Chicago Tribune: Don’t Mess With The Economy

An editorial in the Chicago Tribune warns candidates - from both parties - that trying to "stimulate" the economy right now is a very bad idea. Not only will meddling likely do no good, it actually may do long term damage.

People in Washington rarely need an excuse to spend money, so when they have a particularly timely pretext, taxpayers should be even warier than usual. Like now, for instance. With the economy showing signs of a slowdown, possibly even a recession, there are growing calls for Congress to perk it up with a fiscal stimulus package. But at this point, the risks of rushing to the rescue are at least as great as the risks of holding off.

No one doubts the economy is wheezing. December retail sales were down, unemployment is rising, housing starts and new home sales are way off, and the subprime mortgage crisis hangs over everything. But there is no clear consensus that a recession is on the way.

One reason is that the Federal Reserve Board has taken steps to address the danger. Most notably, it has repeatedly cut interest rates on the loans it makes, and last week Chairman Ben Bernanke indicated it will make even deeper cuts. That course runs the risk of fueling inflation, but it encourages borrowing and spending, which should combat weakness in the overall economy.

They point out that virtually every plan being touted by the various candidates has serious drawbacks. About the only course they see as useful is to try to reform the tax code - which may do some good in the short term, but will certainly pay off in the long run.

Any of the plans that are being trotted out that rely on borrowing money will have a long term, negative impact. It won't actually improve anything, just defer the problems for a short time. Then compound them with additional government debt. That isn't a good idea, no matter how you look at it. Let the Fed handle it - that is what they are there for.

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  By NortonPete, Monday, 14 January , 2008 @ 8:33 am

  The most laughable idea I heard came from Senator Chris Dodd. He wanted to make available 100 million dollars to help solve the sub-prime mortgage crunch. That would help about 500 average homeowners. This needs to take a natural course of correction, period.

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  By Mockin'bird, Monday, 14 January , 2008 @ 5:11 pm

  Couldn’t agree more. Reform the tax code.

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  By Neo, Monday, 14 January , 2008 @ 5:13 pm

  Funny how I never seem to hear the name Robert E. Rubin, Bill Clinton’s financial “wonder boy”.

  Mr. Robert E. Rubin, long active in national and New York City’s public affairs, joined the Clinton Administration in 1993 as Assistant to the President for Economic Policy and Director of the newly-created National Economic Council. Under Mr. Rubin’s guidance, the NEC oversaw the Administration’s domestic and international economic policymaking process, coordinated economic policy recommendations to the President and monitored the implementation of the President’s economic policy goals.

  From 1995-1999, Mr. Rubin served as the 70th U.S. Secretary of the Treasury. As Secretary of the Treasury, Mr. Rubin played a leading role in many of the nation’s most important policy debates. He was involved in balancing the federal budget; opening trade policy to further globalization; acting to stem financial crises in Mexico, Asia and Russia; helping to resolve the impasse between the Congress and the Executive Branch over the public debt limit; safeguarding the nation’s currency against counterfeiting; and guiding sensible reforms at the Internal Revenue Service.

  In 1999, Mr. Rubin joined Citi as Director and Chairman of the Executive Committee and in November 2007, he was named Chairman. He returned to his previous role in December 2007.

  Guess he didn’t want his fingerprints on this $24 billion writedown at Citi.
  We should hope he isn’t hoping to go back into government.

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