Everyone has an Opinion

“The worst part of the Recession is behind us” – Forbes Magazine.
“No Way we will see a recovery in 2009” – Market Watch
- Two headlines next to each other on RealClearMarkets.com.

Looking at the economy today reminds me of the old joke about accounting. “Q: What’s 1+1? A: Whatever you want it to be.” Everyone has their own perspective on where the economy is and what it is going to do or not do. Everyone has a theory but no one has answer. A stimulus package will (or not – depending on your point of view) get the economy rolling again. A lot of writers such a Paul Krugman advocate heavily for the idea. However, there is a Scarlett O’Hara feel about their answers when asked about the resulting amount of massive public debt that will be loaded on the country. “We will worry about that tomorrow” the stimulus advocates say, and then they return to working out the number of zeros to write in the check.

A lot of ink has been spilled on both sides of the political aisle discussing the stimulus approach and its effect. The conservatives have started taking shots at the public works projects from the New Deal (Brit Hume’s comment “Everyone now agrees that the New Deal was a failure” is typical). The liberals blame Hoover’s determination to balance the budget for deepening the crisis. They are convinced that Hoover didn’t spend enough, soon enough, to ward off the collapse. Both sides conveniently ignore the Smoot-Hawley act which raised protectionist tariffs choking the flow of trade and capital throughout the world. Arguably this was an even greater cause of the Depression than any action by Hoover.

People can’t’ even agree on how bad or good things actually are. The two headlines that appeared next to each other on RealClearMarkets.com are typical. The writers for Forbes cite a sack full of statistics and comparisons’ demonstrating the economy is stronger than it was in November and is clearly on the upswing. (http://www.forbes.com/opinions/2009/01/12/recession-stimulus-unemployment-oped-cx_bw_0113wesburystein.html) Things are looking up the writers tell us – the CPI went down 1.5% which meant spending power went up 1.5%! New claims for unemployment dropped from November to December. Theirs is an interesting argument that if we do nothing we will be ok – the worst is past us.

The author from Marketwatch disagrees. (http://www.marketwatch.com/news/story/Dont-conned-thinking-there-a/story.aspx?guid=%7BDD152E8A%2D13D9%2D4CBE%2DB444%2D7BE9F3148685%7D)
The market will continue to go down the author asserts, companies will continue to restructure, and there is no end in sight for tight credit. There may be no turn around until late 2010 or 2011. Put your money in the US dollar and Grade A Muni bonds. This is just the dark before the storm.

Before we can address the economic problems we have to understand where we are. This understanding has to develop untainted by a partisan or ideological perspective. Republicans do themselves and the country a disservice if they vote only for tax cuts and don’t back targeted spending increases and targeted tax increases. Democrats will have to understand some tax cuts are needed, and maybe not all the stimulus proposed is a wise use of money. Both sides will have to make their decisions based on what is right for the economy and not to meet an ideological requirement.

Only when everyone involved is honest on how we got in this mess, and is honest that it will take pain and sacrifice get us out of it, will we begin to move forward. Fixing these economic issues will also take compromise, trust and working together. Coming up with a stimulus package is the easy part, creating that trust will be the hard part.

But it must be done, not tomorrow but today.