Economy in Free Fall - I wish John had waited one more day.

The economic news today was truly disastrous. Growth has fallen to the lowest rate since 2002 - 2.2% down from 4.9% in the fall. The Fed has cut rates by an unprecedented 1.25% in eight days, compared with the half a percent cut after 9/11. A 350 point Dow rally on the news was snuffed out in less than an hour. The senate is racing to add extensions to unemployment benefits and food stamps to an stimulus package that already runs to $160 billion. Housing sales and starts fell by 26% in 2007, the highest on record, compared with 23% in 1980. Prices on house sales fell by 7% and for the first time on record, the median price of all houses fell.

Meanwhile consumer confidence is in free fall, planned layoffs are way up, and a falling dollar will keep inflation rising.

Any one who says that a Democrat will not win the 2008 election is nuts. And McCain just wants to talk about Iraq. He has said economics is not his strong suit.

John Edwards had difficulty interesting the majority in poverty, poorly paid work and families under stress. I have always felt that in the face of a crisis he had a winning message- that greatest burden of a recession should not fall on those least able to bear it. To those more comfortably off, suddenly the prospect of being poor would be all to real.

Secondly, and most importantly, he could have driven home the point that deregulation had failed, that corporate crime and greed had cost America it's prosperity. It was a winning hand.

I can't help wondering about the quality of his advisers.

so he could get to debate one last time.

Thats what this race is going to come down too. If it does, i think Clinton benefits big.

The economy is something you experience governing.

I'd have Bill and Hillary out there banging on at how good the Clinton economic years were and how it can be like that again.

Hillary seems to be able to talk about with complete confidence. The policy wonk has been reading up over the years.

Whose Stimulus Makes the Grade?

By Ruth Marcus
Wednesday, January 23, 2008; A19

One of the benefits of an extended presidential campaign is that it presents real-world tests for candidates. Some take the form of pop quizzes assessing contenders' instincts in a crisis. Others are more like take-home exams -- the latest, and perhaps most revealing, being competing plans for an economic stimulus.

In practical terms, this is irrelevant: The moment for stimulus will be long past by Inauguration Day. But as a way of judging how candidates view government's role, how they balance politics and policy, and how sound their thinking is on economic policy, the proposals offer a revealing report card.

My grading starts with President Bush, because he sets the curve.

George W. Bush: B-minus. The president gets extra credit for signaling flexibility on his roughly $145 billion package and for not insisting on extending his tax cuts, which made no sense as stimulus and would have doomed its chance of passing.

A tax rebate -- the White House has floated $800 per individual -- is a good approach. Bush loses points, however, for excluding those without income tax liability, even if they pay hefty payroll taxes. Points off, also, for failing to extend unemployment benefits. In efficiency and fairness, both are exactly backward. As Federal Reserve Chairman Ben Bernanke explained, "If you're somebody who lives paycheck to paycheck, you're more likely to spend that extra dollar."

Bush says tax incentives for business investment must be a significant part of the package. But such breaks didn't have nearly the positive effect anticipated after they were adopted from 2001 to 2003; the Congressional Budget Office found the impact of those provisions to be "relatively modest"; Moody's Economy.com put it at 27 cents for every dollar spent.

Barack Obama: A-minus. I criticized his previous tax plan, but Obama is at the head of the class with an intelligently designed, $120 billion stimulus plan. He would speed a $250 tax credit to most workers, followed by another $250, triggered automatically, if the economy continues on its sour path. Obama would direct a similar rebate to low- and middle-income seniors, who are also apt to spend and could get checks quickly. One demerit: Obama omits any increase in food stamp benefits, which Moody's estimates would have the greatest bang for the buck, $1.73 for every dollar spent.

John Edwards: B-minus. Edwards gets points for handing in his paper early -- in December, he issued a $25 billion stimulus proposal (plus $75 billion more if needed), including important help to states to avoid cutting Medicaid rolls. But like Hillary Clinton (see below), he would spend too much money on programs -- investing in "green collar" jobs, for instance -- with too long a lag time to make them an effective stimulus. Edwards's grade goes down because he also hasn't explained how the $75 billion would be spent.

Hillary Clinton: C-plus. Clinton, too, raised the issue early, then turned in a faulty first draft with a $70 billion stimulus plan that didn't provide much immediate stimulation. It included a $25 billion increase in the program to help low-income Americans with heating costs -- an excessive amount (the current program is under $3 billion) that probably wouldn't kick in until next winter. Even worse was her housing plan, including a five-year freeze on subprime mortgage rates that could produce higher interest rates and reduce liquidity.

Four days later, Clinton said she would immediately implement a $40 billion tax rebate plan she had put in reserve in her first draft. Fine, but overall, the Obama plan devotes a far greater percentage to spending that is more likely to jump-start the economy.

more...

http://www.washingtonpost.com/wp-dyn/content/article/2008/01/22/AR2008012202614_pf.html

And its government spending that is more important here - and critically the plan to freeze foreclosures and cape subprime rates for five years. Obama is basically cutting taxes. Where have I heard that before. The 'Fault' in Hillary's initial package was the 35$ billion contingency fund did not contain a specific tax cut proposal. Thats what the author thinks 'stimulus' is.

When he talked about it last debate, you had a feeling someone wrote his econmic stuff up and he never read it.