What's Really In The Stimulus Package?

The U.S. Senate takes on President Obama's economic recovery package this week — and some economists have doubts. Alice Rivlin, director of the Office of Management and Budget under Bill Clinton, talks to host Jacki Lyden about hers. Rivlin is worried about the mix of short-term stimulus and long-term rethinking.

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JACKI LYDEN, host:

We'll dive into that economic stimulus plan now. Alice Rivlin is a long-time hand in Washington. She was director of the Office of Management and Budget under President Bill Clinton, and she's now a senior fellow at the Brookings Institution. Rivlin has some reservations about the stimulus plan, but she applauds its boldness.

Dr. ALICE RIVLIN: (Senior Fellow, Brookings Institution): I think the boldest part of it is that it is big and that it gets money out there quickly for the right sorts of things.

One thing that's important is to protect the people who are hurt most by this recession - that's the unemployed and low income people. So there is money there for unemployment compensation, for food stamps.

There are tax cuts that go pretty much across the board to wage earners. That's good. That's the standard stimulus package.

There are other things in this package that are longer-run investments that we really need such as upgrading the skills of our workforce. There's money for more college loans, and there's quite a lot of money for infrastructure.

LYDEN: You've argued to Congress and others that the short-term effects of this bill need to be decoupled from the long-term goals. Where would you draw the line?

Dr. RIVLIN: If I'd been designing it, and obviously I wasn't, I would have taken a slightly slower tack on the long-run investment. We need to think carefully about how we're going to do this, and we need over time to pay for them.

LYDEN: So, ideally you would do two stimulus packages? You wouldn't have done one large one like this? I just want to be specific.

Dr. RIVLIN: I would have put it in two packages - one for the immediate stimulus and one for longer-run investment. But I understand why the president wanted to put it all in one because it then looks as though he is really serious about getting on top of this economic catastrophe. And that's what he should be doing.

LYDEN: There have been a lot of comparisons between President Obama's stimulus package and the spending President Roosevelt authorized as part of the New Deal. But you've pointed out that there's a crucial difference - that when Roosevelt designed the New Deal, he wasn't dependent on the foreign investment of, say, the Chinese.

Dr. RIVLIN: That's right. We now are in a situation where we have to think about who's going to lend us all this money. We've been borrowing about half of our borrowing needs from abroad, chiefly from the Chinese, the Japanese and other developing countries and from the oil exporting countries. So we need to think about whether they're going to continue to finance our spending.

In the longer run, we have very, very big budget deficits facing us from the fact that our entitlement programs, Social Security and Medicare and Medicaid, are growing very much faster than our revenues. So we need to think about getting those down to reassure our creditors that we aren't just throwing caution to the winds here.

LYDEN: Alice Rivlin is a former director of the OMB, the Office of Management and Budget, and she is now a fellow at the Brookings Institution. Thank you so much for coming in.

Dr. RIVLIN: Thank you.

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