The estimable Congressional Budget Office offers this paper on options for a stimulus package to revive America’s swooning economy.

The hard thing about economic policy, it’s been said, is that it’s like driving by watching the road in the rear-view mirror. The CBO report discusses the danger of this “recognition lag” leading to stimulus efforts that come too late to do short-term good but still have the potential to do long-term harm by fueling inflation, boosting deficits and so on.

Nonetheless, CBO appears to believe that the current economic weakness has been spotted in time for a properly designed stimulus to help. Lower inflation since the late ’80s, it says, has improved our ability to diagnose the economy’s condition.

Among the keys to an effective stimulus, CBO says, are:

1) That it come quickly, while it can still prevent or shorten a downturn, and

2) That it come in a form that will immediately boost economic activity. More money in the hands of consumers of modest means, who will promptly spend it, would fit the bill better than general tax cuts that would flow in large part to the affluent, it says. And business tax breaks on new investments would do more good than general business tax relief.

The political complications are obvious. The Democratic majority in Congress may see political opportunity in economic troubles, or at least hesitate to cooperate with President Bush on anything long enough to damagingly delay enactment of a stimulus.

Republicans, meanwhile, may insist on broad tax cuts or rebates that do not leave out the rich or smack of micromanaging the economy. That could also delay agreement and reduce the cost effectiveness of any stimulus that is put in place.

Questions:

* Will there be a stimulus package?

* How soon?

* Will it conform to the CBO’s principles?

Barack Obama is riding high, largely on a wave of enthusiasm for his charisma, eloquence, and youth and his startling defiance of the race barrier.

Obama embodies “change” — the longing of the season — which at its deepest is a yearning for the feeling of change.

When Hillary Clinton keeps emphasizing her superior proven effectiveness at making change, meaning policy change, she isn’t so much wrong as simply missing the point.

But to give Obama his due, he at times demonstrates a difference that goes beyond the atmospheric and inspirational. At times he demonstrates the kind of understanding and candor about complex issues that shouldn’t be as unusual as it is.

There was a instance of this higher sort of “change” in Saturday night’s New Hampshire debate. The exchange (excerpted from the New York Times’ full transcript) went like this:

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Commenter Cash N. Carey, responding somewhat challengingly to my recent announcement of the removal of several offensive posts, rightly calls the Big Question’s attention to the favorable jobs report issued at the end of last week. Here’s the New York Times on the story, and here’s Bloomberg.

Adjustments to the summer’s discouraging job creation statistics show that the job market is still expanding, healthfully if only moderately, and the consensus appears to be that this news eases fears of a stalling economy and looming recession.

Trouble in the housing market, high oil prices and more still raise questions about how long the recovery can last. But it isn’t over yet.

Which suggests that the Bush era, economically speaking, continues to look more and more like other recent recession-recovery cycles — neither better nor worse, on the whole. Here …and here are previous posts warning of the confusion and mischief that can arise from failing or refusing to see the business cycle as a recurrent pattern.

Question: What shall we make of the latest improvement in the economy’s prognosis?

The always illuminating Congressional Budget Office provides this calm but sobering overview of the trouble in America’s housing market and the effects it could have on the broader economic neighborhood.

CBO seems to doubt that the bursting of the housing bubble will pull the economy down into recession — but admits uncertainty is running high. Because a significant part of the economic damage is pyschological, consisting of a loss of confidence among businesses and consumers, its dangers are hard to predict.

I’d add that the political timing — with an intense campaign season just beginning — further aggravates this psychological risk. An election increases uncertainties and guarantees that even more economic humbug than usual will be slung by both sides in the months ahead. Some of the rhetoric will make current conditions out to be worse than they are, and some will warn of exaggerated economic disasters if the wrong side prevails. Nothing about it is likely to build confidence in the short run.

Here are some thoughts on other highlights of the CBO analysis:

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A recent Star Tribune editorial made a point worth pondering. It celebrates the surprising mildness of traffic problems in the aftermath of the I-35W bridge collapse and urges Minnesotans to learn everything they can from this result.

Why hasn’t gridlock been as bad as expected despite closure a central urban artery? One good-sized reason, the editorialists say, is that:

[M]otorists have shown remarkable ingenuity — they are finding alternate routes, getting a jump on rush hour, canceling discretionary trips and making dozens of other individual adaptations.

It’s a response, the editorial adds, that

…could hold important lessons for long-term planning. If the wisdom of the crowd can produce temporary solutions to traffic congestion, perhaps it can produce long-term solutions too…

In fact, couldn’t one important lesson be that it’s possible to overrate “planning” and to underrate “the wisdom of the crowd” — which a conservative might be inclined to call the wisdom of the marketplace?

The Adam Smithian “invisible hand” operating in this situation is the hand of an invisible traffic cop, redirecting motorists to make the best use of increasingly scarce road space.

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The annual Census Bureau report on incomes, poverty and health insurance came out this week and as always it provides a wealth of evidence to prove nearly whatever case one is eager to make.

Our aim here at the Big Question is to see past our own predispositions. With that in mind let’s consider a few main themes of the report, seeking both comparisons and statistical details that put an optimistic spin on the economy’s condition, and those that are not very encouraging.

Not a boom, but basically normal

Real median household income rose in 2006 for the second year in a row, following five consecutive years of decline. The uptick, seven-tenths of a percent, was slight, smaller than the 2004-05 boost of 1.1 percent.

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Good Wednesday noon, Fellow Seekers,

(and p.s. I don’t really find this sutff dull. I’m acknowledging a conventional wisdom that news of the poor is dreary and economic statistics are dull.)

The Congressional Budget Office, the federal government’s most reliable source of economic data, has just released a study of income trends among low-income households with children. The results are surprising, especially if your basic understanding of recent U.S. economic history is described by the concept of rich-get-richer, poor-get-poorer.

From 1991 to 2005, in inflation-adjusted dollars, the average annual income of the poorest 20 percent of families with children grew by 35 percent. Among all households with children, the average for those in the poorest quintile (bottom 20%) made better progress than any other group except for the top quintile, which enjoyed a 54% increase in inflation-adjusted average income.

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Happy Tuesday.

The Center on Budget and Policy Priorities has another interesting report here, out a few months but revised just the other day.

This one deals with the division of national income between business profits and worker pay. In keeping with its customary themes, the Center concludes that too much is going into profits and too little to workers.

Also in keeping with its usual practices, the Center presents some compelling and illuminating data.

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A Good and ever so Civil Thursday morning:

Esteemed colleague Norm Draper did some valuable reporting recently on soaring tuition at Minnesota colleges and universities.

The severity of the price rise is striking, as indicated in this chart. Adjusted for inflation, tuition and fees since 1980 have risen several times faster than the price of homes and cars, not to mention gasoline and bread (which have actually gotten cheaper in real terms).

Here’s another comparison. Put this link (Exhibit 2) together with this one (end of the first paragraph) and we see that per capita health care costs in the U.S. have risen from $1,072 in 1980 to $6,697 in 2005. That’s also a significantly smaller real increase than tuition and fees have experienced — about 160 percent, inflation adjusted.

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