Davos- Doubts surface about economic Viagra
MARKETWATCH FIRST TAKE
Doubts surface about economic Viagra
Commentary: Prescriptions for the U.S. economy
Last update: 12:00 p.m. EST Jan. 28, 2009
LONDON (MarketWatch) -- The Obama administration's prescription of a massive dose of federal spending to fix the U.S. economy is gaining political headway.
But even as Washington's biggest ever pork-fest gathers steam, a few doubts are beginning to surface.
At the gloomy gathering of global high-fliers in Davos this week, for instance, economists questioned whether economic stimulus as currently contemplated will do anything other than build up huge debts that leave the global economic system more unbalanced.
Given the circumstances, a prescription of bed rest and time might be expected to help the economy just as much, for considerably less money.
This, however, doesn't sit well in Washington where failure to act, even wrongly, can be politically fatal.
Naturally those in charge of selling the stimulus plan give lots of lip service to the notion that it should be "timely, temporary and targeted." Those notorious three Ts were exactly the same rationale used a year ago to sell the $150 billion tax "rebate" program that succeeded so brilliantly at turning the economy around.
But it's already becoming clear that the current package risks taking so long to hit the economy that it will spark a huge inflation spike just as a recovery is beginning to take hold. That will in turn spark sharp rate hikes by the Fed which will then shut down the recovery, leaving things much as they are now, only with an even larger federal deficit.
There's also no hope that this Woodstock-for-special-interests will result in anything temporary.
That's because so much of the spending is for pet projects of lobbyists who are well-positioned to protect the "gains" made in the current free-for-all.
And, at $900 billion, there's absolutely no way to argue that the plan is "targeted." It's simply a 900-megaton "Budget Buster."
Sure voting for the spending may be smart politics, but that doesn't mean it's good medicine.
"It is better to have lived one day as a tiger than a thousand years as a sheep." -- Tibetan proverb
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