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Stimulus Debate

01/18/02 12:00AM

Every time I begin to wonder whether partisanship in Washington will undo our great republic, the genius of the founder's constitutional plan restores my faith.

Take the fight over the economic stimulus legislation. Everybody agrees that the economy needs a boost. Everybody agrees that the Federal Reserve has done about as much as they can do by lowering interest rates. So all we need to do is craft a compromise, that is also acceptable to enough Democrats and Republicans to pass, and which the president will sign.

But our legislative machinery is fueled by politics, and just as clearly as nobody wants to be blamed for stopping a law that helps put people back to work, managing the debate in a way that makes the other guys look like they're obstructing the law creates a powerful advantage.

Thus far, this debate could be used as a case study in how Tom Daschle underestimates George W. Bush. Bush caved to one Democrat demand after another. Despite the fact that conservatives were starting to rip Bush apart, each complaint from Daschle yielded yet another Republican compromise. As House-passed stimulus bills piled up on Daschle's desk, the media and the public began to perceive that Bush and the Republicans wanted a bill, and Daschle and the Democrats did not. When the whole thing tanked just before Christmas it was Daschle who was playing defense on Bush's turf.

Bush was clearly prepared to anger conservatives in order to avoid blame for obstructing the stimulus; his father's experience no doubt weighed heavily upon him. But in the end the conservatives cheered Bush for exposing Daschle's strategy.

But how does any of this benefit our recession-bound economy?

Back in the sixties and seventies, the federal government always responded to our frequent recessions with a shot of government spending, following FDR's example. I recall one grant program that actually had the title "counter-cylical anti-recessionary public works improvement program". But as we spun from one business cycle to the next, booms became shorter, recessions came more often and inflation the now almost forgotten bogeyman of economic instability ratcheted higher and higher.

The government cannot competently 'manage' the business cycle. We first learned in November that America has been in a recession since last March. Had Congress enacted a stimulus bill, the federal agencies charged with implementing it would just now be beginning to write the rules for the new programs. The rules would have to be published in the Federal Register. Then there would be time for comment. Then the comments would have to be evaluated and a final draft published. Staff would have to be transferred or hired. Only then could a program be set up. It takes upwards of a year before stimulus funding can get out of the treasury and into the economy, and that's usually just about the time it takes for the recession to run its course and the recovery to get under way - though it may take another nine months before we actually find out.

The result of this well-intentioned but unworkable policy is to over-stimulate the recovery, feed inflation and hasten the next recession.

When the deep recession of the early eighties hit Ronald Reagan in his first term, he refused to play this game. He insisted upon a long-term strategy of permanent tax cuts as opposed to make-work government spending. He trusted the economy to right itself, and he was prepared to be a one-term president, if that's what it took to break the vicious cycle that gave us the "misery index".

That recession ended quickly, and was followed by an unprecedented period of steady expansion, growing employment, low inflation and economic stability. Reagan's refusal to "prime the pump", coupled with brilliant monetary policy from the Federal Reserve, were just the right medicine.

In the recent stimulus debate, the Republican plan was bad, the Democrat plan was worse, and the nation will be best served if neither becomes law.

This is Jeff Wennberg in Rutland.

--Jeff Wennberg is a former Mayor of Rutland.
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