Last week, all the serious Washington types were making measured comments about the risk of recession and the possible need for a fiscal stimulus. The numbers being tossed around (other than by CEPR types) generally centered around $70 billion and even this amount was not a slam dunk. Way back then, everyone wanted a "trigger" mechanism under which the stimulus would only kick in after we have been presented with more convincing evidence of a recession. The Washington Post editorial board admirably lived up to its responsibility of providing the conventional wisdom. But, that was last week. This week, Fed Chairman Ben Bernanke raised the topic of stimulus with the House Budget Committee and said, "In order for this to be useful, you would need to act quickly." The conventional wisdom's trigger mechanism was altogether missing in Bernanke's testimony. Bernanke used the figure of $100 billion, which puts him almost 50 percent above last week's conventional wisdom. According to press accounts, President Bush and the Republican leadership in Congress are now talking about $100 to $150 billion, at the high end more than twice last week's conventional wisdom. The reality is that the economy is in serious trouble and the honchos like Bernanke don't really know what's going on. These folks completely missed the housing bubble as it grew to ever more dangerous levels. As the bubble has started to deflate, they now recognize that we have a problem, but they have no idea how bad it is or how to deal with it. It is time for economic reporters to level with the public on this fact and stop doing PR work for Bernanke and the rest assuring people that everything is okay.
--Dean Baker
