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Stimulus Package Is Bad News For The Economy

Once a bright and hopeful prospect, the proposed stimulus package has actually become a negative influence on the U.S. economy. As is so often the case, the stimulus bill has become something else – an opportunity to reshape government's influence in the economy, as well as fund a lot of programs that wouldn’t otherwise be funded if they had to stand on their own merit.

While reasonable people disagree on what kind of stimulus the economy needs, or what the effect of certain programs might have on stimulating the economy, these debates probably have little effect on the economy in the short run. The trouble with recessions is that they are somewhat of a self-fulfilling prophecy; once people's attitudes turn negative, spending is reduced, and it sets off a chain of events that deepens the troughs.

Consumer confidence and business confidence levels then become primary to reversing economic downturns. That’s the very reason the proposed stimulus bills are having a net negative impact.

In order to get your particular program in the stimulus package, one has to argue that the amount of stimulus needed is larger than thought; in order to gain support, you must make the case that the situation is dire. So instead of being seen as part of the solution, passage of the stimulus package rides on making the situation out to be as bleak as possible.

The problem is that this is eroding consumer confidence at the very time it is desperately needed. The American public is cynical; many believe they’ve already been misled and the situation overstated in order to get their buy-in. And they’re resisting a stimulus package that is overwhelmingly not geared to create stimulus but provide for long-term expenditures that are more about policy than economics. Consumers are tired of fear and urgency being used to replace discourse and well-thought solutions.

This strategy of creating a problem so one can push the remedy isn’t new; it’s an old advertising trick. The environmental movement, for instance, has used this strategy with great success. While creating a problem and then providing a solution to achieve other aims may be good politics, it isn't necessarily good policy.