Time to panic?

What happened

Stocks plunged around the world on Monday and Tuesday as fear of a crushing U.S. recession spread. Some financial analysts said the panic selling indicated that many investors doubt that tax cuts included in economic stimulus packages being pushed by President Bush and lawmakers will give the economy enough of a boost to avert a painful slowdown. (The Washington Post, free registration)

What the commentators said

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“Whether or not the economy is in a recession,” said The Miami Herald in an editorial (free registration), “ordinary people are feeling the pain from the housing debacle and steep gas prices.” Let’s hope that plunging stocks get Congress’ attention, so that lawmakers will act quickly to ease the pinch. But any stimulus package will have to be “temporary,” “timely,” and “targeted for effectiveness.”

Taking money from one taxpayer and giving it to another won’t be “temporary, timely, or effective,” said Alan Reynolds in The Wall Street Journal. “With luck,” President Bush’s plan to boost spending with short-term tax breaks will be “merely wasteful and ineffective.” If Washington wants to jump-start the economy, it should let the Federal Reserve give it a try by lowering interest rates.

With stocks plunging, said Chris Edwards in the New York Post, all the stimulus ideas on the table are “good politics,” but bad policy. Bush’s temporary tax relief amounts to “dropping $150 billion in newly minted dollar bills from helicopters all over the country,” and all that will do is goose inflation by giving people more money to buy the same amount of goods.

Actually, the reason Bush’s plan won’t boost spending is that it’s weighted toward wealthy taxpayers and businesses, said The Denver Post in an editorial. But if Bush compromises with Democrats—and spends more on giving poorer Americans more to spend—he can give the economy “an immediate boost.”