The NYT is ran an online discussion of the new Geithner Plan yesterday. The worry I expressed there is whether the Plan is scalable – i.e., it could work at a modest level, but to really have impact it needs to be huge. And, as it gets larger, I think we’ll see a political backlash.
Looking back over the comments of the day, my position put me closer to Paul Krugman but not too far also from Mark Thoma (look at his response to me, further down the discussion). Brad DeLong came across as the most positive, but even he is doubtful that the planned purchases are large enough – he makes the point that the Administration couldn’t get Congress to agree on any additional money for this purpose, but this puzzles me.
The Administration (1) has not really made this case on Capitol Hill (my contacts there tell me), (2) is asking for lots of money to do other things (their strategy was overweight fiscal from the start), (3) hasn’t communicated well a more general sense of priority or urgency - if we don’t fix our banking system how many other good things are possible over the next decade?
Originally published at the Baseline Scenario and reproduced here with the author’s permission.
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