Okay, so you're suggesting what....

The main reason why the stimulus is a bad idea is because the economic theory behind it (even when Bush did the same thing) has LONG been discredited. It isn’t that our children will pay for it - we are paying for it NOW. Every last penny spent by government is always - without exception - a DRAG on the economy, not a "stimulus".

The financial crisis was NOT caused by "greed" (which always exists and did not magically change at any time, so the question must be asked “what is different; what changed”), nor “deregulation” (which never happened), nor “business [“kleptomaniacs”? Please.] out to make money” (for the same reason it was not greed) and it had absolutely NOTHING to do with capitalism. Capitalism is the unhindered free market and the crisis was caused, in its entirety, by government failure.

Specifically, just as it did in the “roaring” 20s, the Fed pumped HUGE amounts of liquidity into the economy (mostly when the discount rate was dropped below 2% - blame Greenspan and Bernanke). This radically distorted the risk pricing signals that, in a normal market, prevent investors/lenders/etc. from taking on undue risk. The normal market doesn’t prevent EVERYONE from doing so – some always exercise poor judgment – but it prevents any sector-wide occurrence, which is what happened, from taking place.

This was exacerbated by the actions of Fannie Mae and Freddie Mac (and to a FAR lesser extent, the CRA), which, by facilitating the market for risky investments, created an irrational marketplace supported by government action. This made the magnitude of the crisis far greater and, because such investments are traded in the global marketplace spread the impact of the problem far and wide.

Then, just as it did in the 30s, the Fed didn’t simply turn off the excess flow of liquidity; it tightened even further (moving the discount rate above 4%). “Stimulus” packages, interference with the banks, TARP, bailouts, etc. have since made things even worse by radically increasing uncertainty in the marketplace, removing resources from the vastly more productive private sector and undermining the markets themselves. Just as in the 1930s, it was this uncertainty that led to short-lived deflationary fears. Now, of course, the concern is that so much irresponsible spending can do nothing but devalue the currency, perhaps with hyper-inflation.

No one should excuse either the lenders who made loans with little or no security or credit checks OR borrowers that took on loans they should have known they couldn’t afford, but that does not make them the CAUSE of the problem. It isn’t really all that complex once the logical question of “what was different that could have had the impact observed?”

President Obama's answer to the crisis has been the stimulus and intervening in the marketplace. It didn’t work when FDR tried it; it didn’t work under Bush and all he has accomplished is to UNDERMINE the confidence of the entrepreneurial and investor class which drive the economy. It is no accident that the Dow, an indication of investor expectations, hovered around 11,000 all last summer, began a precipitous dive as election expectations solidified to 9,000 by election day and has fallen another 1,000 points since.

The stimulus spending is absolutely flawed in ALL areas. In fact, the best thing that can be done to “fix” the problem is … absolutely nothing and fiscal restraint (a problem for both parties) is the ONLY economically sound strategy (which, BTW, pays for any tax decreases).

Along the same lines, the Fed and Fannie Mae and Freddie Mac need LESS power – not more – as they were the cause and the market, which is completely capable of making corporations accountable (the “too big to fail doctrine” is an economic fairy tale), should be permitted to function to everyone’s benefit. This strategy worked flawlessly as early as 1819 when government intervention resulted in the bursting of a housing bubble, an increase in bank failures and higher unemployment (sound familiar?). The economy recovered rapidly BECAUSE it wasn’t meddled with further.

Regulations, on the other hand, are absolutely UNNECESSARY in a normal market and typically create both a false sense of security (“with the SEC looking out for us, why should we look closely at that Madoff guy?” and a HUGE financial burden (Sarbanes-Oxley costs the economy more every single year than did Enron, Worldcom, Global Crossing, Tyco and Martha Stewart combined). The purpose of government is not now, never has been and never CAN be to “stand up for the little guy”, but rather to create a framework in which everyone may succeed and everyone (little or big makes no difference) can be assured that deliberate wrongdoing enacted upon another will be punished – but, again, that is NOT what happened here.

So tax cuts have their place (particularly taxes on capital which are universally destructive), but reality is that the methods that are “tired and disproven” (loose money, profligate spending, interference in the marketplace, bailouts, redistributive taxation) are the very ones used by Bush and now used (to a vastly greater degree) by Obama. Welcome to Bush term III on steroids.

This isn’t partisanship; it is established economics. Sadly, Obama has chosen economic advisors not on the validity of their positions, but because they tell him what he wants to hear: interfere, intervene, intercede.