January 25, 2008
With credit markets shaky and fears of a recession growing, the Federal Reserve wisely responded earlier this week with a dramatic cut in short-term interest rates.Given the current economic concerns, however, further action is required in Washington. The compromise package worked out between the House and the Bush administration moves in the right direction.
The deal, announced on Thursday, promises to give the economy a needed boost through tax rebates and other measures.
The plan would not necessarily prevent a recession but, combined with appropriate monetary policy, could help the situation. And if there is a recession, the proposed package could help reduce its severity.
The plan is far from perfect, and the Senate should try to make reasonable improvements. Senators, however, should act quickly; Washington may well be behind the economic curve already.
An even larger package might be in order, as some economists have suggested. The deal announced on Thursday left out some measures — expansion of the food stamp program, for example — that could be done most quickly.
The Bush-House package also includes a questionable plan to provide more support for mortgages for high-end homes, reportedly without reasonable safeguards. Some additional scrutiny on this in the Senate would be helpful.
The entire stimulus package would add significantly to the deficit in the current fiscal year. That’s a sobering consideration, given the government’s $9.2 trillion debt and other unfunded liabilities.
It is irresponsible for Washington to borrow more money when the economy is booming, as this newspaper has often pointed out. During more difficult and uncertain times, however, some deficit spending can be justified to pump up the economy and ease the strain on those who have only limited resources.
The Concord Coalition, a bipartisan budget watchdog group, is urging that the final legislation “be carefully designed to have its maximum effort in the very near future, minimize costs in later years, and provide the greatest stimulus for the amount of spending or tax relief.”
In other words, Congress and the president need to make sure we get the most bang for the buck. That’s good advice.