Saturday, January 19, 2008

"Mania's, Panics and Crashes." - More on the Bush Plan

This is going to be a very interesting year! Those who know me know I have been talking about America's credit addiction for a long, long time. A particularly good summary of the series of events leading to our current situation can be found in todays WSJ. ( page a12 - The Panic Stage) You will notice that after a long discussion of the problem, there is a very short paragraph on the possible solutions. Follow the page down to the piece on "Feel-Good Economics" and you will read that the stimulus package that the Bush administration is very, very, very unlikely to make a difference. Let me quote "In short, there is virtually no empirical evidence that tax rebates are an effective response to economic slowdowns. The increases personal saving doesn't help the economy because the federal budget deficit, which can be though of as negative saving, offsets all of it in the aggregate." Oops.... I guess someone in the whitehouse did not do a good enough job on their homework. All this is yet another example of the Bush strategy of "FEEL GOOD ECONOMICS", which got us in this mess in the first place.

1 comment:

Andrea said...

yah, as i understand when they tried this back about 5 years ago, the effect was muted. only ~20% of those consumer tax savings were spent, causing a limited impact on the economy. moreover, i can't see how this won't create a vicious cycle - perhaps there is a tiny positive bump to the economy but once that is passed, won't we be in teh same place? obviously adding to the woes is that it doesn't seem that the Fed has a plan...would love to see some LONG TERM SOLUTIONS!!! rather than just trying to ease pain for the short run. esp given the depressed dollar, we need a comprehensive plan, not just bush's latest "shot in the arm"

ps: JZ: love your WW pic!!