Don’t like the stimulus? Be glad it averted depression
It’s flawed. It’s expensive. But that’s much better than the alternative.
- USA Today Editorial
Our view on jolting the economy: Don’t like the stimulus? Be glad it averted depression
It’s flawed. It’s expensive. But that’s much better than the alternative.
No question about it, Republicans are in a defiant mood when it comes to President Obama's fiscal stimulus.
When the $787 billion in tax cuts and spending initiatives was up for a vote last winter, Republicans took pride that only three of their senators, and none of their House members, joined in. Never mind that the overwhelming consensus among business leaders and economists was that dramatic action was needed to avert a possible depression.
Now with the economy showing some signs of life, many Republicans are calling for cancelling the stimulus' unspent parts. It is, they say, not effective. Or it's too slow take effect. Or it's just not affordable. For a party seeking to rally its base and rediscover its fiscally conservative roots, the position makes some political sense. But as public policy, it's a uniquely bad idea.
To start with, the nightmare scenario that scared first the Bush administration and then its successor into backing massive stimulus appears to have been averted. There is no depression — no bread lines, no bottomless economic collapse, no pending decade of 25% unemployment as happened in the 1930s.
Further, the spending so far, mostly tax cuts, aid to states and extended unemployment benefits, has already had a measurable positive effect. In the first three months of this year, before the stimulus went into effect, jobs were vanishing at a staggering rate of about 691,000 per month. By the second quarter, as federal spending began to surge, job losses were cut to about 422,00 per month. In July, the first month of the third quarter, the number was down to 247,000, with predictions for August's numbers — due out this Friday — in that range as well.
As for what to expect in the future, the recovery is still tentative at best. Many economists predict a "double dip" recession even without a paring back on the stimulus.
Federal Reserve Chairman Ben Bernanke, the central banker appointed by President Bush and now renominated by Obama, has given no indications he is ready to pull back on the massive stimulus he has deployed to keep lenders lending. If a non-partisan official such as Bernanke, who has the threat of inflation to worry about, is not pulling back, it's hard to see why politicians should.
Most economists express similar sentiments. Typical is Mark Zandi, co-founder of Moody's Economy.com. An adviser to John McCain in last year's presidential race, Zandi said earlier this summer that, if anything, Congress should be thinking about another stimulus package.
Many critics point to the $9 trillion in projected deficits over the next 10 years as reason to pull back. Granted, these are huge numbers. But they are not the result of a one-time spending and tax cut package. The government's budget woes are the result of the staggering sums of cash and tax subsidies that it pours into health care, aggravated by the looming Social Security time bomb. In recent decades, entitlement programs for health care and retirement have come to dominate federal spending, far outstripping the cost of core government functions.
Anyone who really cares about the state of the economy would look for ways to restrain the health care spending over the long run, not pick nits with a stimulus that is providing a vital short term boost. Unfortunately, some on the right advocate doing just the opposite.
