The Elusive Quest for Growth” and “The White Man’s Burden“. He is the most consistently interesting and provocative development economist I know. Strafing the aid industry, as he does, takes courage: it offends most right-thinking people and is apt to make you unpopular except with bigots and misanthropes (and Bill is as far removed from those last two categories as anyone could be). The great man has  just started blogging. Add “Aid Watch” to your bookmarks.

One of his first entries is about an invitation from the UNHCR to a “Refugee Run”–in Davos, if you can believe it. “Experience life as a refugee!” At first, Bill says, he thought this was a joke, as one would. I had to google for myself. Apparently, it isn’t.

During the coming World Economic Forum, we will co-host a very moving event in which people “step into the shoes” of the world’s 40 million refugees. For a moment in time, participants will be thrust into another environment where they face an attack from rebels, a “mine field”, border corruption, language incapacity, black-marketeering and refugee camp survival. Following the event, a debrief will invite the participants to discuss the refugee situation and explore ways to assist, should they wish so. Invitations are being extended to WEF participants, Davos residents, schools, visitors, families and individuals.

I see that fewer bankers than usual are attending this year, perhaps because of all the attention being paid to corporate jets and pointless extravagance. Also, who can any longer listen deferentially to a banker’s opinions? But what a missed opportunity. It could have been “A Run on the Banks”–with financiers pushed into an actual mine-field and “rebels” firing live ammunition. No idea is so good it cannot be improved on.

My main reaction to the CBO’s new review of the House stimulus bill (see the director’s blog; a fuller version) is that the package is much smaller than previously supposed. The CBO says it would increase the budget deficit by $816 billion during  2009-2019, but by only $525 billion when it is most needed, in the remainder of fiscal 2009 and 2010. The stimulus for the rest of 2009 is put at just $169 billion. The 2009-2010 stimulus needs to be much bigger, in my view. And the ten-year stimulus should be much smaller: if you are going to look that far ahead, you should see lower spending and higher revenues relative to baseline.

A lot of the front-loading, such as it is, comes from the tax-cut provisions that many Democrats object to. Almost the whole of the ten-year tax-cut stimulus, a little over $200 billion, arrives in 2009 and 2010. If the plan relied on spending alone, barely half of the ten-year stimulus would take effect in 2009-2010.

Continue reading "The CBO on the fiscal stimulus"

My wife and I spent Sunday and Monday in Lost River, West Virginia, staying in a prefab cabin in the hills. I liked this interesting dwelling so much that I hesitate to post this link to the people who rent it out. The area is beautiful, all the more so with a dusting of snow. I particularly recommend Smoke Hole Canyon. It was a good place to exercise my new camera (a Canon 5D mk2, since you ask; more on that vital matter another time).

I bring this up because, I confess, the trip made me examine my current enthusisam for infrastructure spending. The United States has plenty of badly congested highways and urban roads so deeply pitted that a half-track, rather than a mere Hummer, is called for. Fixing those problems seems a good idea. But the “Robert C. Byrd Appalachian Highway System”–the signs keep announcing that–is a different proposition altogether. I don’t think I have seen roads so empty since I first drove along the M62 to Hull (in its day, one of Britain’s more notable roads to nowhere). Like then, I was afraid I had found my way on to a road that had not been opened to the public. I imagined road-surfacing vehicles coming towards me line abreast round the next corner (not that the M62 to Hull has any corners, now I think of it).

Mr Byrd’s highways are wider than the towns they connect.  I hope the fiscal stimulus includes no further shovel-ready improvements. I could see the case for hiring people to drive around on them, though, to help visitors feel more comfortable. Plug-in hybrids, obviously.

Hard questions confront Barack Obama wherever he looks. To make things worse, as soon as the new president and his team have designed what they think is good policy, they have to sit and watch Congress take it apart. In most aspects of domestic governance, Mr Obama’s reward for victory in the campaign is not power – not commensurate to his heroic exertions, at any rate – but the right to negotiate with legislators. He must have wondered more than once this past week whether he was wise to want the job.

Mr Obama was unable to mark his first week in office with prompt action on the economy, his overriding priority. Discussions on the new fiscal stimulus and on the next steps for stabilising the financial system continue. Adding to the delay, Mr Obama still lacks a Treasury secretary. He hopes that Tim Geithner will be confirmed in that position early this week, in spite of the embarrassment over Mr Geithner’s non-payment of taxes.

With the stimulus blocked for a while yet, the president made his first week count by signing executive orders on Guantánamo and the interrogation of detainees. On substance, there was a bit less to these acts than meets the eye, but the symbolism was important. In fact, remote though the connection may seem, if Mr Obama is wise, he will use this early move to advance a vital but so far neglected aspect of his economic agenda: closer co-ordination with other governments.

The remainder of the article can be read here. Please post comments here.

My latest column for National Journal:

One of the things the country likes best about its new president is his taste for consensus. Barack Obama campaigned as a moderate, open to the views of people who disagree with him. His appointments seem to reflect the same attitude: He has chosen mostly centrists, including many veterans of the Clinton administration, with other viewpoints represented too. In planning his fiscal stimulus, Obama made a point of reaching out to Republicans in Congress. This attitude is widely admired, but one must ask whether Obama’s preference for moderation, accommodation, and consensus is what these times require.

The economy’s plight is extreme. Bold and unusual remedies are needed. This necessary radicalism, if you want to call it that, is not straightforwardly partisan, to be sure. This is not a matter of listening to one particular faction and ignoring everybody else. But at the same time, you cannot get to the right policy merely by trending to the middle and splitting differences between Democrats and Republicans.

You can read the rest here [link expires in a fortnight].

My friend Katty Kay tells the Daily Beast that the inauguration makes her feel unwell.

Why am I coming over all queasy this week? Oh, yes, it must be coronation—sorry, inauguration—week in the federation of the United States. So this is why you booted us out a couple of centuries ago. You simply replaced the pomp and ceremony of hereditary monarchy and with the pomp and ceremony of elected monarchy. OK, you didn’t opt for the dynastic duo of Bush and Clinton, which really had us scratching our crowned European heads, but the fanfare with which Caroline Kennedy has entered the political picture suggests your infatuation with royal families is still not over

This week Washington feels like London in the run up to one of our own grand royal events. Hostesses twitter on the phone, or just Twitter, to woo A-list guests to pre- and post-inauguration parties. A-list guests measure their piles of invites in feet, not inches (forget the endangered rain forest, this event justifies a few more trees), while the lowly populous frets over inaugural road closures and inconvenient security measures. The problem is, you’ve adopted circumstance without the scandal. Our royals do it much better.

My wife drew my attention to the piece, possibly expecting me to agree with it.

Continue reading "Was the inauguration a coronation?"

A memorable and most moving event. I don’t know that I have ever seen a crowd like it. Impossible on the ground even to guess how many people were there. I see that estimates are putting the number at between one and two million. They were evidently from all over the country: this was not just a Washington thing. The mood was striking. It was joyful but not crazy (not yet anyway: the bars stay open late tonight). People looked happy and proud. When Obama gave his speech, they listened intently.

Continue reading "President Obama’s first day"

It is safe to assume that in his address on Tuesday, Barack Obama will invoke the need for shared sacrifice. The idea is a banker, forgive the expression, for any inaugural, but especially now. Equally predictable is that he will develop the theme with a certain inattention to detail. It is inspiring to call for sacrifice but something of a downer to tell people too precisely what that sacrifice is going to be. Allow me to shoulder this burden.

The US economy’s perilous condition calls for extreme fiscal activism. The new administration’s stimulus plans are by no means over the top. If anything, a fiscal injection of $800bn (€602bn, £543bn) over two years is too modest. But the implication of so strong a fiscal boost is a swift and severe worsening of the country’s long-term fiscal position.

During his eight years in office – fat ones, for the most part, from a fiscal point of view – President George W. Bush moved the budget balance from surplus to structural deficit. Demographic and other pressures will worsen the position over the next decade or two. Now comes a fiscal expansion that will be only partly counter-cyclical: some of the new president’s spending will not reverse automatically as the economy recovers. A structural deficit of the sort taking shape is unsustainable and will be corrected one way or the other – if not by a timely change in policy, then by a new and potentially even worse financial calamity.

The remainder of the article can be read here. Please post comments below.