Cutting Through The Crap On the Economy

I read this earlier today and I knew I had to post it in full. I hope National Review can forgive me, but Victor Davis Hanson gets to the nut of the current economic situation:

There is a great disconnect about the stimulus bill. Understandably Obama, in pushing for it, made the argument that the last eight years got us into this mess. So why, he asks, are his critics calling for more of the same? But are they really?

The weird thing is that economy got over-stimulated with massive deficits, cheap Chinese capital, low interest rates, inflated houses, and climbing food and fuel costs. The stimulus medicine is sort of like telling an exhausted sprinter that collapses after being unable to keep up the unrealistically fast pace that his cure is to get up immediately and try excessive sprinting again.

In short, things are upside down: The conservatives are mad that Bush over-spent, and suddenly when out of power want to restore fiscal sanity, while Obama says that the Bush borrowing brought on this mess and must be addressed by more borrowing. What is what? Conservatives suddenly are once again fiscal purists when out of power? Liberals blame Bush for reckless Keynesian spending and want to cure it by more of the same?

Few tell the truth: The conservatives should say 'Mea culpa—our deficit spending and borrowing helped to get us into this mess, so we've seen the error of our ways, and want you liberals not to repeat our mistakes.' And the liberals should say, 'Bush on the budget was one of us in borrowing and spending and priming, so we can't really trash the last eight years since we're now advocating more of the same.'

We have a significant debt issue that is at the heart of this downturn. Governments-domestic and foreign-are deeply in debt. Financial institutions are over leveraged. Companies have over extended themselves. American consumers are collectively up to their eyeballs in debt. That indebtedness needs to be addressed before any kind of strong, long term recovery can take place. Yet the brilliant economic minds in Washington are trying to get us out of this mess by stimulating more debt.

Look, we did need to do something to prevent credit markets from freezing. Credit is a vital part of the global economy, and had the credit markets seized up for a prolonged period of time, it would have been disastrous. The goal now seems to be to debt ourselves out of this mess, and that is exactly the wrong impulse to be indulging. A long, slow recovery is probably in order as economic entities at all levels get their debt loads back to manageable levels. Instead, I see us hitting a recovery late in '09, early in '10 that fires up inflation while growth significantly lags. That is going to lead us right back into the economic pits.