“You know we have a crisis,” said Steve Huntley in the Chicago Sun-Times, “when bipartisanship starts flowering in Washington like cherry blossoms.” With a cascading series of economic jolts now making a painful recession seem inevitable, the White House and Congress this week scrambled to get on the same page. Even before world markets went into a free-fall this week and the Fed implemented an emergency interest rate cut to calm investors, Washington was roused by the biggest unemployment spike since 9/11 and the growing crisis in housing and banking. President Bush proposed a $145 billion economic stimulus package, including tax breaks for businesses and individual rebates of up to $800. In a rare display of bipartisanship, said Peter Baker in The Washington Post, congressional Democrats and Republicans said they would work together to quickly pass the package, which would also include extended unemployment and food-stamp benefits. “Indeed, officials on both ends of Pennsylvania Avenue are using the term ‘kumbaya’ to describe the rare consensus.”
That’s sweet, said Steve Chapman in the Chicago Tribune, but pardon me if I don’t sing along. Consensus or no, Bush’s stimulus package is highly unlikely to rescue us from recession. The theory is that putting cash into people’s wallets will trigger spending and boost the economy. But if, as many experts suspect, we’re actually already in a recession, the money will arrive too late to accomplish that. Besides, $145 billion is barely 1 percent of our economy’s annual output. That relatively minuscule injection isn’t going to “rev up” such a beast. And let’s not forget that “any money the government lays out will not drop miraculously from the sky.” Because the government is already operating in the red, those funds “will have to be obtained the old-fashioned way—by borrowing.”
That’s why Bush would have been better off letting the Federal Reserve do its job, said Bill Thomas and Alex Brill in The Wall Street Journal. This week, when the Fed took the drastic step of lowering a key interest rate by three-quarters of a point, it helped stanch some potentially devastating losses and signaled that Washington understands the seriousness of the situation. Chairman Ben Bernanke is “better positioned” to deliver quick stimulus than Bush or Congress.
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But rebates do work, said The New York Times in an editorial. The $300 individual and $600 family checks that Washington sent after the 2001 recession “were spent relatively quickly, providing the economy with a shot in the arm.” That’s true enough, said Barbara Ehrenreich in The Nation. But all this lofty talk about “the economy” obscures the fact that millions of Americans are hurting and need more than a Band-Aid. It sure would be nice, for a change, if the stimulus package were truly targeted at those who need it the most. Our economy, “with its dizzying bubbles, wild lending sprees, and reckless downsizing,” has become hopelessly divorced from ordinary people. “We could take the current crisis as an opportunity to fix that by shoring up government support for the needy and dislocated.”
What’s most infuriating, said David Ignatius in The Washington Post, is that this entire crisis might have been avoided. As early as 2005, Wall Street analysts and financial journalists were predicting that the “shaky structure of subprime mortgage loans” could collapse, with a crippling ripple effect on the economy. But the issue barely registered with Washington politicians. Bernanke, the “neophyte” Fed chairman, predicted that any subprime fallout would have only “limited” effects. “Sorry, but that was not the correct answer.” It’s all eerily reminiscent of Hurricane Katrina—warnings ignored, and then “frantic action after the disaster has begun.”
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