Need to see the gloom and doom dropped

In order to get the economic stimulus and bank-debt bailout plans passed at all, let alone with any swiftness, I can understand there was a need to crank up the level of urgency, the level of fear of what would happen if something isn’t done.

So every press release, speech, or interview by both sides during the long election campaign, and in the three months since the election, has focused on how bleak the economic situation is, how it will deteriorate further for quite some time even if the bailout plans are implemented, and will fall off a cliff into a deep dark hole if the bailout plans are not passed.

Without creating that sense of urgency, a year or two from now Congress would probably still be concentrating on the blame game, and debating what should be done.

However, that long period of emphasis on the frightful outlook for the economy probably contributed to it. It’s not possible to create enough fear and concern to get the donkey-like Congress moving with any degree of necessity, without undermining consumer and investor confidence even further. That obviously accelerates the economic slowdown. So we have had an ugly downward spiral underway for over a year that has been feeding on itself.

Now we have the stimulus and bank-debt bailout plans approved, or close to it. Politicians on both sides of the aisle have had their endless hearings for more than a year now, in which they have shown their constituents back home just how tough they are, that they are just as disgusted and angry as Main Street is at Wall Street, AIG, Merrill Lynch, the Fed, the Treasury Department, the SEC, Fannie, and Freddie, and more recently the bankers, and auto-maker CEO’s – anyone who ever had an opportunity to see this coming, but didn’t, or saw it coming and did nothing about it.

Well, everyone that is except Congress itself of course, the ultimate watchdogs in charge of it all.

But now all sides have debated, negotiated, bargained, and settled on the game plans.

All agree the plans are not perfect. But they can’t be since we’re in uncharted waters and no one can know with confidence what will work. Although everyone seems to think they know, it won’t be possible to know what would have been better until a few years down the road, when we can look at the results through the infallible 20-20 lens of hindsight. Then there can be, and doubtless will be, a lot of “I told you so” going on, for our childrens’ sake hopefully from those saying, “I told you it would work”.

But what a shame it would be to throw several trillion dollars into hugely expensive, unprecedented efforts to bolster consumer and investor confidence, and thus get the economy turning, and then undermine its chances by continuing the debating and criticism, continuing to emphasize the dismal situation, and thus keep consumer and investor confidence pressed down.

Hopefully that won’t happen. There is nothing more to be gained by continuing to emphasize the negatives, and it would only guarantee failure without giving success a chance.

What is needed now are steps to supplement the money-based stimulus efforts with psychological support that will improve consumers’ confidence in the future. That would go a long way in repairing the harm done by almost two years of the self-fulfilling prophecy of talking only of the gloom and doom that lay ahead.

The media would have to play an important part. For instance, recently, there have even been several pieces of good economic news that could have been pointed out as encouraging signs, like the unexpected report that retail sales rose 1% in January, or the improvement in existing home sales. But instead the reports were buried under a bushel of pessimism that, yeah, those were probably only temporary improvements. Or how about reminding consumers that some things are better, like the dramatic drop in the price of gasoline?

The most important component of the economy is consumer spending, which accounts for 65% of GDP. And an important influence on consumer spending can be whether consumers are fed a steady diet of fear, or a more balanced diet that includes at least a taste of optimism.

As Ronald Reagan showed when he took on the dire economic situation that had developed in the 1970s, and as George Bush Jr. showed in cajoling consumers to get out and spend after the terrorist attacks, upbeat talk and encouragement in scary times can be a powerful influence indeed on consumers and therefore on the economy, especially when accompanied by aggressive fiscal stimulus efforts.

So it’s time. Having aggressively sold the need for the economic stimulus and bank bailout plans via emphasis on the doom and gloom, we now need to see the gloom and doom dropped, and upbeat talk and encouragement become the next step in the rescue efforts.