Economic Stimulus II

Jon Kyl demonstrates again why he's my favorite Senator with his wise words about the foolishness of band-aid, short-term measures to address the impending recession. Only two short-term responses make any sense: measures to help prevent foreclosure for families on the brink, and temporary measures by the Federal Reserve to improve liquidity in the credit markets (though the latter needs to be treated with great caution, because too-low interest rates is what got us into this pickle in the first place*).

"Immediate" rebate checks and government spending will not address the real problem, which is that wages for most workers are not keeping up with soaring costs of living necessities such as housing, fuel, and health care. We delayed the effects of this problem for a few years by borrowing against rapidly-rising housing equity, but that well has run dry and set off a domino effect on the economy making things even worse. Rebate checks and government spending ("Keynesian prescriptions" as Sen. Kyl says) are just disproven snake oils for recession. We have to focus on raising wages and lower costs of necessities.

How do we do that? The best way to raise wages is to export more goods and services. Americans are already over-consuming and not saving, so there isn't any room (in a sustainable sense) to raise consumption domestically to improve demand and wages. But there's a rapidly growing middle class in Asia interested in buying things America has to offer. We need to facilitate that by lowering built-in costs in American exports, such as embedded high taxes, health care, and legal liability costs. To the extent the government helps expand demand at home, we should be building up our defenses and infrastructure, and do it in a long-term way that will provide a steady stream of work, not a short-term spike in retail sales.

Lowering health care costs is a two-fer, because it is also one of the big factors causing the economic squeeze at home. Another two-fer is investing in alternative energy sources and expanded domestic energy production to keep energy costs under control, which will also entail new, high-paying technology jobs. On the flip side, we have to be careful about propping up the deflating housing market by lowering interest rates again, because that only makes housing less affordable to anyone who doesn't already own.* Our economy needs to get away from dependency on housing prices to achieve real growth.

Guess what? All these prescriptions are in Mike Huckabee's economic stimulus plan! Check it out, and vote for a rare politician who doesn't fall for the counterproductive urge to "do something now" that will only make things worse in the end.

(I think we've been looking at the wrong Senator from Arizona: Huckabee-Kyl 2008, anyone?)

* If you're not aware of how the Fed's interest rate cuts from 2002-2005 are the chief cause of the housing crisis, I'll post an explanation of that later.