The Checks May Be in the Mail
Here we go again. Obama was elected just three days ago, and he’s already calling for a new “stimulus” package. I’ve written on this subject before, and I imagine that Obama is talking about some version of what House Speaker Pelosi wants. Pelosi, of course, has been calling for additional fiscal stimulus even before the last round of checks went out.
Just to recap, we’ve had unprecedented stimulus policy in the last seven years. We’ve had rebate checks in 2001, 2003, and 2008. We’ve also had broad tax cuts (not just for the top bracket) during this time period. And, we’ve had an extremely accommodating Federal Reserve; that is, the Fed has been trying to get the economy going with monetary policy.
Yet, we hear constant chatter about how bad the economy is doing:
-The nation’s unemployment rate bolted to a 14-year high of 6.5 percent in October as another 240,000 jobs were cut, stark proof the economy is almost certainly in a recession.
-The jobless rate zoomed to 6.5 percent in October from 6.1 percent in September, matching the rate in March 1994.
-October’s decline marked the 10th straight month of payroll reductions, and government revisions showed that job losses in August and September turned out to be much deeper. Employers cut 127,000 positions in August, compared with 73,000 previously reported. A whopping 284,000 jobs were axed in September, compared with the 159,000 jobs first reported.
If you believe these measures are accurate, then you must have at least some doubt in the effectiveness of stimulative fiscal (not to mention monetary) policy. A basic thought experiment explains why this stuff may not work: if someone gives you $500, that does very little to change your long-term position in life. In other words, the $500 check does very little to help you provide for family beyond the current month.
These stimulus check are not about fixing and/or “managing” the economy. These checks are about buying votes. It’s no coincidence that Pelosi, not Harry Reid, has been preoccupied with sending out more checks – redistricting in the House will take place in 2010. As noted in this Weekly Standard blog post, redistricting “is the only time politicians chose the voters instead of vice versa.” Pelosi wants to do everything she can to add to her party’s lead in the House.
