Why Push Another Stimulus Plan Now?

Last week before Congress Bernanke said the following. Now, did you ever hear the saying "the cure is worse than what ails you"? I understand that things aren't that great. I understand that the Fed and Treasury feel they needed to do something. I realize something has to be done.

But, when you have a near trillion dollar plan that has only just begun to take effect, ought not we wait just a bit and see how it works before we go and pump another 1/2 trillion or so of taxpayer money into the system?

Isn't the current complaint from both the left and the right of the political spectrum of his predecessor Alan Greenspan that he interjected himself into fiscal policy? Won't this backfire as foes from either party will now use this decision against him and perhaps constrict his ability to use his powers in the future?

Bernanke has got broad authority from Congress in order to deal with the current crisis. One can argue whether of not he has used it wisely or should it have been granted to him but it was and he has mitigated what could have been a far worse scenario. The problem with what he is doing now is that he will become the fall guy for either party for anything that goes wrong from here. Should the stimulus not work, he will be accused of wasting tax payer money with no result. Should its relief only be temporary (like that last one was) he will be accused of acting for the short term, not what is best for the country's long term.

No one is saying they think a stimulus will "cure" what ails us so Ben's backing of it has no real long term positives for him.

Ever hear the saying "give a man enough rope to hang himself"? Congress just did it to Ben, he took the, rope and now they have their fall guy.

Much of what the Fed can accomplish is based on what people think of the institution and its leader. The general perception of Ben is that he has done a great job thinking outside the box recently and has saved us from much worse. That gives markets some degree of confidence that we will get though this.

When Congress takes his forray into their domain and uses that as a reason to cast blame from themselves to him, his ability to calm Main St. or the Markets [.INX] ,[.DJI] in the future will be severely restricted.

That is far worse than whether or not any stimulus is a good idea.....it isn't by the way.

Comments

[rdr4:]

Both Bernanke and Greenspan contributed to the problem by making political choices while economic choices were ignored. While the swimmers drowned, they saved (or wasted a lot of money trying) the swimming pool and snack bar.

When various elements of a system can only play the blame game and none can fix the problem, it is time to clean house and start over.

2008 Oct 28 09:19 AM

[Smarty_Pants:]

"Why Push Another Stimulus Plan Now?"

Because the politicians in Washington are completely clueless and feel they need to be seen as 'doing something' to address the 'problem'.

The fact that what they are 'doing' won't help and is more likely to be detrimental is beside the point to them.

2008 Oct 28 10:37 AM

[CLH:]

We are in the middle of an economic correction which is badly needed and the gov as usual wants to stop it--sick sick. People need to learn how to save and not borrow as the Japanese have learned.

Corrections are necessay to teach people that they must wait until they can afford their trinkets.

2008 Oct 28 12:32 PM

[Joshua Lacey:]

This past year the exorbitant cost of fuel has seriously damaged our economy.After filling up the family vehicles and paying more for every consumer product whose cost of production and shipping was passed on to us there was little left over to save, invest or spend. So, we tighten our belts , cut out some extras, buy only the bare min. That sadly in turn results in more job losses. OPEC has us over a barrel literally.WE reduce our use they in turn just cut production by 1.5 million barrels a day and vow to cut more if they don't get the price results they want.Our country needs to invest in reducing our dependence on foreign oil. The 168 Billion they paid out in the last stimulus pkg that did nothing at all for our economy would have gone a long way toward getting us started on the road to energy impendence. I highly recommend Jeff Wilson's new book The Manhattan Project of 2009. I highly recommend this book for anyone interested in seeing America become more energy independent.

2008 Oct 28 08:17 PM