Wednesday, November 19, 2008

Better get some fiscal stimulus in place fast

"In another sign that the struggling economy continues to slow, consumer prices tumbled by a record amount in October, carried lower by skidding energy and transportation prices, raising the specter of deflation."
-- New York Times, 11/19/08

Yet, we still see altogether too many pols on TV worrying about about the deficit, the debt and balancing the budget. Didn't any of these guys take Econ 101?

With the Fed having nearly exhausted its monetary arsenal, the only way to jack up the economy before it crashes further is fiscal stimulus through federal deficit spending.

For 25 years, we've enjoyed a long period of expansion and low inflation with only occasional, not-so-bad recessions, relying almost entirely on the Fed to turn the heat up or down, as needed, through its control over the money supply. A whole generation of pols and regular folks have grown to maturity with the expectation that the Fed can take care of things and deficits are always to be avoided. You really knew this was true when, in the the 1990s, the Democrats adopted the formerly Republican habit of praising balanced budgets and going ga-ga over the surplus that was supposed to materialize.

Many of our today's Washington pols can't get their heads around the notion that spending for the sake of spending without finding the money to pay for it can at times be a good, even a necessary, thing. And many of them, Republicans and Democrats, may be afraid to embrace this idea publicly lest they lose the next election.

They'd better get over it fast. We may be running out of time.

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