Some harsh words on the economic stimulus checks, from a Wall Street Journal op-ed written by Ernest S. Christian and Gary A. Robbins, both former Treasury Department officials:
Washington can be counted on to create a crisis—usually by sheer incompetence. Then it rushes to the rescue, often doing more harm than good. Late last year, with an impending recessionA recession is a significant and sustained decline in the economy. Typically, a recession lasts longer than six months, but recovery from a recession can take a few years. , Congress rushed forward to spend more money. The plan was to send $106 billion of Economic Stimulus Payments—typically between $1,200 and $1,800—to millions of American families.
The planners predicted people would immediately spend the money on additional consumption and that increased demand, especially for consumer durables, would stimulate production, boost the economy, and forestall recession. In January, House Speaker Nancy Pelosi declared that 500,000 jobs would be created.
. . . But people have not gone on a spending spree. Recent Commerce Department data indicate that less than 10% of the stimulus money is being spent on new consumption.
In a classic case of government working against itself, other more powerful government actions, including the Fed’s extraordinarily loose monetary policy, have boosted inflationInflation is when the general price of goods and services increases across the economy, reducing the purchasing power of a currency and the value of certain assets. The same paycheck covers less goods, services, and bills. It is sometimes referred to as a “hidden tax,” as it leaves taxpayers less well-off due to higher costs and “bracket creep,” while increasing the government’s spending power. and caused families to restrict purchases, especially in the case of higher-priced consumer durables. Overall, compared to last year, the quantity of consumer durables purchased has declined by 1.5%. Retail sales are sluggish. Contrary to Ms. Pelosi’s confident prediction, the economy has shed 460,000 jobs since December.
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