Shoring up the economy
President George Bush wants to give you an $800 rebate. Sen. Elizabeth Dole is talking about expanding food stamps and extending unemployment benefits. Officials might not call the current situation a recession yet, but something has to be awfully wrong for conservatives to offer ideas like these.
How the nation weathers the current economic climate will be a test of our political leadership ó and when better than during an election year? So far, Republicans and Democrats have talked harmoniously as they try to pump some life into the economy. Let’s hope they stick to that and deliver a stimulus package quickly.
Economists define a recession as two consecutive quarters of decline in real gross domestic product, so you don’t know a recession has set in until you’re six months into it. But there have been plenty of reasons for consumers to tighten their belts. Three-dollar-a-gallon gasoline is driving up the cost of everything and eating up paychecks. The subprime lending fiasco has led to foreclosures for homeowners and big headaches for banks and investors. The housing market has a cloud over it. Plant slowdowns and business closings take a heavy toll.
They say a recession is when your neighbor loses his job, and a depression is when you lose your job. The degree of financial trouble people experience during an economic slowdown like this can be very individualized. And recessions are cyclical; what goes up will come down. But government is right to step in to help people living on the edge, such as those receiving food stamps or unemployed, and small businesses barely hanging on. That’s why most proposals for a stimulus package include business tax cuts, changes in depreciation schedules and other such measures. Congress should strive to narrowly target small business and prevent large corporations from exploiting lawmakers’ good intentions.
Fed Chairman Ben Bernanke put a silver lining in this cloud when he announced a dramatic cut in the federal funds rate that should ultimately lower interest rates on credit cards, home equity loans, student loans and some mortgages. Americans are carrying a lot of debt, and current interest rates doom chances of paying it off quickly. This will help.
President Bush is hoping Americans will shop the country’s way out of this recession. Cutting back is more on the minds of a good portion of the population ó 34 percent, according to national survey reported on Cardtrak.com. So be it. Even if rebate checks go right into savings or help pay off existing debt, the people who receive them will feel better about their financial situation. When it comes to recession and fear, how people feel can make a big difference.