Navigating the economy by the rear-view mirror

Considering how poorly they get along, President Bush and congressional Democrats are coming to a remarkably quick consensus on an economic stimulus package.

Part of this is driven by genuine concern over what seems to be a deteriorating economy, and part of it a desire not to be seen as standing idly by when polls show both the president and Congress held in low public esteem.

Bush has proposed, with few details, $145 billion in stimulus, amounting to the 1 percent of GDP that economists say is needed. The heart of the package are tax rebates of up to $800 for individuals and $1,600 for couples that, the president says, will "get money in the hands of our consumers and small-business owners to help the economy."

Conspicuously, the president did not, as he does on most economic matters, try to tie his cooperation to making his tax cuts permanent.

Congressional Democrats welcomed his proposal, although they fretted that it seemed to exclude from rebates those who do not earn enough to pay federal income taxes -- for example, a family of four earning $24,900. Thus, they may try to include low-income workers by making the tax cut refundable or expanding the earned income tax credit.

In the harsh calculus of stimulus spending, people further down the economic scale are more likely to rush out and spend the money, the whole purpose of the rebate, than the better off, who might sit on the money.

Opinion is divided on the efficacy of stimulus packages. The money is effectively borrowed. It is not targeted specifically to the problems of high energy prices, tightening credit, stagnant job growth and an anemic housing market. Generally, they seem to do more for consumer morale than for the economy as a whole.

And the stimulus tends to be slow in arriving. If there is a recession, the economy, as it has with past recessions, may be coming out of it by the time the stimulus arrives.

(Distributed by Scripps Howard News Service, http://www.scrippsnews.com)