Washington, D.C. is a place where delusions go to thrive. That explains why Congress and the president are now agreed on remedies that will not work, expending money they do not have, to fix a problem that may not exist.
The alleged problem is a recession. From the sounds of panic, you would assume we are already in a deep downturn. In fact, that does not appear to be the case, and many economists doubt we will have a recession (defined as two consecutive quarters in which total economic activity declines) at all.
The Congressional Budget Office, for example, predicts the economy will grow by 1.7 percent this year. A couple of weeks ago, The Wall Street Journal surveyed 54 economic forecasters, who on average put the chance of a recession at 42 percent and expected growth to approach 2 percent in the first half of this year.
Steven Wieting, an economist at Citigroup, predicts growth of 1.2 percent. But like our elected officials, he sees no point in getting hung up on technicalities. "Academic definitions aside, we'll call that a recession," he writes in a new report. We can call it a recession or we can call it a wirehair terrier, but that won't change what it actually is: an expansion, albeit a modest one.
Notwithstanding that, President Bush and House leaders have agreed to pelt the economy with $150 billion in rebates and business tax incentives to rouse it from its lethargy. The idea behind the rebates is that consumers will use the cash to buy goods and services, keeping companies and workers busy supplying them. Business tax incentives are supposed to goose investment in plants and machinery. The two sides are agreed, in the mantra of the week, that these measures will be "timely, temporary and targeted."
In their dreams. Timeliness, in this case, is not unlikely -- it's impossible. The Internal Revenue Service, it seems, is fully occupied at the moment sending out tax forms and processing returns, and will be for a while. So even if the program zips through the Senate, the checks probably won't go out until June and won't all reach the beneficiaries until August. The money itself will take months to be spent, if it gets spent at all -- postponing the intended boost until next football season.
If a recession is already underway today, it could very well be over by then. This is the equivalent of a doctor telling a patient that she may have pneumonia and promising to put her on antibiotics -- in October.