Stimulus cuts and confidence games

By Conor Clarke

One of the arguments that has popped up in favor of making and keeping the stimulus large -- especially as the Senate considers cutting it -- is the impact a big bill would have on public confidence. Here (picking one of many examples) is Robert Shiller in the Wall Street Journal:

The danger at this point is that if the actions we take are not aggressive enough to have a substantial, visible impact on the economy, then confidence will continue to plummet.

I agree that one of the things a stimulus bill needs to do is boost confidence. Not controversial. But one thing that seems confusing about this argument is that public support for the bill is not high. The numbers vary a bit: Rasmussen puts it at 37 percent in favor, with 50 percent saying it will make things worse, and Gallup has a slight majority in favor of the bill and a larger majority in favor of changing it substantially. But the current stimulus bill is not something the public is clamoring for. So why believe that a bill the public does not support will boost public confidence?


One possibility is that the public will feel differently about the bill after it actually passes. Another possibility is that some portion of the opposition to the bill comes from those (like Shiller and Paul Krugman) who support making it larger. (This might be true, but if you follow those poll links above I think there is some slight evidence that opposition increases with the size of the bill.) And a third possibility is that maybe the low expectations are ultimately beneficial. But I am not confident.

This article available online at:

http://www.theatlantic.com/politics/archive/2009/02/stimulus-cuts-and-confidence-games/407/