No Second Stimulus

The US faced a genuine crisis at the end of George Bush's term. It looked like the financial system could collapse. But Bernanke, Paulson and Geithner took some drastic action that prevented the economy from self-destructing. So, now we are just in a regular, cyclical recession. Let it go.

It's as if a huge fire threatened to destroy a city. They called out all the fire departments in the region, and the put the fire out. There's a lot of destruction, but the rest of the city is no longer going to be destroyed. The extra firemen can go home.

The bankers and economists who run the government thought they had eliminated the business cycle, but it turned out that their attempts only postponed booms and busts and thus made them worse when the next one came. The only Fed chief who has faced up to a recession is Paul Volker. Greenspan tried to get out of them painlessly and created more pain in the process. Bernanke hasn't been tested, yet. We don't know whether he has an exit strategy, and if he does, whether it will work. In any case, the exit should be painful to reduce the risk and depth of the next recession. Nobody wants to inflict pain. It doesn't seem fair that the middle and lower classes should pay for the recession created by the supposed barons of Wall Street, but that's the way it is. A few of them will suffer, but many, like the employees of Goldman Sachs, will continue to profit munificently.

Rather than a stimulus, the US needs more of a social welfare net, more unemployment benefits, more medical care for lower classes, something like they have in Europe. Tax breaks for small business are not the answer, no matter how loud the Republicans scream that they are. But neither are a lot of make-work jobs. We just need to care for those who need it while the economy recovers on a regular cycle. In the meantime, we need to hold down inflation and support the dollar with some fiscal and monetary discipline.