Mark Thoma has a roundup of commentary on the Citigroup bailout. I'll add a few thoughts.
1. For all of the Depression Mania, there is a lot of the U.S. economy that does not have to shrink. Manufacturing is pretty lean to begin with. Housing construction is already much lower than it has been in years. Unlike the 1930's, we have some very big sectors (health care, education, other government employment) that are unlikely to develop massive layoffs.
The one sector that definitely needs to contract is the financial sector. Maintaining Citi as a zombie bank is not really constructive. I would feel better if it were carved up, with the viable pieces sold to other firms and the remainder wound down by government. In my view, getting the financial sector down to the right size ought to be done sooner, rather than later.
From my perspective, the whole TARP/bailout concept is misconceived. The priority should not be saving firms. The priority should be pruning the industry. Get rid of the weak firms, and make good on deposit insurance. Then let the remaining firms provide the lending that the economy needs.
2. When I see Obama's proposals for a big investment in infrastructure, I get this picture in my head of former mortgage brokers and bond salesmen on highway construction projects wearing hard hats and driving bulldozers. Actually, the employment benefit of infrastructure projects is more likely to go to the illegal immigrants who were laid off from housing construction and who otherwise would be headed back home.
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I enjoyed reading this quoted section from another blog until I read the very last sentence about how "the employment benefit of infrastructure projects is more likely to go to the illegal immigrants who were laid off from housing construction and who otherwise would be headed back home."
First, this is an extremely xenophobic and even racist statement.
Second, it is incorrect and involves severely stereotypical thinking. There were many many people, many US citizens, and all here legally, who have been involved these last few years in housing construction and have been battered by this economy.
I know some of these people, and it's rather ill to assume that all who work in blue collar industries must be illegal aliens.
Third, infrastructure development can not only provide many many jobs to US citizens, but not all have to be these blue collar jobs. Building infrastructure requires engineers, architects, inspectors, etc...many higher skilled professionals. Also, even many of the blue collar jobs require skills of a high degree in some trades: electrical, plumbing, etc.
Fourth, when Obama talks about infrastructure development, he also means things like greater broadband deployment, and even a digital electric grid. These of course require higher skilled individuals to complete.
I don't know what Arnold Kling imagines when he hears infrastructure development, but apparently he hasn't read the actual Obama press releases on the subject or listened to Obama speak.
It seems that to Arnold Kling, infrastructure development must mean nothing more than digging ditches by the road side or some sort of thing.
Fifth, this statement ignores the other side of the coin, namely, that this nation is in dire need of infrastructure improvement. There's the not so small issue that this sort of fiscal stimulus program would actually leave us with assets that would enable longer term economic growth, not to mention just a higher quality of life.
In short, I'm just shocked at the ignorance of Arnold Kling's statement.
But I do remember another Kling post, where he casually dismissed the rising 6% unemployment rate as nothing to worry about. Of course, since then the rate has gone to 6.5% and is likely to climb higher, but I guess to Kling this may not matter, since to him it's only those dang illegal aliens being hurt by all this.
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