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December 3, 2001
Are Government Leaders Taking Action On Economic Stimulus Simply So They Can Say They Have Taken Action? It Appears So.
Congress and the President need to proceed cautiously in developing an economic stimulus package. Why? Mainly because we don't know what we don't know. That is, since all economic recessions are unique, we don't know if the fiscal and monetary policies that led us out of past recessions will be effective to lead us out of the current one. We don't know what we don't know. And that is why columnist Gene Steuerle urges Congress and the President to proceed cautiously.

Below are excerpts from Steuerle's column. Please feel free to quote from or reproduce the column. And, if you do so, please let us know.

    The first response of President Bush and the Congress is exactly the right one. More crucial than anything else is to maintain some sense of balance, to avoid a cycle of fear, and to make it clear that the nation can act decisively. But staying on this difficult psychological course requires many careful steps.

    In the face of our not knowing what we do not know, it becomes easy for lobbyists to push for provisions they have been advocating for years, if not decades. And under some circumstances these provisions may have merit. But make no mistake about it, few of the many provisions in the stimulus package are well-considered responses to our new circumstances. Indeed, they provide direct evidence that our elected officials do not know what to do. I don't fault them for this failure because few, if any, of us are any better off. I just want them to be adults about it. Sometimes one has to have patience, as hard as that may be.

    What about the macro question of making sure that enough money or incentives are put into the economy? Well, in the first place, much of what is being proposed today is not much of an incentive anyway. One can always promise to set aside some funds to hit whatever budgetary target one wants. The macro question can be separated from the micro one. The best bet at this time is to concentrate on what everyone agrees has to be done -- for instance, putting the right equipment in airports and post offices and providing for the military. Later we can spend whatever built-up funds might have been reserved temporarily by holding other decisions in abeyance. Slack in the budget for the near-term is now as necessary as is slack for the long-term. This is not an easy process for the politician to accept. It means that maybe someone else will beat him to the money. It means telling the public that he doesn't have all the answers now.

Please contact Tax Analysts for the full text of Steuerle's column.

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