It's the Stimulus Package, Stupid

For those who were listening last winter when Alan Greenspan called Washington fiscal policy a "blunt instrument," for softening recessions — well, Washington fiscal policymaking doesn't get much blunter than this. Tuesday — twelve weeks to the day after the Sept. 11 attacks and nine since lawmakers promised to act on an economic stimulus package "deliberately but with dispatch" — three members from the House and three from the Senate finally got around a table to try and get something on George W. Bush's desk by, say, Christmas.

"It's time to go to work," said House Republican Bill Thomas after the group's first sit-down. Economists from Wall Street to the White House, meanwhile, are thinking "too little, too late." Manufacturing looks to have bottomed, inventories are being sold off and consumers are still spending — the contraction that began in March is expected to give way to some form of recovery in the next six months. An extra $75-$100 billion in tax cuts, extended unemployment and extra health insurance might add a few tenths of a percentage point to GDP growth in 2002 — but it's not going to change the schedule appreciably.

Trying to help

What a stimulus package will do, though, is make it look like Washington is trying to help. That's why Bush was willing in Orlando Tuesday to signal a GOP retreat on a retroactive (to 1986) repeal of the corporate alternative minimum tax. It's why Senate Democrats — though they couldn't actually pass a bill — finally let go of their weeks-long fight to load up the package with antiterrorism spending and farm subsidies. After spending the better part of three months jostling for ideological goodies to present to constituents ahead of the 2002 elections, Congress may be finally figuring out that if there's anything that constituents of any stripe don't want when they're hurting, it's absolutely nothing.

Here's what they're likely to get, one of these days: Extended unemployment benefits and a new round of tax rebate checks for lower-income workers, along with some faster tax-write-off rules for businesses investing in capital equipment. And whatever compromise emerges from a still-vicious fight between the Hasterts and the Daschles over health care subsidies and whether to accelerate various middle- and upper-class marginal-rate tax cuts in Bush's $1.3 trillion baby of last spring. Republicans say that's where the stimulus is; Democrats say they're welfare for the rich and a budget-buster besides.

Bush has long since stopped worrying about the reborn deficits that his tax cuts, the war on terror and the business cycle will be visiting upon America for the next several years — another $75 or $100 billion is a drop in the red-ink bucket. But he is becoming very conscious (again) that his father's wildly popular war on Saddam didn't save him from the 1991 recession, and that the longer the 2001 recession lasts — and the longer George W. is seen to be gazing overseas while the home front burns — the fainter voters' memories will be in 2004 of the way he fought his war. And he just wants something he can sign.

Casualties

Some time this winter, he'll get it — Congress would be too embarrassed not to have done something — and the economy will likely recover just in time for all sides to claim that it was their policies that did the trick. But there look to be at least few casualties along the way. The New York Post has it that one is Treasury Secretary Paul O'Neill, who after getting jilted at the altar by John Breaux on a Senate compromise bill started telling reporters that the recovery was imminent anyway. When your job is to sell your boss' agenda to the Hill, the boss doesn't take it to kindly when he demands a bill by Thanksgiving and then has to demand it again by Christmas.

The other may be a death of credibility — that Wall Street, after living since Sept. 11 in a world whose economic center of gravity had shifted to Washington, should probably take this cue and stop looking southward for help when the business cycle goes south. Private economists, who have been factoring an economic stimulus package into their recovery forecasts since the attacks, are already reaching the point when it's ceasing to matter much one way or the other. As Washington dithered the fall away, the markets charged back past their Sept. 10 levels and consumers made their way back to the stores. Whatever happens in the spring will happen with or without Congress' help.

Of course, back in the 90s, when the living was easy, Wall Street and the private sector always did love it when Congress was at each others' throats — it kept them from smothering the economy with their clumsy, pork-driven attempts at kindness: Fiscal policies that were enacted too late to be helpful and whose effects always lingered long after they were healthful. When it came to the economy, the best thing Washington could do was stay out of the way.

Maybe life is getting back to normal after all.