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In the Age of Coronavirus – Cracker Jack Economics

March 24, 2020 By Debbie Young

President Donald J. Trump meets with House Speaker Nancy Pelosi and Congressional leadership Wednesday, Oct. 16, 2019, in the Cabinet Room of the White House. (Official White House Photo by Shealah Craighead)

What is it with these politicians looking for a prize in every package? Even though it may seem like light-years away, it was only last week that Joe Biden and Bernie Sanders clashed over stimulus in a primary debate, Andy Kessler reminds readers in the WSJ.

Shoveling Something with “Shovel Ready”

Mr. Biden celebrated the 2009 Recovery Act, saying it “had $900 billion in it and was the thing that kept us from going into a Great Depression.”

If you believe that, I’ve got a bridge to nowhere to sell you. The Obama administration touted “shovel ready” projects—they were shoveling something, all right.

Sadly, a Stimulus for All

Then again, remember President George W. Bush’s 2008 $152 billion stimulus in the form of tax-rebate checks? The “booster shot” for the economy was a huge dud. Sadly, here we go again—a stimulus for all of us.

What actually saved the economy in 2009 was one word: backstop. Finance froze because toxic mortgage-backed securities littered the system and, as with mad-cow disease, no one knew which ones were bad.

The Federal Reserve provided a backstop to the commercial-paper market, then money-market funds and eventually banks, by buying up many mortgages to relieve default risk. Once bank stress tests took Armageddon off the table, lending restarted and the crisis ended. Spending on roads and bailing out General Motors were mere pork-barrel waste.

Cracker Jack Stimulus Won’t Work

As Mr. Kessler explains, the economy climbed out of the Great Recession in large measure thanks to the production and delivery of iPhones, Teslas and Lyfts (oh my) over the decade that followed.

The best stimulus is the production of goods and services that the economy needs, at ever-cheaper prices.

By all means, let’s get immediate money to those who need it through unemployment assistance and backstop loans. But government giveaways as stimulus don’t work. It’s just Cracker Jack economics.

P.S. In the Age of Coronavirus: a Homemade Throat Sanitizer.

P.P.S. If you can’t find hand-sanitizer, you can make your own.

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Debbie Young
Debbie, editor-in-chief of Richardcyoung.com, has been associate editor of Dick Young’s investment strategy reports for over three decades. When not in Key West, Debbie spends her free time researching and writing in and about Paris and Burgundy, France, cooking on her AGA Cooker, driving her Porsche Boxter S through Vermont and Maine, and practicing yoga.
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