Bush and the Economy

From a speech by the President at the Economic Club of New York:

"Fortunately, we recognized the slowdown early and took action. And it was decisive action, in the form of policies that will spur growth. We worked with the Congress. I know that may sound incongruous to you, but I do congratulate the Speaker and Leader Reid, as well as Boehner and Mitch McConnell and Secretary Paulson, for anticipating a problem and passing a robust package quickly.

This package is temporary, and it has two key elements. First, the growth package provides incentives for businesses to make investments in new equipment this year. As more businesses take advantage, investment will pick up, and then job creation will follow. The purpose was to stimulate investment. And the signal is clear -- once I signed the bill, the signal to folks in businesses large and small know that there's some certainty in the tax code for the remainder of this year.

Secondly, the package will provide tax rebates to more than 130 million households. And the purpose is to boost consumer spending. The purpose is to try to offset the loss of wealth if the value of your home has gone down. The purpose is to buoy the consumer.

The rebates haven't been put in the mail yet. In other words, this aspect of the plan hasn't taken to effect. There's a lot of Americans who've heard about the plan; a lot of them are a little skeptical about this "check's in the mail" stuff that the federal government talks about. (Laughter.) But it's coming, and those checks, the Secretary assures me, will be mailed by the second week of May. "

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What's really important to note in this is that the government doesn't have the resources to grab and pull the economy out of recession. $130 billion is a drop in the bucket of national U.S. economic activity. The only useful stimulus, then, is one that is well-timed and can help keep the economy from tipping over. That point was passed at - and possibly before - debate on this package ever began. Stimulus that was voted on in February but doesn't arrive until May is useless, and accomplishes nothing but adding to an already gargantuan Federal budget deficit.

But even more than that, look at the second-to-last quoted paragraph here. The President just said - with a straight face, I presume - that a $300 to $1,200 check is supposed to offset the wealth you may have lost if your home value has gone down. Funny, but paper wealth in housing has dropped by tens, sometimes hundreds of thousands of dollars. If a $300 check could offset the losses in housing, we wouldn't need any stimulus at all!

This "stimulus" is too late, too little, and utterly ineffective for anything but adding to the national debt. And just remember: if the government is running huge deficits at the peak of the economic cycle (which we probably hit sometime in 2007), how bad will the deficits be as economic activity slows - driving tax receipts down and increases the strain on government programs (like jobless benefits)?