Intersecting Minds: Education, Business and Technology at the North Carolina State Jenkins Graduate School of Management

Beyond the Stimulus | February 6, 2009

A nice article today from the New York Times, highlighting the legislative process at work. Good for the Senate to actually sit down and have an honest debate about what aspects of the stimulus will generate economic activity, and which ones won’t. This shouldn’t just be a Christmas tree from which Senators can hang their pet programs like ornaments, as Senator Susan Collins from Maine said so eloquently, yesterday.

It’s important to recognize though, that the stimulus is just the beginning. The federal government will continue to take an active role in the process of cleaning this mess up. The problems are simply too myriad for one piece of legislation to handle it all. Tim Geithner, Obama’s newly confirmed Treasury Secretary, will be holding a meeting on Monday to announce the new administration’s plan to revive confidence in our countries financial system.

This also segues nicely into my counter-argument against the Cato institute folks (represented by my friend), who would rather just sit back, cut some taxes, cut some government programs and call it a day. At its core, our finanical system and stock markets are predicated on a basic amount of confidence in our private sector. In order to purchase stock (and also to sell it), a belief must exist that our institutions will be solvent and able to serve their customers. If that confidence is shaken badly enough, people will stop buying those stocks and dump their shares. This is what we’ve seen happen over the last several weeks. Combine this event with all the other poor economic conditions such as unemployment, the housing crisis, and a global recession, and we ARE facing a potentially catastrophic situation.

Our economy needs a basic restoration of confidence before it can recover. The stimulus and the Geithner plan are as much about restoring confidence in our system as they are about actually fixing the problem.

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