Steven Pearlstein: Expensive, Dangerous and Necessary

[babylonsister]

Expensive, Dangerous and Necessary

By Steven Pearlstein
Friday, January 16, 2009; Page D01


Over the past several weeks, two unpleasant realities have come into sharper focus.

The first, which has come in the form of public speeches and private warnings from top officials here in Washington, is that the government is going to have to commit a lot more money and become a lot more active in managing the economy if it is to prevent a financial and economic collapse.

The second is that there's only so much government policy can do.

That's the tough political sell for congressional leaders and the incoming Obama administration as they seek to win the country's backing for a big new economic stimulus bill and a second round of bailout money for the banking and financial system.

There is already a strong political backlash against the federal rescue of the big banks and the Detroit automakers -- from the left, which thinks it was nothing more than a Bush administration bailout for rich bankers who caused the crisis in the first place, and from the right, which sees it as the first step toward socialism. And now Americans are told that notwithstanding the enormous sums already committed by the Treasury and the Federal Reserve, it wasn't enough to "fix" the problem and that much more will be needed.

The dilemma was nicely summed up yesterday in a press release put out by the House Appropriations Committee outlining its plan -- a pretty good one, by the way -- for $550 billion in "investment" spending designed to stimulate the economy.

"The economy is in such trouble that, even with passage of this package, unemployment rates are expected to rise to between 8 and 9 percent this year," the committee said. "Without this package, we are warned that unemployment could explode to near 12 percent."

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http://www.washingtonpost.com/wp-dyn/content/article/2009/01/15/AR2009011503845.html