Not stimulus at all

Perhaps I was a little late coming to the understanding, but others haven't even come close. Even by classic Keynesian logic, that $787 billion monstrosity wasn't a stimulus bill. There was little in it that would pump money into the economy in anything remotely resembling a timely manner. As this Register editorial explains, it repeals the Clinton-era welfare reform and puts in place numerous heavy-spending programs that won't be implemented for years. A wish list granted. But if the economy recovers, it's more likely to be due to natural forces, as Esmael Adibi explains, than through this spendathon.

Temporary end of bailouts

I just learned that the Federal Reserve has authorized an $85 billion -- with a b -- loan to insurance giant A.I.G., so the rash of government bailouts of companies that should have been allowed to fail -- Schumpeter and creative destruction and all that -- may not be at an end. To be sure, this is a loan, not a buyout, so there'a at least a chance taxpayers might be paid back. But it's another sign that the U.S. has contracted the Japanese Disease (which Japan might be shedding) of considering certain enterprises "too big to fail, and therefore worthy of injections of taxpayers money. They call it "stability," but it's more like a formula for economic stagnation.

However, Secretary Henry Paulson at least declined to bail out Lehman Brothers over the weekend, for which this Register editorial praised him. As it further argued, we're in for some rough economic times. Esmael Adibi, director of the Anderson Center for economic forecasting at Chapman University (run by Friedmanite disciples) told me he thinks we are in a recession now, which will be declared by the National Bureau of Economic Research (which officially declares such things) in the six months or so it typically takes them to gather and analyze all the relevant data. There's no painless way out of a recession, but the shortest and least painful is to let those who made bad decisions or hit bad luck take their hits and learn (temporarily) to avoid those excesses for a while.

Robert Samuelson at the WaPo argues that the business model the financial markets -- lots of leverage, exotic investments, derivatives -- have developed over the last 20 or so years has failed, and it's time for a new model, more conservative and reality-based. I suspect he's right. But bailing out those who have followed the model will only delay necessary adjustments to reestablish the economy on a sounder basis.