Is the stimulus Obama’s Iraq? (Financial Times, UK)

As the $819bn stimulus bill passed the House on Wednesday, Mike Pence, the Republican congressman from Indiana, explained why it was doing so without the benefit of a single Republican vote. Mr Pence called the stimulus a “dusty old wish-list of liberal spending priorities”. It is meeting little Republican enthusiasm as it approaches the Senate for a vote next Monday.

Well, tough cookies, one is tempted to say. Liberals are now in power, led by a popular president. It is in the nature of things that the nation’s agenda will be their agenda. But an emergency stimulus is a special case. Mr Pence’s warning should not go unheeded. The problem he mentions is serious, with the potential to divide the country even if the stimulus works.

There are two strands of US liberal activism: on the one hand, there is spending on big public works projects, of the sort that was popular between the New Deal dam-building of the 1930s, through which Franklin D. Roosevelt electrified the south and west, and the space programme of John F. Kennedy, which put men on the moon from 1969. On the other hand, there is welfare, which began with FDR but spread profligately after Lyndon Johnson. Americans never repudiated the public works legacy of the New Deal, even at the high tide of Reaganism. This is what they generally think of when they use the word “stimulus”. But they remain suspicious of post-1960s welfare programmes and this stimulus is in large part a welfare bill.

Stimulus, many economists have stressed of late, is about restoring what John Maynard Keynes called animal spirits. Keynes meant something like “morale”. But there is a more animal sense to “animal spirits” that appeals to the broad public.

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