"Begin with the end in mind" - Steven Covey
I have never been a big fan of Steven Covey, or his Seven Habits, but I think when we're talking about the economic situation, all of the different bailouts, and where we are going to ultimately end up, I think Dr. Covey's habit of beginning with the end in mind (one of the Seven Habits) is applicable.
There is a wide divergence of opinion on the courses of action to take with regard to the economy.
There are some who don't think the stimulus plan on the table is bold enough (Paul Krugman)
There are others who believe that we should do nothing about the economy and let the market correct itself (Those from the Ron Paul/Lew Rockwell/Ludwig von Mises school of thought). Sure, there will be quite a bit of pain for a few years, but we'll be $1 trillion dollars less in debt, and the thinking is that the problem will correct itself cyclically like it always does.
Others (especially those on the far right like Rush Limbaugh, who has gone as far as saying that he hopes President Obama fails) feel like any massive government intervention smacks of Socialism and Liberal Social Engineering.
I'm not sure what the best course of action is. It seems like our only recourse now is to trust that the President and Congress are prepared to do the right things. This is something that does not inspire a lot of confidence. I feel some confidence in President Obama and the advisers he has surrounded himself with, but when was the last time Congress attacked anything this complex and did a decent job?
My biggest questions with regard to the stimulus is (whether it is $800 billion, or $1 trillion), what is the end goal of the stimulus? What are the measurements of whether the stimulus is "successful" (similar to questions I asked for a long time about Iraq/Afghanistan - how/when do we know if we've "won")?
Is the goal to get to a certain percentage of unemployment that is lower than the current level of unemployment? Is it a certain amount of growth of the economy?
What is the end game? Is the money going to be used in the most effective way? Or is it just going to be given out scatter shot?
Are we just throwing money at a problem and hoping that we just pull the right lever, or do the right combination of actions that will make the economy correct? How do you protect against unintended consequences - you take one action to correct one problem, which exacerbates a seemingly unrelated problem?
I know we don't remember much after a few months as a collective group, but I think it is so important to rewind and see where we've come from, and just how little our leaders understand what is really going on (read Tuesday Ramblings 9/24/08). The economic crisis is vast, complex and multi-pronged. Banks are failing. People are being laid off. People are losing their homes and businesses.
And if they don't really understand all of the prongs and how they inter-relate, how can we be expected to make informed choices?
Not that long ago (late September), we were told that if we didn't get $700 billion that week, the world economy was going to be in Depression within a short time (a matter of weeks they told us). The money was given. Basically a blank check from Congress, with little oversight, and little direction on what was to be done with the money by the participating institutions (and predictably with little oversight, instead of loaning the money and unfreezing credit, the banks used the money to acquire other banks, pay their shareholders and year end bonuses).
The economy has gotten worse since then, but nowhere near the levels of the Great Depression.
A little time went by, and they said that what we originally had planned to do with the $700 billion was no longer applicable - they didn't think the initial course of action was now the best use of the money. They have just recently again been wrangling on what to do with the second half of the $700 billion ($350 billion).
Now, they are getting ready to put through an additional large economic stimulus package with infrastructure projects (maybe up to $1 trillion by some accounts). The goal it is said, is to get people back to work and get the economy moving again.
But, what if it doesn't "work" and the US economy and the world economy continues to careen downhill? What then?
I've heard very few people seriously ask those questions - it almost seems like a lot of people feel like if we ask the questions, that might jinx the plan.
What about at the end (and the economy will recover at some point with or without a stimulus plan)? Will we just go back to the things that brought us here? Or will there finally be real change in how we view the economy and Capitalism?
Capitalism in the mode of Bear Stearns, Freddie and Fannie, Citi, Countrywide, etc, is NOT sound Capitalism.
It also seems like, and has seemed like for a long time, at least to me, that we are still operating in a panic mode, both at the macro level and the micro level.
Maybe the President and his economic advisers drawing up these plans are not operating in crisis and panic mode - if that is the case, they need to do a better job of telling us that and showing us that.
When you operate in the panic mode, very few true and lasting things can be accomplished. Imagine if US Air Captain Chesley "Sully" Sullenberger would have panicked in the face of the events of US Air flight 1549?