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An Irreversible Decline?   February 6th, 2009
President's op-ed repeated this questionable assertion       

 
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I always find questionable assertions interesting. The latest one seems to be the President claiming that if we don't accept the stimulus package immediately, not only will our economy continue to decline... it might not recover. He repeated this in his Washington Post op-ed on Thursday.

http://www.washingtonpost.com/wp-dyn/content/article/2009/02/04/AR2009020403174.html?nav=hcmodule

And if nothing is done, this recession might linger for years. Our economy will lose 5 million more jobs. Unemployment will approach double digits. Our nation will sink deeper into a crisis that, at some point, we may not be able to reverse.


First of all, no-one knows for a fact what will happen if "nothing is done." No-one knows if the recession will linger for years--in fact, many have suggested that the economy might already be bottoming out and is set to rebound in the second half of this year. Amid the bad news, there are a number of reasons to be optimistic.

And even though we don't really know what exactly will happen--with or without the stimulus--President Obama has already affirmed "Americans know that our economic recovery will take years -- not months."

So Obama has asserted that the recovery will take years but at the same time implies that the recession might last for years "if nothing is done." So when he was asserting that the recovery will take years, was he indicating that he knew the stimulus plan would be rejected and therefore the recovery would take years? Or was he saying that even with the stimulus, the recovery would take years? And, if so, it seems we can conclude that the president has said that the recovery will take years with or without the stimulus.

In my opinion, assuming the financial system is fixed (which is far more important than any stimulus package), I can't imagine us still being in a recession in the summer of 2010. I tend to agree with the many economists that believe, assuming a functioning financial system, that we could very well be looking at a recovery in the second half of this year.

The cynic in me believes that the reason that President Obama is in such a rush to pass the stimulus package is because with every day that passes, there's a "risk" that economic indicators will start improving even without the stimulus and diminish the liberal argument in favor of massive government spending.

Regardless of anything else, however, what I find entirely suspect is the president's assertion that "we may not be able to reverse" the economic situation if we don't spend a trillion dollars immediately. The United States and the world have faced far more difficult situations in the past, and we have survived and prospered. Of course we will recover from the current crisis and it's completely inappropriate for the president to suggest otherwise. Americans are a strong and resilient people that have shown time and time again that we are capable of working hard and confronting the most difficult challenges. To suggest that our greatness is now only due to what the government can do flies in the face of our history... and even some of what the president said in his inaugural speech.

I think the real urgency is that this presidency and, perhaps, the Democratic party won't be able to recover if the stimulus bill isn't passed, or if the timing of the stimulus bill doesn't work to their favor.

If the stimulus bill is rejected or significantly delayed and the economy starts recovering without government intervention, it'd be a demonstration that the free market can function without liberal government responses.

If the stimulus bill is passed but the economy starts to recover before any significant amount of the stimulus money is spent, that too will show the free market can function without liberal government responses--and the voters would also hold the Democrats responsible for a trillion-dollar boondoggle that ultimately the economy didn't need. The country might even demand that the government rescind the parts of the stimulus package that hadn't yet been spent, amounting to a rollback of liberal spending.

And if the stimulus bill is passed and nothing improves then they can (and will) just blame it on the economy being so bad after eight years of President Bush.

So I suspect the urgency of passing the stimulus bill now is to make sure the stimulus is passed immediately so that at least some of the money is being spent before the recovery happens by itself so they can at least try to make the claim that their stimulus bill fixed the economy. The timing is such that this is the window of opportunity for Democrats to utilize this crisis to forward their agenda. Obama's chief of staff, Rahm Emanuel said as much:

http://www.youtube.com/watch?v=_mzcbXi1Tkk

You never want a serious crisis to go to waste. And what I mean by that it's an opportunity to do things you think you couldn't do before.


It's not that America's future depends on passing this stimulus package now. It's that this administration's opportunity to utilize the economic situation to "do things you think you couldn't do before" is now. They have to move fast before either economic indicators change and make it difficult to pass the pork, or before public sentiment against the stimulus package makes it even more difficult for politicians to approve.

The urgency is political, not economic.

Update 2/9/2009: In his first press conference on February 9th, 2009, the first question from the press was specifically about this "irreversible" assertion. President Obama did indeed back-peddle and say, in his estimation, it would simply be "much harder."

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