From the meeting of the world's elites in Davos, Switzerland to working American voters and their politicians, the economic stimulus plan having passed the House is creating a very positive stir as Americans look forward to getting some cash back from their taxes. Stock markets around the globe rebounded. The hope is Americans will rush out and buy American made products and American based services, and businesses will apply their kickback to hiring more employees. Sounds Good! But, is it?

The Bad! - This was an immensely compromised proposal. Economists from Bernanke to college professors were in almost unanimous agreement as a result of previous research, that economic stimulus is most effective when injected into the population which will have the greatest propensity to spend it all on consumables and services. The reasoning being that such a massive expenditure will create demand for business products and services, and in turn prevent rising unemployment, which would slow the economy and consumption down, even further.

The 2001 tax rebates didn't have the all the oomph! in stimulus politicians had hoped for. The reason is that many of the Middle Class instead of going shopping, used the funds to pay down their credit cards. No stimulus effect for employment or business from that. But, here, the politicians are agreeing to make the same mistake. Part of the compromise was that Democrats would drop their call for increases in food stamps and unemployment benefits.

There is no question, food stamp recipients and the unemployed would have been the most likely group to go shopping with the funds of the stimulus package. It's not clear why Republicans insisted these people be dropped from the stimulus, but, a few guesses are readily available. Increasing food stamps would increase eating, and poor people are already the most likely to be obese. And the unemployed, would be less motivated to seek reemployment if their unemployment benefits were extended. Clearly however, such rationales undermine the express purpose of the stimulus idea, to stimulate consumer activity in a slowing growth economy.

Democrats in turn accepted Republicans offer to drop their demand for businesses to be refunded taxes previously paid. Which is rational, since the economic slowdown is not a result of business not having enough profits or capital to continue operating. Their problem is they don't have enough customers putting in orders. Yet, this seriously compromised bill passed by the House, instead provides businesses with $50 billion in accelerated depreciation (tax deductions they wouldn't have been able to claim until later years) with the hope that the tax savings will cause businesses to invest those savings in new plants and equipment. Whether they do, or not, is debatable.

What is clear is that the government is reducing its revenues yet again, increasing the deficit back up to more than a quarter trillion dollars with this $150 billion, hopefully partially effective, economy

stimulus plan. Ardent fiscal conservatives might argue it would be warranted if the entire $150 billion were dedicated to stimulating the economy with maximum efficiency, but that is clearly not the case. As much as $80 billion of the package could have no stimulative effect at all on the economy because of credit card pay downs and businesses increasing profit margins instead of productive capacity and employees. That would be $80 billion wasted on a purpose never intended to be met.

The Ugly! - The ugly truth about this angelic bi-partisan fever that swept over the House of Representatives is that they are all facing reelection in November and they are all attempting to buy votes from their constituents back home. This accounts for the compromises, and the targeting of who will benefit, and who won't. The very poor in this country don't generally vote.

So, politicians could exclude the poorest, and did, despite the fact that they, more than any other group of Americans, would have used the money for the greatest stimulative effect upon the economy, buying food, medicines, doctor visits, and other American based products and services as opposed to imported conveniences and plastic gadgets from China. (Congress refused to require label foods as imports, or American, insuring consumers can't tell if they are buying American or Chinese.)

The Senate has yet to debate and deal with this package. Only about 1/3 of the Senate is up for reelection this year, which means 2/3 won't be as pressured by the election year to rubber stamp the House version of the Bill. Additionally, the Senate tends to be the more deliberative half of the Congress and therefore, more likely to debate the merits and weaknesses of the House proposal discussed in this article.

Should there be sufficient Democratic and Republican Senators objecting to the weaknesses so as to avoid public reaction against one party over the other, the potential exists for a better version of the Bill with more stimulative impact and insurance being produced. It would then be up to the Conference Committee to resolve the differences between the two versions of the Bill. And then up to the President to sign or veto it.

There are a number of potential political twists and turns ahead for this proposal. But, they remain only potential and hardly guaranteed, as the 800 lb. gorilla pushing this bill through is the election cycle well underway. This was in evidence in last night's Republican debate in which the candidates agreed the stimulus package was a needed start but, that it didn't go near far enough to cut taxes and increase the national debt even further.

One has to wonder why the presidential hopefuls still don't get why the tax cut mantra isn't carrying the public opinion like it used to? Democrats and Republicans are for the increased stimulus spending, but insist on cutting taxes further. Did they not go to public schools with basic arithmetic classes? Apparently not, considering their 3.67 Trillion dollar addition to our children's national debt over the last 7 years.