Here’s how to deal with a recession: A federal government which is already spending more than its income should borrow even more money, so as to give lots of people a tax rebate. This is the bipartisan plan of President Bush and Congress. They are taking a leaf from the presidency of Jimmy Carter.
Even accounting for inflation, the Bush-Reid-Pelosi rebate is far more profligate than the proposed Carter rebate of 1977. But the two rebates appear to be based on the same demand-side principles.
He’s right on that. The “stimulus package” is great politics, but absolutely horrendous policy. When we’re already running the budget into the ground, the last thing this country should be doing is trying to jump-start the economy by giving everyone a check. It’s a bit of “bread and circuses” politics that demonstrates just how economically illiterate the government is.
Middle class voters are feeling a squeeze, but that’s a symptom of a larger problem. The reason why the dollar is falling and the markets are volitile is because the US is on an economically unsustainable course: we’re spending too much, regulating too much and we have a massive entitlement crisis looming and no one has the political will to touch it. When even the French are being more fiscally responsible than we are there is a serious problem.
A realistic stimulus plan would involve significant cuts in spending, making the current tax rates permanent, and structural economic reforms like ensuring that depreciation tables don’t artificially increase the taxable assets of a business. However, none of those things are particularly “sexy” and don’t have much impact to the average voter. So instead, President Bush and Congress are planning to bribe the American people.
In the end, this plan is ultimately self-defeating. We can’t get out a problem created by fiscal profligacy by being even more profligate—and while a tax rebate check is a nice thing to have, it’s not going to have the long-term effect necessary to lift the economy. Even if we do get some economic stability in the next few months, that’s more likely due to the sub-prime crisis easing rather than some government check.
This isn’t a stimulus package, it’s a bribe, and while it may be politically popular, it’s not going to fix our underlying economic problems.