fed itself be the PPA, though I assume there are arguments against giving too much power to one agency. Those are arguments we should maybe have, because what's "fast-moving" for Congress is too slow.
Another country is complaining about an influx of Mexicans crossing its borders looking for work. That country is Mexico. From the Tucson Citizen: