Monday, January 21, 2008

"Stimulating" the Economy

Whatever else it may be, good or bad, President Bush's plan to ward off recession is a nearly foolproof political move.

Scenario 1. Congress approves the plan, it works, and fiscal conservatism looks good. Score Republicans.

Scenario 2. The Democrats in Congress block the plan and the Democrats take the blame for the economy tanking.

I can only see one possibility for a loss here, and then only a partial loss:

Scenario 3. Congress approves the plan, and it fails. While Bush and political conservatism could be blamed, the Democrats would have to share the blame since they (the Congress) approved it.

So what about the plan on merit?

Ignoring any political dirty tricks as contributing causes of "the recession", I see two major issues: Gas prices and the mortgage meltdown. I don't think any long-term economic stability is coming until these issues are solved (and I don't see any simple solution).

Meanwhile, the President's intent to put money in the hands of individuals is almost certain to get people buying, at least for a little while, and at least a little bit. That may be enough in the short term. If people are spending, product is selling, retailers are restocking, and manufacturers are producing and workers are working and earning, so workers are spending.

(This classic cycle may break down, though. The part where "manufacturers are producing" does not necessarily lead to American workers working and earning. "Manufacturers producing" may lead to Chinese workers having more to spend, or more likely, to manufacturers having more profit without any workers making more money.)

The Democrats are already posturing.

They want the money to go to the working poor. Fine; they'll probably spend it--then it'll be gone and they'll still be the working poor, but they'll be further appreciative of the Democrats whom they believe have "helped" them.

They want new government programs. Figures; give a liberal a chance to make government bigger and guaranteed s/he'll do it. No matter what it costs the taxpayer. Bad idea at any time, and especially bad now because the result would be more government, increased taxes, and the programs (even if they ever worked) would not affect the economy for months to come. (Oh, wait. That's good, because then, the recession would still be on at the elections, and once the programs finally take hold, maybe a Democrat would be in the White House to take credit for the turnaround.)

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