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January 22, 2008
Is it possible to avoid a recession?
Alan Reynolds of the Wall Street Journal doesn't think so. Further, he believes the various "stimulus plans" being floated by all the presidential candidates as well as George Bush's idea to goose the economy, are all doomed to failure:
No candidate will become president soon enough to matter, and to ask the question is to presume that recessions can and should be avoided. It has never been proven that these "stimulus packages" and rebates even lessen the severity or duration of recessions.
But some business mistakes require time to be fixed. Too many houses were built in some areas, so prices have to fall to discourage more building and encourage more buying. Some banks made too many bad loans, so they need to become more cautious.
Besides, if presidents really knew how to avoid recessions, why do we keep having them? Nonetheless, President George W. Bush is now joining the election-year rush to "give the economy a shot in the arm."
A shot of debt, that is. All proposals for fiscal stimulus claim to "jump-start" the economy by having the government borrow money from Smith and give it to Jones. Unfortunately, Smith is paid interest on that IOU, which implies a higher tax burden on somebody. That future taxpayer is, as usual, the forgotten man. All the attention is instead focused on Jones -- trying to get the Jones family to spend more on what Mr. Bush alluded to as "basic necessities."
But this is an election year and politicians are being judged on what they intend to do to "solve the problem" - as if the business cycle could be repealed or the mistakes made during the last few years could magically be undone.
A prayer for when you hit your knees this evening:
"Dear Lord, save us from well-meaning but incompetent politicians who know less about economics than most high school seniors."