What Can We Expect?

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During the weekend, the New York Times posted responses from 11 economists to the Times' simple question: "When will the recession be over?"

I guess we'd all like an answer to that one. But you don't have to read many of the economists' replies before you reach the conclusion that prosperity is not just around the corner.

I suppose it is a hopeful sign that consumer spending was up more than expected in January. The increase followed six consecutive months of declines — and consumer spending is a vital part of the recovery equation.

But the increase was 0.6% — forecasts called for an increase of 0.4%. How much will the economy benefit?

Not much, apparently. Of course, any increase in consumer spending is good. But Ben Rooney of CNNMoney.com reports that "[d]espite last month's rebound, many economists expect consumer spending to remain weak given the outlook for continued economic deterioration."

And, before anyone gets carried away over a modest increase in consumer spending, that dreadful fourth quarter of 2008 resulted in a $62 billion loss for American International Group (AIG).

So, writes David Ellis for CNNMoney.com, "To keep the company from cratering and causing broader fallout across the financial system, the government said it would overhaul its bailout."

Which leads me to another — and not altogether unrelated — observation.

Back in 2002, when Dick Cheney was promoting another round of tax cuts to stimulate the economy, then-Treasury Secretary Paul O'Neill argued that the economy was already careening toward a crisis.

But O'Neill was silenced by Cheney's admonition that "Reagan proved deficits don't matter." Shortly thereafter, O'Neill lost his job.

This weekend, I watched part of Rush Limbaugh's speech to CPAC. He drew a standing ovation from the true believers when he spoke dreamily about how the United States got out of the recession of the early 1980s with tax cuts that were responsible, in large part, for those deficits.

Those same conservatives complain now about the deficits created by the stimulus plan — which wouldn't be necessary if the economy hadn't tanked under the weight of the deficit burden imposed by the Republicans.

I'm no economist, but it seems to me that the lesson we should have learned is that deficits have no short-term impact on the economy, but, left unattended, can and will have an enormous impact farther down the road. Reagan's presidency didn't have to pay the price for his deficits, but his successor, George H.W. Bush, did.

Then, after Bill Clinton restored some sanity and built a budget surplus for his successor, George W. Bush, Dubya proceeded to give away the surplus in the months before the September 11 attacks. So that money was gone when we needed it to go after Osama bin Laden in Afghanistan — but that was a priority that didn't last too long. Attention was soon diverted to Iraq, which the United States invaded almost six years ago.

For those of you keeping score at home, the cost of the war now exceeds $600 billion.

Still think deficits don't matter, Dick?