The so-called economic stimulus plan died Wednesday, a victim of Capitol Hill gridlock. Thank goodness.
Republicans wanted to spend $89 billion to goose the economy this year; Democrats had their own $69 billion plan. Both agreed that people put out of work should be able to get an additional 13 weeks in unemployment benefits.
If chummy bipartisanship had prevailed, maybe they could have split the difference. But the philosophical divide between the two parties over how best to confront the economic aftershocks of Sept. 11 was simply too deep.
So it’s dead.
Because of that the nation has saved itself at least $69 billion in unwise spending and is that many billions closer to returning to balanced federal budgets. Glory be.
This isn’t the first time the nation has been saved from unwise spending by partisan wrangling. Gridlock came to the rescue back when a Democrat was in the White House and Republicans controlled Congress.
As the economic boom gathered force in the late 1990s, tax payments poured into government coffers faster than even the most optimistic forecasters could count. Budget surpluses just kept growing. Democrats wanted to spend it; Republicans wanted to give it back to taxpayers. But they could never agree on a plan and the serendipitous result was that much of the money went toward paying down the national debt–at least for awhile.
Now gridlock comes to the rescue again. Allowing those out of work to collect an additional 13 weeks of unemployment benefits is humane assistance. And that assistance may yet happen. But just about everything else in both stimulus packages had more to do with political positioning for the November election than rushing to the economy’s rescue.
Furthermore, the economy doesn’t need Washington’s meddling. After cutting short-term interest rates a record 11 times over the last year, the Federal Reserve passed up the opportunity to make it an even dozen this January because the outlook is now brighter.
No, we’re not out of the woods yet. But this may turn out to be one of the shortest and mildest recessions on record. The economy actually grew–albeit marginally–toward the end of last year. The jobless rate dropped last month.
The latest sign? Worker productivity surged late last year. That stunned economists who expected it to fall as it normally does when the economy slumps. Higher productivity is what allowed the U.S. to barrel ahead so strongly without igniting inflationary pressures during the late ’90s. This means the stage may be set for an early resumption of solid growth.
It appears that the remarkable American economy is still resilient, even after the bursting of the high-tech bubble, the horrific tragedy of September, and a financial scandal that has shaken investors.
The politicians may not want to acknowledge it, but gridlock was precisely the kind of “stimulus” this economy needed.
