Treating the Patient

The more I read and learn about the “stimulus” package, the more I get the gnawing feeling that the authors have created a generous lottery in which their most favored constituencies get tens of billions, regardless of whether there is any real impact on the economy. Congressional leadership and the President say the right words—jobs, jobs, and more jobs. They use the fear, uncertainty and doubt (FUD) meme to convince us all that “catastrophic” outcomes will surely follow if we’re not stampeded into immediate spending. They believe that big government will somehow rescue the economy, while disregarding the fact that over the past eight years, under George Bush and the Republicans, deficit spending grew at unprecedented rates, and yet, this massive spending did nothing to avoid our current problems. Why is it, I wonder, that still more deficit spending will fix these problems?

Victor Davis Hansen comments on all of this when he writes:

I think we are ignoring three things about the stimulus package. First, the soaring deficits and mounting aggregate debt in the 2000s contributed to our present debacle. (Yes, Bush and the Republican Congress are to be blamed for spending sprees that cannot be explained entirely by 9/11, Katrina and the two wars). We were already 'stimulated' and running a Keynesian economy, so why is more of what got us into this trouble the solution?

Second, the crash in oil prices from $148 a barrel to less than $40 has resulted in, along with dives in imported natural gas, a monstrous stimulus-perhaps three-quarters of a trillion dollars per year for consumers. Can't we pause a month or three to see the effects of thousands of dollars in cheaper heating and transportation costs for the American household?

Third, interest on US treasury bonds is nearing almost nothing. Yet, Asia and Europe are still buying them. The result is that the US is receiving trillions in free loan money that should be translating into cheap mortgages and interest rates, and an infusion of cash that will soon kick in unexpectedly dramatic fashion.

In other words, while we scream about the Great Depression, there are insidious, rarely mentioned stimuli already in play that are far more helpful that borrowing a $1 trillion to redistribute and hire more government employees.

There is no doubt that the economy is in trouble. But if you believe Nancy Pelosi, Harry Reid and President Obama, eight years of mismanagement got us there. It would seem that a few months of careful, deliberative analysis might be worthwhile before acting. We just might be able to design a true stimulus package that would cost half a much and accomplish something meaningful.

My physician friends tell me that all young doctors hear the wry comment that “despite what you do or prescribe, most patients will heal themselves.” I suspect that despite what our governmental leadership does, the economy will also heal itself. But Pelosi et al feel compelled to treat the patient. I just hope the treatment doesn’t have long lasting, negative side affects.