Stimulus

Like most conservative-leaning folks, I dislike the stimulus bill recently passed by Congress, which seems more focused on enactment of Democratic social policy than addressing our economic ills.

I suppose the Democrats believe deeply in this stuff, and imagine that taking care of lower-income folks and "investing" in efforts like education and the environment will benefit the country. Certainly these things sound desirable, but the efforts neglect the realities that created these conditions in the first place. If the private sector doesn't see returns in broadband or health care technology, isn't that a sign that government investment therein won't produce economic returns? It is hardly comforting that the rationale for the items starts with "jobs" but moves to various social goods upon questioning, and moves again to the economic climate when those goods are questioned.

But I don't think much of the Republican tax cut proposals, either. Increasing personal income is all well and good, but currently those increases would first be saved rather than spent. And while we should increase personal savings, we should also reduce government dis-saving. A deficit-financed tax cut only increases future taxation for repayment, and probably at progressive rates. Politically, tax cuts undermine the argument for government retrenchment, as progressives will complain about benefits for the wealthy while reducing "services" to the lower income.

It seems to me that our economy has been unbalanced by years of excess consumption, private and public, and that a large amount of capacity has been built to produce things that won't actually be required. That misallocation must be unwound and those resources rededicated more productively. But what they ought to produce won't be clear until we have first reached a more sustainable level of consumption, and can divine what things we should focus on producing better and what things people will want more of. No one is going to invest until they see the way forward. If we "stimulate" now, before resolving those uncertainties, investment won't respond because it _can't_. Unfortunately, we first have to see a bottom before we can go forward. Perhaps at that point, some time in the future, a demand injection would actually accelerate the recovery process. But I fear we are now retarding the destruction that must precede that recovery.