Are we really headed into a recession, or is it just because of politics as usual. Did we really need a economic stimulus package consisting of tax refunds, or is it merely an attempt to buy votes considering the 2008 election is just around the corner?
In other words: Is it a bribe?
Democrats in 2000 were denying there was a recession when it was in control of the White House, and now it is the opposite in that they chanting about a recession being just around the corner, and that George Bush is the blame.
If this is politics as usual, it is an attempt by supporters of the democratic party such as much of the media and democrats themselves to scare the American people into believing there is a recession so they will vote for democrats come fall, because obviously if there is a recession it is the republicans fault.
Anyway, that's what they want you to believe, if this is the strategy. There really is no way for me to know this because I'm not an economist and I'm not a politician, but I do have 15 years of following politics and studying this stuff. I don't think I'm too out of whack with reality.
However, George Bush called the democrats on their bluff, and is attempting to beat them at their own game by his economic stimulus package, and democrats would be fools to vote against this package, considering people love free money. Well, it's not really free money, unless you don't pay taxes.
Most experts, democrat and republican, that I've read have stated they doubt this package will be enough to stimulate the economy, but it can have a psychological effect on the economy.
If people feel as though this will be enough to boost the economy, if they feel this will be a bit of a help in their own financial woes, then perhaps this will provide enough of a boost to the economy to avoid the recession that is supposedly just around the corner.
Or, you might say, Bush's economic stimulus package is nothing more than an attempt to buy votes. And, of course, the Democrats will get some votes, so they think, from the poor people who will get a tax refund even though they don't pay taxes.
In the end, though, usually it's the president who gets credit for these types of bills. Throughout history, the president has received credit for the economy, whether it is going well or going bad, not Congress or the Senate, and not the treasury department for that matter either.
Do we really need this stimulus package? Is the economy that bad?
David Gitlitz of NRO.com writes that "fortunately, for all the pessimism, the economy continues to show healthy signs of life. One of the biggest stated concerns of the Fed is that the credit-market upheaval will have the effect of restricting the availability of credit, with banks reluctant to extend new loans to firms. But commercial-and-industrial lending remains robust, with growth at an annualized pace of nearly 30 percent over the last eight weeks. Since 2004, the average eight-week annualized growth rate of C&I lending is just 13 percent."
He wrote that Barnanke predicted that weaknesses in housing demand to weigh down consumer spending, yet during the past two years of which the housing market has been going down, "but personal-consumption spending was still on pace for growth of about 3 percent... and wages and salaries were running at an annual growth rate of better than 5 percent, up substantially from levels below 0.5 percent at the middle of last year."
While the unemployment rate has recently gone up to 5%, that is still below the average rate of the past 30 years of 6%. And, he adds, "During the economic revival of the 1980s, the rate never went below 5 percent."
And, finally, he writes the following:
"Typically, recessions have been caused by tight Fed monetary policy. Every recession over the last 40 years was preceded by the Fed putting the real inflation-adjusted fed funds rate above 4 percent. Today the real funds rate is just above 2 percent, and it’s headed lower — meaning all the recent recession talk is cheap."
I have found this and other information that shows that we are not headed into a recession, and I just happened to have Mr. Gitlitz's column handy. But the information is relatively the same in all of them.
So, are we really headed into a recession. Is the economy really that bad right now, or, as Mr. Gitlitz writes, are we just talking ourselves into one.
Like I said, I don't know the answer. And in the next few days I'll analyze this from the other side and see if I'm missing something.