Richard Whalen

Does anybody get it? Bush thinks he is a national hero because he is cutting Americans a check for $600 – politically called his stimulus plan – that will make it all right with the world. And the Democrats, just to look good, are now calling for another, bigger, better stimulus package. Does anybody in Washington think that Americans are going to spend their little check “wisely” -- pay their mortgage, maybe, or their Visa card? Yes little -- what does $600 pay for these days?

The Bureau of Labor Statistics reported that 80,000 jobs had disappeared in March. The news inspired Speaker of the House Nancy Pelosi to propose a second economic stimulus package that would include the mailing of tax rebates to millions of Americans beginning next month. But the real numbers are scary. The Bureau says that the March decline was the largest job loss since March 2003 when the economy was still shaking off the lingering effect of the 2001 recession.

Now here’s the real headline: SINCE THE START OF THE YEAR, 232,000 JOBS HAVE DISAPPEARED. And incredibly enough, we still have economic journalists and TV commentators who are wondering if we are in a recession? As I have said in previous blogs, we have been in a recession for at least a year, perhaps longer. The real question is whether the “R” word is turning into the dreaded “D” word?

Going back to the Great Depression, the reason why unemployment soared close to 25 percent was that the Federal Reserve cut the money supply as the downturn deepened. Big companies faced credit squeezes. People who had invested in stocks were suddenly broke or jobless. Or their bank failed on them, so they could not draw all their savings from the bank. So like a classic case of dominoes, this caused the upper class to be unable to pay the middle class, which made the middle class unable to pay the lower class etc. Simple, right?

“Many economists restated their forecast that the Federal Reserve’s policymakers will drop their benchmark short-term interest rate when they meet on April 30 – perhaps by as much as half a percentage point in an effort to lower the cost of credit and thus stimulate spending,” reports the New York Times. To date, I do not see past or prospective interest rate cuts doing much, if anything to get our economy going. As in the 1930s, the Fed is pushing on a string.

I think Bush’s “stimulus” plan is just plain bogus – a sad joke that certainly is not making the American people or the international community interested in investing in the U.S. market.

And so what’s next? My friend, John Crudele, who in my opinion is one of the smartest business writers around, offered the following solution in his New York Post column on April 8. He writes: “… My belief [is] that the only stimulus package we can afford right now is one that allows people to spend their own money. In other words, what we need is a simple law change that will permit Americans to use their own retirement money – without being killed by taxes….”

Is this a radical idea? No, it is a brilliantly simple suggestion – a law change that is long overdue.

John continues: “Americans have socked away more than $10 trillion in various kinds of retirement plans. And if you give them a good excuse – like attractive home prices and relief from onerous tax penalties – many might be happy to give the housing industry a lift…. But no matter what percentage we decide to free up, it’ll make [Bush”s] $150 billion economic stimulus package – which we can’t afford anyway – look like small change.”

Cheers for John Crudele -- I hope all the CQ Politics readers will help get his recommendation into the right hands on Congressional tax-writing committees.