From Nate Fick's segment on "All Things Considered" on Thursday, arguing that there are only limited opportunities to apply what has been learned in Iraq to new operations in Afghanistan.

Governments habitually bail out enterprises deemed too important to fail. Are taxpayers better or worse off?

Unfortunately, we can't say definitively because we only observe the world under the policy that was adopted, not under the opposite policy.

That doesn't mean we can't make some educated guesses.  We made some money on the 1979 Chrysler bailout but lost a net $132 b. on the S&L bailout of the late 1980s.  There would have been a lot of jobs and income lost if we hadn't acted then, but it's hard to say how much.  On balance, we're probably better off, but it's impossible to prove.

Last Sunday, Treasury Secretary Hank Paulson proposed to temporarily increase the present law $2.25 b. Treasury lines of credit for the Government Sponsored Enterprises (GSEs), Fannie Mae and Freddie Mac, to allow Treasury to purchase GSE equities, and to establish a consultative role for the Fed in establishing GSE capital requirements.

Paul Krugman's column today is pretty mild, until his discussion of the likely path of the economy leads him to this prescription for the new president:

But what the economy gives, it can also take away. If the current slump follows the typical modern pattern, the economy will stay depressed well into 2010, if not beyond — plenty of time for the public to start blaming the new incumbent, and punish him in the midterm elections.

To avoid that fate, Mr. Obama — if he is indeed the next president — will have to move quickly and forcefully to address America’s economic discontent. That means another stimulus plan, bigger, better, and more sustained than the one Congress passed earlier this year. It also means passing longer-term measures to reduce economic anxiety — above all, universal health care.

Peter Goodman and David Herszenhorn tell us in today's New York Times that "Democrats See a Need for Further Economic Stimulus."  The discussion is a very good example of what the absence of the last post's budget target can enable--every political faction advocating for a handout today funded by taxpayers in the future.  There should be no need for further spending in 2008 & 2009 that is not combined with lower spending or higher taxes in 2010 & 2011, when the economy has turned around.

In the article, the references to infrastructure spending are what caught my eye.  Consider:

I think we've got an old-fashioned disagreement here at CG&G.  Unlike Stan, I fully expect the federal government to abide by a balanced budget standard, and I reserve the right to be disappointed, cranky, and vocal about it when it doesn't.  By a balanced budget standard, I mean:

1) For the General Fund (i.e., excluding Social Security and Medicare Part A), a target of balancing the budget over a complete business cycle.  Alternatively, I would accept a weaker standard of no upward trend in the ratio of (total) debt to GDP. 

This allows for countercyclical budget policy.  It does not allow for so-called stimulus packages that are enacted with no intention of repaying the additional borrowing at the next turnaround in the business cycle.  It also does not allow for semi-annual budget forecasts that have on-budget deficits during periods of above-average growth.  With this standard in place, it doesn't run afoul of Stan's concern about whether a budget deficit is the short-term policy in 2013.

My "Fiscal Fitness" column from this week's Roll Call is about John McCain's promise to balance the budget by 2013.

Comments much appreciated.

There weren't many details available when the Treasury yesterday announced that it would ask Congress for the authority to buy Fannie Mae and Freddie Mac stock should it be necessary.  Published reports like the ones in the New York Times and Washington Post didn't indicate the estimated cost but talked about it being in the billions.

There's little doubt that Congress will provide what Treasury is requesting.  My question as a budget person is how it's going to be treated.

I agree with Stan -- this post by Brad DeLong about his appearance opposite Grover Norquist on a BBC "news" program is a classic.  If Norquist is the BBC's idea of a right-of-center expert on the challenges facing Fannie Mae and Freddie Mac and the implications of those challenges for federal policy, then the BBC does not qualify as a news organization.  And as a result I care as much for its continued existence as I do any other reality TV program, which is not much at all.

Brad DeLong has one his best posts EVER this past Friday.  Don't miss it.

Andrew, as usual, has raised a number of interesting questions.

I have just one observation.  Does anyone else see the excruciating irony here?  The same administration that wants to do away with earmarks and asks everyone to trust the decisions to department and agency employees, refuses to trust those same employees when they make other decisions.