Feb

18

It’s Still the Economy (Stupid)

Filed Under 2008 Election, Economics, Press Release, Taxes 

Contact: Brad Jansen

703-470-5042

vern@mckinleyforcongress.com

Ashburn, VA—Voters in last week’s Potomac Primaries in Virginia and Maryland responded that the economy was the top issue of concern to them in the midst of weakening economic growth and a potential recession. The House and Senate passed and President Bush signed into law last week a plan of action or “stimulus package” to address these concerns. What passed was a two-year $168 billion economic stimulus package that is meant to give the economy a boost. At the core of the economic package are one-time tax rebate checks to be handed out over the coming months.

When assessing the sensibility of the stimulus package the first question is whether the economy is actually in a recession. Although the economy is slowing, the National Bureau of Economic Research (NBER) is the arbiter of that issue and they have not weighed in one way or another yet. Historically, the NBER weighs in well after a recession starts, as they did not proclaim that the 2001 recession had in fact begun until eight months after it started. So last week’s stimulus package was approved even though it is uncertain whether we are in the midst of a recession. Further, a $168 billion stimulus package in an economy of $14 trillion is insignificant if it is intended to counteract a recession.

Another question to ask is where the money is coming from for this stimulus package. It is a misnomer that the government is injecting money into the economy, as a better way to describe it is moving money around. As the economy has been running at a deficit in the years since the last recession started in 2001, the money is being moved across generations.

“I think that politicians in Washington want to be seen as ‘doing something’ about the troubled economy,” notes Vern McKinley, who is challenging Congressman Wolf for the Republican nomination in the 10th Congressional District of Virginia. Congressman Wolf of Virginia voted for the stimulus package as did most members of the House.

“There are a few good provisions in the package, but the idea that giving out rebates in this manner will give a significant boost to the economy is silly. Any stimulus of this size would not stop a recession if one is already ‘baked in the cake.’ In order to pay for the rebates the government is going to have to borrow in the market. Borrowing from future generations to pay for consumption today is not a good idea. I think we have done enough of that the past few years,” notes Vern McKinley. “We need to focus on longer term issues, like getting the corporate tax rate down or extending the earlier round of tax cuts, which will improve long-term growth prospects,” McKinley concluded.

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