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Thursday, Nov 26, 2009
The right time to jump-start the economy may already have passed.
Jan 11, 2002 | Immediately after Sept. 11, it seemed everyone agreed: It was time for the federal government to jump-start the faltering economy with a juicy economic stimulus package. But in a classic display of partisan bickering, the intervening months have witnessed little progress and lots of hot air. House Republicans want to carry the country out of recession with a flurry of corporate tax cuts while Senate Democrats demand more money for workers, and the White House proposal calls for a mixture of business tax breaks, added benefits for the unemployed and an accelerated reduction in income taxes.
But with consumer confidence and other economic indicators signaling the possibility of a recovery (albeit halfhearted), does the economy really need to be goosed? Is an economic shot-in-the-arm worth the cost?
Most politicians, perhaps mindful of their own electoral futures, appear convinced that the need for a stimulus is as strong as ever. With midterm elections threatening to alter the congressional seating chart, the political rhetoric has grown even more heated in the face of positive economic reports. On Jan. 4, Sen. Tom Daschle, D-S.D., launched a broad attack on the Republicans' tax-relieving plans, blaming last year's $1.35 trillion tax cut for creating "the most dramatic fiscal deterioration in our nation's history." Two days later, President Bush responded in kind, blaming Democrats for blocking stimulus legislation and declaring vehemently that "not over my dead body will they raise your taxes."
Yet economists, from both the left and right, are beginning to sing a different tune, questioning not just what form the stimulus package should take, but also whether there should be a governmental boost in the first place. Stressing that a stimulus package will likely take effect after the economy has already recovered on its own, many economists now argue that the plans being considered in Congress are unnecessary, and possibly dangerous.
"The opportune time for the stimulus package -- an idea that I strongly supported [in November testimony before Congress] -- has passed," says Alan Blinder, an economics professor at Princeton. "At this point, Congress would be better off forgetting about most of the policy suggestions and moving on."
