Saturday, January 26, 2008

Economic Stimulus for an Overheated Economy

For the last couple years, Americans have been having a party buying overvalued houses at prices they knew they could not afford, taking advantage of the lowest interest rates in our lifetimes, on the assumption that those rates will last forever. Those who already owned homes have been partying even harder, spending in a flash the home equity they spent their lives accumulating.

At the same time, our government has been having its own party, invading Iraq; invading Afghanistan; threatening Iran (threats that include naval battle groups sailing foreign seas are not cheap); funding proxy adventures (e.g., Ethiopia in Somalia); and generally building a military force fancier, bigger, and more expensive than that of the whole rest of the world put together.

Whether or not these parties are justified is not the issue here: my point is simply that they have been expensive. The Government paid for its debts by borrowing from the very considerate leaders of the People’s Republic of China; the American middle class would like to pay by getting a deal from the Government, which will pay for the deal by getting another deal from those very considerate Chinese Communist gentlemen.

Now that some chickens are coming home to roost, the Bush Administration is offering some incentives for us to…save? reduce both personal indebtedness and the national debt? enhance productivity? plan our lives in a more mature fashion? trim the incredibly, grossly overweight national offense budget? Well, no…the incentives are designed to spike our drinks and keep the party going for, presumably, at least one more year.

I have summarized all this in somewhat casual terms without any erudite discourse. But I am just a political scientist, not an economist, so what do I know, anyway? Maybe someone else can explain the logic of all this to me, but please, no sarcasm. There’s enough of that around here already.

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