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Tuesday, May 06, 2003
posted by gbarto at 3:28 PM:
Bush Urges Congress to Cut TaxesPresident says lawmakers should approve proposed economic package to provide relief to Americans
Probably not a bad idea. As to the deficit questions, the danger is not economic but psychological. That is, people obsessing over deficits could make it a problem; if the deficits are considered on their own terms they are not a problem.
I am writing in Silicon Valley, the heart of the bubble and the strongest source of difficulty for our economy and this is what I see: empty houses that people can't afford to move into. Empty apartments that landlords can't afford to rent at affordable rates if they are to pay their creditors. Venture capitalists scared shitless who won't relinquish a dime in investment.
People are, in a word, frightened by the climate. But it's here, and it isn't going away until we deal with it. That's bad news for the economy because we risk playing the same games as Japan if we refuse to adjust expectations. But on the deficit front, it gives us room to maneuver. Deficits aren't bad, in and of themselves. They're bad if interest payments are soaking up money that could be used for investment and government bonds are tapping off capital that would otherwise be invested. Those conditions do not obtain. To the contrary, there is plenty of money on the sidelines - if there's something to invest in, the capital is there to do it. And since it isn't being invested in the first place, the so-called crowding out effect isn't going to lead to money being pulled from riskier ventures for the safety of bonds.
What's needed is a way to get money to the people while big business and the 90s wunderkinds come to realize that they're going to have to do something in this world, lowered expectations and all, because sitting on the sidelines scared isn't getting them anywhere. This will take time. Time that they can take but time that the general public doesn't have. Let's do the tax cuts.
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