The Wall Street Journal‘s Mark Gongloff quotes Lehman economist Ethan Harris in this morning’s “Ahead of the Tape” column:
In the rush to enact a timely package, politicians may have stopped a 2008 recession, but they have ignored a risky letdown — after the election. [The U.S. faces ] another brush with recession in 2009″ [for this reason].
Gongloff adds that once the “stimulus cocktail wears off,”
…home prices seem likely to keep falling, weighing on consumer balance sheets, confidence and spending. The expansion after the the 2001 recession … was partly fueled by more than $1 trillion in borrowing against home equity. It is hard to see the economy getting that lift this time.
Even if the stimulus package serves to help the political class survive the November elections, it still remains that (as Hazlitt pointed out) the longer and indirect consequences of policies or actions are those that the good economists will focus on. Unfortunately, democratic capitalism produces politicians and the economists who focus purely on short-term results. Until the rank-and-file realize that it is the expanding nation-state itself, with its monetary inflation and government spending, that has created this mess, and that more of the same can only prolong the inevitable (and make it worse), then the next few years will look like the 1970s all over again. This time, could we at least be spared the disco?