Jon Chait discusses the stimulus package:

Republicans like to accuse Democrats of wasting taxpayer dollars and being condescending eggheads. But if President Obama’s economic stimulus fails to prevent a depression–and I’m not saying it will–it will be because he didn’t waste enough money, and didn’t spend enough time being a condescending egghead.

Let’s start with the egghead part. The stimulus bill is based on Keynesian theory, which I’ll briefly explain in the condescending manner we liberals so enjoy using. When we’re in a severe recession, good productive capacity goes to waste. Autoworkers sit home unemployed because nobody has money to buy cars, and cooks sit home unemployed because nobody has money to go out to dinner. The first thing for government to try is to reduce interest rates, to encourage businesses to borrow money to hire more workers and buy equipment. But, if interest rates hit bottom, then the government has to shock the system back to life by spending money directly. Say, Washington hires construction workers to build something, and those workers start buying cars and going to restaurants, and, after a while, the economy is running again.

So Obama decided to spend a lot of money. The Republicans’ hoary opposition technique is to boil any legislation down to one or two silly-sounding expenditures that Joe Sixpack can understand–Midnight basketball! A bear DNA study! Obama anticipated this critique and tried to eliminate all waste from the bill. He kept earmarks out and focused the spending on public investments like energy efficiency and education. The logic went beyond just politics. If you’re going to spend a lot of money, you might as well get something useful for it.

David Smith:

Tim Geithner, the US Treasury Secretary, did not underplay his first big announcement, describing it as The Financial Stability Plan: Deploying our Full Arsenal to Attack the Credit Crisis on All Fronts. It included a joint public-private-sector fund to buy up to $1 trillion of illiquid assets and a $1 trillion program to supply new credit to consumers and businesses.

The markets, initially at least, were unimpressed, the Dow closing down by nearly 400 points. As with last month’s UK toxic asset proposals, investors wanted more detail and bank shares dropped. Geithner’s statement is here, and the links will take you to further details of the plan.

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