Bush’s Stimulus Woes
Posted by Ryan on January 18, 2008
In order to hold off a potential recession, President Bush is looking to work with Democrats (not that “new tone” crap again!) in order to get a quick stimulus package together in time to save the day. One suggestion is a 1%/GDP ($145 billion) injection from the government to the consumer in the form of a tax rebate, like in 2001 (I got $600 back that year!).
Fed Chairman Bernanke is trying to tell the Dems what they want to hear, while endorsing old Keynesian rhetoric of quick stimulus to the low and middle income folks so that they will spend us out of our woes. Bernanke also refused to firmly tell the Dems that the 2003 tax cuts should be made permanent at once, which would ease investor and business worries about the economy into 2010.
Malkin has a very insightful and quite precise take on this: “The stimulus will stimulate more of the same bad behavior that got people into trouble in the first place.”
Consumer spending has been a trademark component of the economic growth we’ve seen this decade and the last. Yet, consumer spending is a problem nowadays because many factors: inflation, negative press on the economy, subprime jitters, persistently high oil prices, massive personal debt, and the weak dollar. Mix them all together and call it stew, but you still have all the ingredients of a bear market and a recession. I certainly hope it’s just election-year media hype, but the business cycle could truly be turning downward.
In the end, maybe the final proposals will work, maybe not, but I think pandering to the Dems will do no good for anyone. Neither will pandering to the ghost of John Maynard Keynes in a 21st Century supply-side, globalizing economy the size of America’s.