It is now officially President Barack Obama’s economy.
In his first press conference, the president made it clear that the economic slowdown wasn’t his doing. He inherited it from President Bush. Fair enough.
But Mr. Obama’s $787 billion economic stimulus bill—which received only three Republican votes, all in the Senate—is his doing.
He set up markers to determine whether he would support the bill. For example, it had to save or create 3 million new jobs. And it had to provide an immediate boost to the economy.
And while some in the media have noted that most members of Congress didn’t know what was actually in the bill, the more important issue is that no one knows whether the stimulus package will help, or even hurt, the economy.
A doctor at a recent health policy conference asserted that no one can predict the interactions and possible side effects that can occur if a patient is taking nine or more prescription drugs.
The economic stimulus bill is like that. The Congressional Budget Office had to make countless assumptions about how individuals, companies and industries would respond to financial and regulatory changes in the bill. Are those assumptions correct? No one knows. But if history is any guide, you can bet the CBO will be way off on most of its forecasts.
Of course, the government has to get the stimulus money from somewhere, probably by borrowing it from other countries like China. But will the Chinese continue lending to us, and at what interest rate? No one knows.
The stock market may rally, anticipating a spurt in buying and building, which could boost the economy—and government revenues. Or it may recognize that much higher taxes will be needed to pay for the spending spree and go even further in the tank. No one knows.
We are in completely uncharted territory. When Ronald Reagan became president amid a steep economic downturn handed to him by President Jimmy Carter, Mr. Reagan cut taxes, reduced government regulations and cut government spending. And it worked smashingly.
The stimulus bill vastly increases government spending and regulations. And many of the tax cuts are actually spending increases.
No one knows how this mix will affect the economy. But we do know one thing: It’s President Obama’s economy now.