OVERSTIMULATED

Part One:
THE SKY IS FALLING

Letting politicians fix the economy is like hiring a plumber to fix the space shuttle. Politicians who trust that their own hand is greater than Smith's invisible counterpart often do nothing to solve problems, and in many cases simply make everything worse.

Case in point: President Bush announced a $150 billion fiscal stimulus package this week. It is important to note that this package is not in response to any specific downturn in the economy. After all, the housing market has been tanking for over a year now. The dollar has been depreciating with noticeable speed for at least six months. Publications like The Economist and The Financial Times have been dedicating considerable ink to America's economic woes and the possibility of recession for the better part of a year.

"I am personally skeptical that the economic weakness is sufficient at this point to justify such a package," writes Greg Mankiw, a professor of macroeconomics at Harvard University and the author of the most widely used textbook on the matter. "Given where the economy is right now and the best forecasts of where it is heading, the fiscal package seems unnecessary as a short-run measure."

Unnecessary indeed: this package is purely political. It's no coincidence that it comes so soon after "The Economy" surpassed the Iraq War as voters main concern. The presidential candidates, eager to rustle up a few brownie points, have hurriedly pieced together knee-jerk solutions to a problem that may or may not actually exist. The media have seized upon Chicken Little's grave forecasts and repeated them ad nauseum, converting conventional wisdom into unquestioned truth.

And the result? The sky is falling. Recession is inevitable, apparently. The cruel irony in all of this is that fears of economic downturn are often self-fulfilling prophecies. If people think the economy is bad, they alter their behavior in ways that ultimately makes the economy go bad. If the fiscal stimulus packages achieves anything, it will hopefully restore some faith in the minds of the public. But $150 billion seems like an awfully hefty price tag just to appease what Keynes called the "animal spirits" of the marketplace.