[quote=Rich Toscano]The idea may be getting some scattered play among economists, but I am skeptical that those in power would just let the market play out without intervention. I think that people are not sick of stimulus per se, they are sick of stimulus that isn’t helping them individually. So I could see the approach changing but it’s hard to envision them just backing off entirely.
This goes double if we start to get another leg down. It’s one thing to talk about austerity when things look like they are recovering; it’s another to do it in the midst of a panic or big downleg. (Think of the TARP, all it took was a market decline to get that passed on the second go).
I do agree that if the people who are talking austerity get elected, they will have to do something to appear austere. But I don’t think it will last, especially if we get another serious downleg in the housing market or economy.[/quote]
That all makes sense. But what about this scenario: The republicans win congress in November. None of the bills the democrats propose have enough votes to pass. The republicans propose bills that they say are austere and claim will help the situation, knowing Obama will veto them. Obama does veto them because he knows they will tank the market and the economy. The stimulus fades away because no new measures are taken. The republicans can blame Obama, saying that, if their bills had been passed, the economy would’ve recovered. Obama will blame the republicans, saying that their measures were faulty. Nobody feels like have to take the blame, which is all politics seems to be about any more.
