Archive for February 14th, 2009

I spent much of this week hoping that this horrible stimulus bill would not pass — that our president would prove sensible, would calm the Democratic hordes in the House and rewrite the bill in a way that would, you know, actually stimulate the economy. Instead, we are relying mostly on a Keynesian multiplier that may or may not happen (the idea that every government dollar spent will trigger more dollars spent). Much of it will not happen immediately, much of it is not terribly important (government building remodeling projects) and the tax cuts are small and one-off things.

This strikes me as a huge missed opportunity. Obama promised a tax cut to 95% of Americans. How about cutting a big chunk of the 25% tax bracket down to the lower 15% level? And the 28% down to the 25% level (or, heck 15% — a flat tax!)? This would immediately have put more money in the hands of middle-class Americans and broadly encouraged more work (in America, we rarely choose leisure when we make more money — kind of a strange phenomenon, but true). It would be easy to understand, systematic, and the government would not be picking winners. And it wouldn’t even involve tax cuts for the “rich,” which would be politically unpalatable.

As it is, the current stimulus brings to mind a dysfunctional couple that has struggled with debt in the past. It all comes crashing down around their ears. And so, they talk to each other about cutting back, doing without, living within their means. One party starts saving. But then the other looks around and decides to do something. Not a horrible impulse if it involves, like, getting a second job. But, alas, no. This partner decides that the bathroom needs remodeling. And goes out and spends big bucks on that — but not just that. Also an Oriental rug for the entry way, repaving a driveway that doesn’t need to be paved, new $400/yard designer wallpaper for the entire basement where no one goes, plus a shopping spree for clothes no one really likes, but since you’re spending money… I mean, yes, in theory, some of this could raise the price of the house when you eventually sell it, and some will make you feel better. If you feel better, you might, eventually, earn more money. But you’d think this particular partner had a major problem. And you would be right.