PrintDecember 24, 2008
How to fix this recession
The headline at The Globe and Mail reads, "US Falls Deeper Into Recession." The sole data backing up its headline is that jobless claims went up again. Newsflash: unemployment is a lagging indicator; it will continue to rise after the recession is over. The last we heard was that the third quarter GDP shrank 0.5%, a "revision" that left the previous estimate unchanged.
But the interesting point of the article, to me, was this segment:
"Governments across the world have tried to boost expenditure to ease a recession ... with Japan and Germany becoming the two latest countries to unveil new spending programs."Japan's government approved an 88.5 trillion yen ($980.6 billion) budget, its biggest-ever, to cover a 12 trillion yen fiscal stimulus program and Germany pegged its second spending package at 25 billion euros ($34.97 billion).
"But some economists have said increased spending so far has failed to boost confidence among consumers, markets and investors." [My emphasis.]
Maybe instead of a surge in spending and "stimuli", what we need from our governments is a surge in responsibility.
Here is my modest 3-step proposal: (1) do government accounting just like honest businesses do accounting (e.g., include future Social Security payments as liabilities); (2) produce a taxing and spending plan that is consistent with that accounting; (3) then execute that plan.
Imagine the boost in "confidence among consumers, markets and investors" if they knew the government had a predictable and responsible plan for the 40% of the economy it controls directly and the other 60% it merely regulates.
If "confidence" is the problem, a trillion dollar bailout here, a trillion dollar guarantee there, a trillion dollar take-over here and a trillion dollar stimulus there, all without a clue as to where the money will come from, are not the kinds of things that build confidence.
The plan in a sound bite: "honest, responsible and predictable government budgeting."
Crazy, I know.
