THE LAST WORD
George F. Will
Stimulating Talk, Redux
Washington will stimulate the economy by enacting pet agendas in the name of recovery from a perhaps nonexistent recession.
When Bob Kerrey, governor of and then senator from Nebraska, was asked about dating the actress Debra Winger, he said she was his "stimulus package." That versatile locution is back in vogue and is being applied to the economy, of all things.
Partisanship in Washington can be costly, but so can consensus, and suddenly there is agreement that the economy needs to be stimulated. The supposed crisis that is causing this meeting of political minds is that the market is correcting some mistakes made about something central to capitalism, not to mention progress—risk taking. There has been too much risky lending to unqualified ("subprime") borrowers, who were living riskily.
Corrections are necessary: When too much housing has been built, the market must clear the inventory. Corrections can be painful: Housing prices have declined. Lower housing costs are not an unmixed curse: Partly because of something dating from 1913 (the mortgage-interest deduction) and partly because of recent low interest rates, too much American wealth is tied up in housing. But houses are most Americans' largest assets, so homeowners, feeling less wealthy, are curtailing their spending, which causes lenders to curtail their lending, which further inhibits spending.
Six weeks ago, a poll showed that 57 percent of Americans already felt the nation was in a recession. But a recession is not a matter of feelings; it is two consecutive quarters of economic contraction. But there recently has appeared the oxymoronic phrase "growth recession," by which a recession can be declared to exist—and Washington activism justified—whenever growth is less rapid than it recently has been.
A real recession may have started, although in the fourth quarter of 2007, aggregate hours worked increased, as they did in the third quarter, and oil prices have declined. Economic fears can, however, become self-fulfilling by paralyzing decisions to consume and invest.
Often, the wise response to an economic correction is "Don't just do something, stand there," because the market is doing the right things. But corrections provoke political competition to provide relief. And when government "fine-tunes" the economy with "demand management," it responds to economic conditions as they were, not as they have become. The ameliorative measures Congress will legislate, perhaps by March, will be responsive to economic conditions indicated by statistics collected many months before the measures will begin to affect economic behavior, if they do affect it.
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Member Comments
Posted By: preybrother @ 09/06/2008 11:00:52 AM
Comment: Great George Will! You are right on the money. But, do you know what? Our government, through "Free Trade" agreements has not only gutted our manufacturing base but has neglected small business
outright. Just a few days ago, I read where a tax cut is supposed to "help".. uh...all businesses compete
on the worldwide market. Politicians in Washington are promoting Gobalists International Business. Not only to they get a tax break but can easily move manufacturing, telephone banks to China, India, Phillipines, Vietnam etc. Ok, how does that tax break help small business compete? Let me give you an example. My small company holds patents on a few products. In order to become more efficient and control costs, we started manufacturing our product about five years ago. Due to cost increased in raw materials and compoent parts, we have begun to out source manufacturing for our small compoent parts to China. Why?
Because they cost too much in America. Why? Because of labor cost, OSHA (a good thing if practiced in a reasonable manner), state and local interference etc. The fact is American labor cannot compete with countries like China and India. American companies must have a "level" playing field and we are not getting it with "Free Trade Agreements" like NAFTA-SHAFTA. Free Trade Agreements are for companies like good ole Walmart with outlets around the world including China where their manufacturing is located. Oh and in order to be successful in China, these muti-national companies must have good working contacts with Bejing aka Communist Party. It has been said that without Free Trade Agreements, US would lost many jobs. Well, those jobs could be replenished by Small Business. Yes, creation of more jobs and a larger
tax base. But, God Forbid, why would our politicians help small business when they are getting most of their
campaign funds from big multi-national corporations?
Posted By: Mwalimu @ 01/24/2008 4:47:35 PM
Comment: Since private individuals can spend money more wisely than the government, we should abolish taxes so everyone can go on a shopping spree and boost the economy. But wait a minute! You can???t go shopping if highways that are supposed to bring the goods to the shopping mall are shut down because of collapsed bridges.. You won???t want to go shopping if parking lot full of panhandlers and criminals. We can put the criminals in jail - but prisons cost money. It would be much cheaper to fund programs that prevent crime. In fact, It???s widely known fact (at least if you teach in a public school in Los Angeles) that most violent criminals were abused as children. Providing therapy and healing for abused children costs money, but it???s a lot cheaper than maximum security prison The same applies to the homeless
Rehabilitating a homeless person costs money but it???s a lot cheaper than the current jail-police-sweep-emergency-ward cycle Los Angeles currently uses. Providing students in inner city neighborhoods costs money, but it???s a lot cheaper to send a boy from the ???hood to college for 4 years than sending him to the pen.. It is much cheaper if our government spend $ 150 billion a year in research and development for sources of renewable energy than it is to fight the war in Iraq I???m paraphrasing an article I read in the Los Angeles Times about 98 years ago which described the economic and taxation policies of none other than Adam Smith. The godfather of capitalism not only favored taxes. He felt that the rich should be PROUD to pay more taxes to support the society than helped them prosper. Will can label me a tax-and-spend liberal if he chooses. But in truth, the taxes we pay now often mean lower taxes in the future. Tax and spend liberals are the only true conservatives.
Posted By: wilsan @ 01/21/2008 1:00:05 PM
Comment: It appears to me that Newsweek is finally getting it's recession. Congratulations.