First, do no harm

That's what Ed Leamer, director of UCLA's Anderson Forecast, says should be a principal goal of any stimulus plan. But the one just passed by Congress doesn't exactly measure up, according to Leamer. From his new Anderson Forecast report:

It should have been timely, temporary and targeted, as promised by Nancy Pelosi. It is none of the above. To get a stimulus, we need to put idle workers and idle capital back to work, and we need to concentrate spending where the job loss has been greatest. That’s what I would call targeted. Tax cuts are not targeted at all since they offer little promise of spending where we need it. And the budgeted spending misses the target by a wide margin, with the exception of the tiny amount of help for homes and cars and a larger amount of help for state governments in their time of need.

He figures that the focus should be on homes, cars, retail and restaurants because that's where most of the damage has come from. Of the total stimulus package, only $62 billion goes towards stuff that is targeted, temporary and timely. That doesn't mean the rest of the money is going down the drain - or that the programs being financed are unworthy. What it does mean is that the strategy of “all spending, all the time” carries huge risks not worth taking right now. More from Leamer:

Keep in mind that an economy is an organic self-healing system that will repair itself with or without government help. The worst thing a government can do is to get in the way of the natural self-healing, by adding to the fear and the uncertainty. The Bush administration did about as good a job at contributing to fear and uncertainty as any government in recent memory. The Obama administration seems determined to offer more of the same.

[CUT]

We need an antipsychotic drug that makes us realize the soup lines of the Great Depression are in the past, not in the future. An ideal stimulus package with the greatest multiplier would provide help for consumers to buy homes and cars and purses and shoes and restaurant meals. That would help put home-builders, autoworkers, retail clerks and waiters back to work.

Leamer admits that his projections are more like hunches. The economy is acting in very unusual ways and "there's nothing like it in the historical records" (here's the LAT story). About a year ago, the Anderson Forecast said the nation would avert a recession, and a few months later the roof caved in. Nobody knows. Still, you have to wonder about the recent spate of relatively positive news (or at least not terrible news) and whether we might be in for a mini-spending spree among consumers. As Leamer and others note, the economy can repair itself – to some degree – without government help. This could mark the beginning of that repair job.