Thursday, February 12, 2009

Whither the economy, whither Barack?

WASHINGTON - U.S. retail sales jumped 1 percent in January, reversing a six-month declining trend and defying economists’ expectations by posting the biggest increase in 14 months.

The data are a glimmer of hope for a recession-hit economy, but higher gasoline prices and sales, and buyers snapping up other items on post-holiday discounts, appeared to aid last month’s results. Analysts cautioned that the relief is unlikely to last.
(Associated Press)
I've been saying (not in print) that I believed the government did enough with Tarp I to keep lending markets from freezing up. I've also been saying that I think the U.S. culture is so enamored of buying things that not even the economists and mainstream media in concert can stop them.

But this isn't an "I told you so" post. Not exactly.

I'm not as sure about it as I was.

I think the GOP push to assist the home-buying market would have been the most effective part of a stimulus plan, since it should have established some kind of floor under home values thrown into flux. In turn, that would start the revaluation of securities currently valued in terms of either zeros or question marks. I heard that on Hugh Hewitt's radio program and it makes sense to me.

The stimulus bill we're getting looks like a stinker to me. I don't see much real economic stimulus in it, but I do see quite a few pet Democratic programs, as though the idea was "We need to spend, so bring out your Christmas lists!"

I think government and media have produced a climate in which consumers are largely in a waiting mode, seeing what the government will do before they make large purchase decisions. One would be relatively foolish to buy a house right now if the government is going to make it much easier in six months. That's just common sense.

President Obama has made the situation worse by predicting calamity if (what we can now call his) stimulus bill fails to pass.

On the other hand, his speech appeared to boosts the popularity of the package, and if that sparks consumer confidence (even if the focus of that confidence is poorly founded), the overall effect may be positive in the short run.

Politics being what it is, even if the Democrats make the economy worse and prolong the recession there is no guarantee that it will hurt them politically. How do you judge the effectiveness of a stimulus package? The most popular methods involve post hoc ergo propter hoc, the practice of attributing what comes after to what came before, and cum hoc ergo propter hoc, where if two things happen at the same time one figures to have caused the other. Both are logical fallacies, though it is important to note that correlation of events does remain our best clue to establishing cause. It's just that a sample of one is a poor way to establish causation.

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