Saturday, January 19, 2008

Don't Show Me the Money

All of a sudden, everyone -- the president, congress, every major candidate -- is on board with the idea that we need an economic stimulus package. Hey, I'd love to get a check as much as the next guy. The last time Bush did this, I contributed all of it to NARAL and the ACLU.

Except, with all the talk about recession, neither the White House nor any key economic analyst is predicting negative growth -- much less two consecutive quarters of it, which defines a recession. Most predict in the range of 2-3% positive growth. See this chart.

Does that mean there aren't people who are hurting? Of course not, but that's the result of structural changes to our economy and tax policies engineered by the Republicans. Won't be undone with just one check.

All the attention to the housing crisis neglects the fact that housing and constructions represents just 5% of our total economy. Other segments of the economy are doing quite well.

You hear retail is in trouble? If so, it's not because people are spending less; it's because retailers have built stores at a higher rate than the increase in spending and so have too many dollars invested in real estate and inventory. of course, when they slow up building and move inventory rather than buying more it will increase unemployment, but unemployment has been at historically low levels for some years. Also, higher exports due to the weak dollar provide new markets for manufactured goods that will make up for some of that.

Everyone talks about consumer confidence. And it's true, if people are worried about the future they might tend to spend less, especially if they are having trouble getting ridiculously high credit limits on their MasterCards as they did in the past. But their confidence is based on what the news media and politicians tell them. If that doesn't mesh with reality we have a problem.

Wouldn't Bush just love to take credit for putting cash in the hands of the electorate this spring?

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