Apparently, Rudy Guiliani said that what we need to stimulate the economy is a major tax cut. So we're already running a deficit - $164 billion in the last fiscal year. Now I'm not necessarily a stickler on zero deficits - when we borrow to invest in infrastructure like roads and bridges and stuff that will help grow the economy, that's OK. When we borrow to finance ongoing things like government operations, that's not a good thing. So a big problem with the economy right now is that people are overextended - they've already borrowed a lot and can't afford what they've already borrowed. So why does it make sense for the government to borrow more money to finance a tax cut? It's either pay now or pay later.
Seems to me what we need is structural changes in banking regulations to ensure that the subprime debacle can't happen again. There needs to be more of a balance between the unfetterred market economy and overregulation of the economy. I happen to think that at the moment we've leaned too far to the unregulated end. Time for more of a balance.
That won't help in the short run, of course. I supposed we're going to have a stimulus - seems like $150 billion or so, presumably in borrowed funds - will get sent as rebate checks, possibly by June 30. What I'd rather see is direct debt relief for those underwater in their mortgages. That could take the form of loan refinancing backed by the Fed of Fannie Mae or something, combined with several months of direct payment forgiveness while all that is being worked out. If we are going to spend $150 billion of the next generation's taxpayers money, let's help the people directly who need it most: those who, in many cases through no fault of their own, are now in trouble with their mortgages. Let's not foreclose on any more houses the rest of the year. I'll bet $150 billion could go a long way to helping with that.