Thursday, January 31, 2008

Debt and recession

Senator Bob Corker has announced that he will vote against the bipartisan economic stimulus package endorsed by President Bush, Nancy Pelosi, and key Republicans and Democrats alike. Corker believes the stimulus plan isn't a real help to our economy, and its motivation is entirely political on the part of both parties:
"This is not about economics," said Corker, R-Chattanooga. "This is a political stimulus to make people around the country feel good about us here in Washington."

"I'm truly happy for people all across our state who will receive a check from the government," he said. "Any time anybody can receive a check, a refund if you will, I am happy for them in that regard."

But, he added, "I know in my heart all we are doing is damaging our country."

"I believe that low taxes stimulate the economy," Corker said. "But I also believe that the only way to keep low taxes in place is to control spending."

I am glad to be getting such a sizable tax rebate, but some of the authors of this plan within both parties are expecting that the American people will spend the money and stimulate the economy through that spending. A good chunk of the coming refund in my household is likely to be saved, not spent, however. In fact, it seems to me that consumer over-spending has created much of the present economic difficulty we are in. Democrats are keen to blame Republicans and Republicans try to find a way to blame Democrats. The roots of the present economic crisis did begin during the Clinton Administration, but we can't really blame Bill Clinton for it. We can blame Americans themselves who decided they "needed" things that they could not afford and were willing to go into debt to pay for them, when they knew that their ability to repay the debt was questionable. Banks and credit card companies (most of which are in fact managed by large banks) lent money to people they knew were high-risk at interest rates that made the loans even more difficult to repay. Mortgage lenders gave loans to very high-risk customers. Now consumers are complaining about the debts they can't repay because of unholy levels of interest, and lenders are complaining because they took risks that in former times any responsible bank would have avoided.

Political incumbents will benefit from the stimulus proposal, but the country very well may not in the long term. The stimulus plan may encourage a resumption of the unchecked consumer spending spree that got the country into the present recession to begin with.

Senator Corker continues to pleasantly surprise me with his conservative good sense. Even when voting against a popular proposal, he gives a very sound and very conservative reason why.



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