Stimulate Me II, the Sequel

As a retiree I am spending more time than in years' past reading newspapers, political blogs, and even watching the talking heads on TV (not surprisingly, I am partial to the MSNBC line-up). The economy is, of course, the topic of the hour. And while I am certainly not a trained economist, I was nevertheless as prescient as many who are in predicting our current difficulties and a good deal more so than the Masters of the Financial Universe who steered so many of our banking establishments down the road to ruin. Indeed, I have given a lot of thought to the current meltdown – not only out of general interest but, like most middling-class Americanos, out of a very real concern what all the turmoil may mean for my own long-term personal comfort and prosperity.

Sadly, I must agree with most of the pros who now, however belatedly, seem to have reached something approaching a consensus that our economy is well and truly up the proverbial creek – and it’s going to take a good deal of paddling and a fair amount of time before we achieve anything that will look like a recovery to many of us. In fact, there is uncharacteristic agreement on the part of most mainstream economists as to what it is we can do that will most likely make the current unpleasantness as short and as tolerable as possible. The “it” being a truly massive fiscal stimulus package.

Of course there are quibbles over the exact make-up of the package. Some want a few more tens of billions of tax cuts and some a whole lot more billions for infrastructure – but there is no doubt in my mind that Congressional ingenuity is more than up to finessing these disagreements by simply adding to the kitty. And this is one of those rare instances when Congressional logrolling may actually be in the national interest.

Admittedly, last week’s votes in several House Committees were on a strictly party-line vote; but Mr. Obama’s meetings this past week with the House and Senate majority and minority leadership and next week’s kissy-face meetings with key Republicans in both bodies will certainly turn-up the heat a notch or two on the Republicans. I note that the Senate’s draft bill already sweetens the pot a bit with more tax cuts than the House has proposed and there is no doubt in my mind that the Conference Committee will be in a giving mood to folks on both sides of the aisle when it finally puts the apple in the mouth of this mother of all porkers.

Ultimately, it seems to me that the political calculation for our Republican pals is an easy one. Why appear to get in the way of our new President during his national honeymoon with his popularity off the charts? If things go reasonable well, they can share the credit; and if the package has no discernable effect they can always blame him later (Obama made me do it).

So, I actually expect Congress to pass something credible by President’s Day as promised and with a goodly amount of bi-partisan support. Of course I may be wrong.

But what happens if Congress does pass a near-universally acceptable stimulus package? Unfortunately, probably not much – at least not immediately. The sad fact of the matter is that even a favourable outcome (the odds of which I put at about 65%) will likely see the economy continue to deteriorate at least through the middle of the year and the resulting recovery will no doubt be anemic for many months thereafter. Unemployment will reach double digits. It’s a damn near sure bet that 2009 will be a year we will all want to forget as soon as possible.

Furthermore, there is a significant chance that things could really get much, much worse (I put the Vegas odds at 25%). The loss of jobs the past few months has truly been breathtaking and at some point it is possible that we go into a real tailspin with increasing unemployment leading to more foreclosures, leading to further reductions in demand, leading to further layoffs, and so on. And then there is always the possibility of unforeseen events in the form of a new terrorism attack, a dust-up between Israel and Iran jeopardizing oil supplies, an inability or unwillingness of our creditors (like the oil potentates and China) to support our latest orgy of deficit spending however necessary, or some other god-awful thing we haven’t even yet contemplated. YIKES!

Of course, it is also possible that we’ll get all the breaks and the previously taken monetary stimulus and force-feeding of cash to financial institutions coupled with a tsunami of new federal spending will perk-up the national psyche like a muy grande espresso and we’ll be off-to-the-races much quicker than anyone is predicting. I charitably put the odds of the caffeine-based scenario at 10%.

Furthermore, once the economy is stabilized the work has just only begun cleaning-up the debris that is the Bush legacy…

Finally, good luck to President Obama on managing our expectations – something not made easier by the need to portray the stimulus package as among the most important pieces of legislation since the New Deal.

As a people, patience is not one of our better known qualities. Fasten your seatbelts kids, it’s going to be a bumpy ride.

In other news, I am gratified to report that Jane and I were not the only two people in the country to take note of President Obama's reference to non-believers in his inaugural address. There was a great opinion piece in the Washington post on this subject yesterday at: http://newsweek.washingtonpost.com/onfaith/guestvoices/2009/01/this_land_is_my_land.html

Well, time to get dressed and head over to the elders. Dad has an appointment with the doc this morning. The agenda for later in the day calls for shoveling - we're under a winter storm watch with 9-15 inches expected by 6 a.m. tomorrow. The forecast for the rest of the week is of the classic snow/rain, snow/rain, and snow/rain variety.

Cheerio!