Federal Reserve Chairman Ben Bernanke testified before the House Budget committee today. His prepared statement on the economic outlook is available from the Fed's public Web site
So why do I care?
Because I've seen too many economic magic bullets come, go, and backfire.
I'm a single father of three, supporting my family with a career in technology consulting - a geek job. Locally, I know people who have lost jobs in both the high-tech / high-growth industries, and in the traditional manufacturing industries. As soon as the (obviously overheated) housing industry started to slow down, our friends in the building trades found themselves under the same pressures.
And the bad news is finally trickling down into the macroeconomic numbers that Wall Street won't let Bernanke and the government ignore. I read that chairman Bernanke is calling for an economic stimulus package to get "cash into the hands of the people".
To be useful, a fiscal stimulus package should be implemented quickly and structured so that its effects on aggregate spending are felt as much as possible within the next twelve months or so. Stimulus that comes too late will not help support economic activity in the near term, and it could be actively destabilizing if it comes at a time when growth is already improving. Thus, fiscal measures that involve long lead times or result in additional economic activity only over a protracted period, whatever their intrinsic merits might be, will not provide stimulus when it is most needed. Any fiscal package should also be efficient, in the sense of maximizing the amount of near-term stimulus per dollar of increased federal expenditure or lost revenue. Finally, any program should be explicitly temporary, both to avoid unwanted stimulus beyond the near-term horizon and, importantly, to preclude an increase in the federal government's structural budget deficit. As I have discussed on other occasions, the nation faces daunting long-run budget challenges associated with an aging population, rising health-care costs, and other factors. A fiscal program that increased the structural budget deficit would only make confronting those challenges more difficult. - http://www.federalreserve.gov/...
While I recognize the need for short-term help, I'm inclined to be cautious in national response to the chairman's call. From where I sit here in Michigan, a short-term stimulus package isn't worth a hill of beans if my job and my neighbors' jobs aren't here next year.
I believe it is critically important to view job security as the number one component of fiscal security. Those who build houses are feeling the pinch right now that may not be a short-term event. The housing industry on which the relied was built on an economic and environmental house of cards. This question vastly oversimplifies the issue, but if my high-tech job goes to India and my neighbors' factory jobs go to China, and the housing market never overreaches again, will there even be an economy left to save?
I vividly remember getting that IRS "bonus" check in 2001. The few hundred dollars would barely cover a months' worth of groceries for my family, much less save us from any of the true economic dangers that we face. I fear that the kind of economic stimulus package being discussed by chairman Bernanke could do more to distract us from our problems than they do to address our problems.
Am I off base in thinking that we should put the brakes on any short-term economic package that distracts us from addressing the nation's long-term needs?
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