The real heart of the matter, the functional insolvency of certain money center banks, remains without a plan. So many trial balloons have been launched by the Administration that plan fatigue has set in the blogosphere, and perhaps in the public at large.
Even those who feel that Mr. Obama is being too cautious on the stimulus plan agree with him that thrift is not a priority. For example, an antagonist on this matter is the Nobelist Dr. Paul Krugman, who pens in "On the Edge" in today's NYT:
It’s hard to exaggerate how much economic trouble we’re in.
DoctoRx here. I disagree. Bad as things are, one can always exaggerate their severity. Right now, I call this a Great Recession, not a Great Depression. We have not even reached the unemployment level of the depths of the 1982 recession, adjusted for population growth.
Consumers, their wealth decimated and their optimism shattered by collapsing home prices and a sliding stock market, have cut back their spending and sharply increased their saving — a good thing in the long run, but a huge blow to the economy right now.
Philosophically, this point is the crux of this matter. The growth-at-any-price crowd can't stand it that individuals are responding logically and prudently to a dangerous time and would rather strengthen their own fiscal situation than the amorphous, non-flesh and blood thing that Dr. Krugman studies, the economy. Perhaps he has forgotten that the original meaning of the word "economy" is "thrift"?
The meme all over the media and in elite circles such as Dr. Krugman's is the same thing I heard treating obese patients or those addicted to cigarettes. They wanted to stop smoking or lose weight- but just not now, doctor. There was too much stress right now, or something. But come a heart attack, and it is amazing how easy it can be to break the addiction to smoking! Or to lose weight.
If consumers can't break the cycle of debt when it's in their individual interest to do so, they will never do it. It's now or never.
This is the medical analogy to our debt situation. Americans, chastened by the Great Depression, foreswore debt for a generation. And the economy did great once we won WWII. (Of course, winning the deadliest war in history helps!) But the Merchants of Debt came back with a vengeance. They need to be routed again. Dr. Krugman certainly believes he is a populist. But the greatest victims of the debt culture are the poor, working class and "middle" middle class. Once, people used the term "usury" for the rates these people have to pay to become unsecured borrowers.
We are not exactly in a Marxian crisis of capitalism. We are in a crisis caused by the emergence of a finance-driven economy. Thus we are supposed to "love it" when the GDP rises. It will rise one day, but without real structural change, it will be just more of the same.
The "stimulus" bill is going to be financed by more debt, and thus is a "hair of the dog that bit you" strategy; or by printing money, which takes us straight back to the 1970s. The only good reason to "go there" is to help those needing acute help due to the recession, including numerous suffering individuals and states and localities, I believe.
Tending to those obvious and acute needs, plus finding funding to get through the banking crisis, is more than enough for any Administration to do and do right.
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