February 17, 2009

Making a stimulus a snoozer

It's not going to do much, this new stimulus bill. It's tiny, compared to the problem. It's slow, compared to the speed at which economic realities change and take hold in the public psyche. It has too many tax breaks, which are not efficient as stimuli, and are obviously temporary, as we all know that this money isn't a gift, it's a loan. Well, I hope we all still believe that the money will be paid back at some point. If that isn't the case, the foundation of the cheap credit that keeps the US running would be destroyed. 

Which brings us to California. It's not inconceivable that it actually goes bust - it really is in dire straits and it has very few options. What if it goes under, and people extrapolate? Same scenario - vastly increased borrowing costs for the government. That would be bad, with consequences going from simple government paralysis to loss of essential services. 

Pffft. The immediate danger of sudden systemic collapse has passed - probably was over several months ago - but the danger of a slow slide, deflation or permanent stagnation hasn't receded. It has barely diminished. 


Post a Comment

<< Home