The stimulus impact

This is the first attempt I have seen to give the stimulus -- and by extension Barack Obama -- credit with the rescuing the economy. Here is the crux of the argument:

This is a major achievement. We cannot emphasize enough how bad the world’s financial markets have looked at various points since September — including during the first month or so of President Obama’s administration. Market attitudes have changed profoundly since the beginning of March. It’s no longer “sell the collapse” but much more “buy the dips”; this is the essential ingredient needed to stave off bank runs and to keep markets from spiraling downward in self-fulfilling collapse.

How did the Obama team pull this off? In part, it was with the huge fiscal stimulus enacted in February. While increased government spending feeds through into the economy only slowly, the big push to spend demonstrated that the government was willing to borrow heavily to offset any likely fall in spending by households and firms. This in turn reassured everyone that the economy could not decline too far or too fast.

The author concedes that the stimulus hasn't even really done anything, with spending still in its very early stages, but mainly credits it with psychological benefits. This is, of course, very difficult to quantify or prove.

Nevertheless, I bet we are going to see a lot more arguments like this. Whether the stimulus actually leads to recovery or not will be irrelevant. All that will really matter is that Obama's spending spree and recovery will correlate -- really, it's hard to imagine the economy remaining in the doldrums for another year or two -- and for most people that will be enough. I fear it's going to be a difficult argument for free marketeers to win.

In the comments section, meanwhile, we find this:

Gents, there is no way that this opportunity to push health care reform through can be foregone. By all means it should be packaged as part of the stimulus; cut elsewhere, if you have to, to finance health spending. But if the deficit and govt borrowing are increased further in order to achieve this essential goal then so be it. Once a program is in place, and cannot be cut without serious pain to a lot of American voters, that will be the time to deal with the deficit by some tax increases, the deficit-reduction measure that is still so difficult to get through Congress.

That's the agenda in a nutshell. Take over health care now, rest assured that voters won't let it be cut because they like "free" stuff, and raise taxes later.