Economic Stimulus Package: Good or Bad Idea?

Given that it's an election year and all the warning signs are flashing that an economic recession is on the horizon, there appears to be a bipartisan consensus in Washington for an "economic stimulus package" to pass Congress as quickly as possible. I'm not an economist, but I'm skeptical about the usefulness of injecting $150 billion worth of artificial stimulus into an economy valued at nearly $20 trillion.

We finally have the deficit down to a manageable level, so it's disheartening to see the nation pushing to reverse that trend on a taxpayer giveaway that is uncertain to produce any real dividend. A federal outlay of $150 billion is a serious chunk of change when Congress concedes it does not intend to pay for the expenditure and instead reverting to its default position of tacking on another mortgage. If a serious recession is indeed on the horizon, revenues will flow in with diminishing returns anyway, meaning our road to fiscal purgatory is already being paved.

The idea of "economic stimulus" generated by the federal government is far-fetched on its face. The nature of the economy is to rise and fall during the peaks and valleys of the business cycle. The specific nuances of our economy has been transformed wholesale over the course of generations, but the basic curve of the business cycle does not. The Federal Reserve has been more aggressive with monetary policy in the last quarter century and it has helped iron out the previously jagged rises and falls of the business cycle, but it's not possible to completely do away with it....and $150 billion in "economic stimulus" from Congress certainly isn't enough to render the cycle null and void.

So let's say the $150 billion stimulus comes in the form of $100 rebate checks for every American taxpayer to spend and thus pump into the economy. In an economy as driven by consumerism as ours, is that microscopic increase in per person purchasing power gonna have any measurable effect? I can't say yes or no with certainty, but I'm skeptical, and ask myself why a $150 billion federal investment in, for instance, highway improvements, wouldn't be just as useful in promoting economic stimulus since those improvements would involve the consumption of goods and services that stimulate growth just as much as the new DVD player that Uncle Bob buys with his rebate check.

And of course, the supply-siders are repeating their tedious mantra of economic stimulus through tax cuts for corporations or the wealthy, alleging that the money will be invested in the American economy and produce more long-term dividend that any rebate check ever would. That's a fuzzy thesis even in a closed economy, but in an economy as globalized as ours, it's far more likely the taxpayer-financed "investments" would help finish off construction of the next batch of smokestacks in industrial China than it would be to producing new manufacturing jobs in Detroit. Even with Bush still behind the wheel, I think the populist political climate of today will make it politically difficult for him to shower his corporate benefactors with yet another round of deficit-financed tax cuts in the name of an "economic stimulus package".

I'm leaning towards the idea that we'd be better off to hunker down and save our $150 billion to finance the pending costs of government in the event of a likely recession than attempting to reshuffle the deck chairs on the Titanic with a hurried "economic stimulus package" in the months ahead. I could be proven wrong on this, but it would seem to me the costs outweigh the likely benefits.