As the U.S. economy continues to fluctuate, politicians on
both sides of the aisle are pressing for the passage of an economic stimulus
package to help stave off the threat of recession. At first glance, the package
? whatever its eventual form ? sounds like a good idea. Recessions are, by
definition, periods of sustained economic regression during which a significant
portion of Americans suffer financially. As usual, our politicians are
displaying an incredible lack of understanding on this key issue.

If passed, the economic stimulus package will only serve to
delay the inevitable correction that will be necessary to fix the causes of the
(possible) recession. By passing the burden to future generations, our
politicians are compounding the problem. The various packages are nowhere near
large enough to effect significant change in our economy. In a recent article
in Newsweek, Robert Samuelson noted that the $50 billion proposals may sound
large, but represent a tiny fraction of our $14 trillion economy.

Furthermore, the plans attempt to stimulate growth by
encouraging both higher levels of investment for the future and current
consumer consumption. In his op-ed in The Washington Post, Steven Landsberg
points out that investment and consumption are ? except for in the very
short-term ? almost always mutually exclusive. It?s impossible to increase both
at the same time, especially in times of slow growth or recession.

So this leads me to a broader question about the nature of
public policy: Why can?t our government embrace the bigger picture and focus on
the long-term economic health of our country? Furthermore, even if it were able
to do so, what would that long-term policy look like?

If you are optimistic about our leaders, you argue that
they?re trying to make good policy, but simply pass bad legislation out of
ignorance or bad information. There are significant reasons to believe that
it?s almost impossible for the government to pass consistently constructive
economic policy ? I?ll get back to those in a bit. If you?re pessimistic about
public leaders, you believe they care only about re-election and make policy
solely for that purpose. It?s not altogether surprising that in an election
year, both parties are eager to throw money at voters.

Either way, it?s unrealistic to think the government is
capable of always knowing what?s best for us. Not only is it condescending, the
idea is flat-out wrong. For an illustration of why the private sector is
superior to the public in economic matters, imagine that you?re running a
business ? your job is to make decisions that will earn you the most money
possible. Depending on the decisions you make, you?ll either prosper and make
money, or undoubtedly go out of business. This is a good incentive for making
intelligent, informed choices.

Now imagine that you?re in public office and you face
re-election in two, four or six years. Would you always pursue intelligent,
fiscally sound economic policy? Or would you pursue policy that gets you
re-elected (and no, these do not always coincide).

By design, the most effective incentives for encouraging
good decision-making are absent in the public sphere. Yes, it?s true that
politicians face re-election, but this is only an incentive to appear to make
good decisions, rather than to actually make good policy. The distinction is
critical. By sending $300 checks (or whatever the eventual dollar amount) to
every American, Congress appears to be helping the economy. Of course, they?re
doing nothing more than compounding the problems that created the threat of
recession in the first place, thereby defeating the goals of the stimulus
package.

Recessionary fears are well-founded and an economic downturn
may, in fact, cause hardship for many Americans. However, the U.S. economy is
far too strong to suffer more than a short-term correction.

So what should the government do? In short: not much. The
government plays an important role in the economy, but the role should be
mostly limited to that of a referee?s: Ensure the game is played fairly, but
don?t determine the outcome of the game. There are certainly good ideas for how
government money should be spent ? any bill that reduces our dependence on
foreign oil is cool with me, but that?s another column altogether.

Corey Sheahan
([email protected]) is a senior majoring
in history and economics.