My biggest concern about the stimulus package being debated to death in Congress is not that it won't help jumpstart the moribund economy over the next couple of years, but that so many will be disappointed it's not a miracle elixir, they'll lose confidence in the government's ability to make a difference, and prolong the recession by sitting on their cash.

That's the impression I had after listening to a doom-and-gloom panel discussion featuring an investment analyst and four business journalists last night. The panel–moderated by Business Week's editor, Steve Adler–touched on a number of very interesting points to keep in mind as the Obama administration tries to rejuvenate the sinking economy.

Although the panelists were not optimistic the stimulus package would turn the tide anytime soon, there was praise for its structure, as it's designed to deliver a one-two punch to elements threatening to drive the economy into oblivion.

The plan offers an urgent, though short-term boost to our safety net, delivering additional dollars for unemployment benefits, food stamps and health insurance to prop up the millions losing their jobs. It also gives a life-line to bankrupt state governments, and perhaps helps them avoid laying off workers and putting off major projects to close widening budget deficits, which would be an anti-stimulus to an economy already crippled by similar contraction in the private sector.

Long-term, the stimulus package offers a “time-release capsule,” according to one of the journalists on the panel, by injecting federal funds for job-creating infrastructure projects into the system over the next six-to-18 months.

However, the danger, as I see it, is that the stimulus package will be misperceived by a desperate public as a panacea that will “solve” our economic problems and ignite growth overnight.

In fact, this is a band-aid to help slow the bleeding as we hermorrhage hundreds of thousands of jobs, with many more layoffs to come over the next few months. It is meant to cushion the blow and bring victims of the economic meltdown to a softer landing, while helping spark a quicker turnaround in the medium-term.

The growing emphasis on tax cuts, rather than spending, being driven by Republican naysayers will also slow down and lessen any positive effects of the stimulus, I fear.

Congress and media gadflies are lamenting the price-tag of the stimulus bill, as if the $800 billion or so being discussed is all we'll have to spend. In fact, President Obama and Congress must prepare the public to expect calls for trillions more. This stimulus bill is merely a down payment–the first baby steps on a very long road to recovery.

The panel emphasized there are much bigger challenges ahead, both short- and long term, in getting the economy back on a solid footing, and it's all going to cost a lot of cash.

For example, the banking system remains in a precarious state, and until that's rectified, the economy is operating with a knife in its gut. We cannot have sustained economic growth with a credit system on life support.

But what will the Obama administration do to secure the banking system? Will they follow the lead of their predecessor and simply inject hundreds of billions more into individual banks, in return for taxpayer equity? Of will they return to the roots of the Troubled Asset Relief Fund, taking toxic assets off the balance sheets of banks, thereby allowing lendors to move forward without such dead weight to hinder their renewal?

A critical element fueling the banking problem is the deepening mortgage crisis. With millions losing their jobs, how many more people will lose their homes this year and next? And how big of a drag will that be on our economic recovery? This is why Rep. Barney Frank, D-Mass., chair of the House Financial Services Committee, is so insistent on including foreclosure relief in the next wave of TARP bailouts. At best, people will no longer be able to use their homes as cash machines, cutting off a key source of financing for consumer spending.

Then there is the auto industry to worry about, one panelist repeatedly pointed out. While an emergency cash infusion of dubious constitutionality from the TARP program in December is helping keep Chrysler and General Motors in business (Ford has thus far declined Uncle Sam's helping hand, courteously), the auto makers will be back (without their private jets, one hopes) to beg for more relief, with sales at a standstill.

Should one or both of these major U.S. manufacturers go under, that could not only overwhelm whatever positive effect we might enjoy from the stimulus package, but deliver a death blow to the economy for years, as millions more could lose their jobs, with little hope of going back to work anytime soon. Where will President Obama and Congress stand on that critical challenge?

The panelists dismissed any fears of inflation from all the money being artificially pumped into the economy by Washington, echoing most economists who say the cost of doing nothing would be far higher than massive deficit spending–at least in the short- and medium term.

Given the surplus labor in the market and the standstill in consumer spending, it's hard to imagine prices soaring out of control anytime soon. Indeed, deflation is more of a concern if the economy keeps imploding. (Still, as Treasury's printing presses churn out trillions to keep the economy liquid, I have nightmares of a Weimar Republic scenario down the road.)

Then there is Social Security and health insurance to reform, with massive bills to come due at some point.

Also, keep in mind we have two wars in progress. While President Obama is likely to wind down operations in Iraq over the next two years, he has vowed to substantially boost our presence (and costs) in Afghanistan over the same period. That might be good news for the defense contractors and give some communities who depend on such firms an economic boost, but with all the other challenges we face, the wars remain a huge drain on our economic strength.

During the panel discussion, there was some grumbling about having a “rookie” president in charge at a time of such historic crises, but in my view, it all depends on who that rookie is. Adding a “Michael Jordan” to a roster would turn around the worst of teams, and Obama is the Jordan of politics right now. Having a leader as bright, reasoned, cool, collected, charismatic and focused as Barack Obama in charge is an advantage, not a weakness, in our current plight, I believe.

There was also a question from the audience about whether “press negativity” is having a “multiplier effect,” helping convince readers/listeners that we are all doomed, undermining consumer confidence and discouraging the spending and investment needed to spark renewed economic growth.

The panel of journalists, even in a room filled with their media peers, seemed embarrassed by the question, insisting they try to find a positive side to every story they report, and offer some glimmer of hope to their audiences. Frankly, that's not the job of the press. The media need to stay focused on what the public and private sectors are doing to get out of this mess, not sing us lullabies to help us sleep easier at night.

In addition, one panelist noted that such criticism is unfair, given how the media has been taken to task for not bringing to light earlier how fragile the economy really was, and how reckless were the investments (in subprime mortgages and credit default swaps) that brought us to our knees. Closer to home, another panelist pointed out how hard it is for the media to remain upbeat when their own industry is being destroyed by layoffs.

Finally, it was surreal to listen to such a grim panel after the swank reception welcoming the attendees, courtesy of McGraw Hill. A variety of groups were given invitations (mine came via the New York Financial Writers Association) to attend at no charge and hear the panelists offer their views, with the function arranged by Columbia University's Knight-Bagehot Alumni Committee (a scholarship program for business journalists).

We were on the 50th floor of the McGraw Hill, offering a breathtaking view of midtown Manhattan. There was a multitude of delicious finger foods, washed down by top-shelf booze from an open bar–with single malt, 12-year-old scotch the drink of choice for many, including yours truly.

The room buzzed, and for a moment it didn't feel like we were all traveling on a sinking ship. But once the program began, I felt a bit like I'd been drinking champagne after the Titanic hit the iceberg. Might as well enjoy whatever good times remain while they last, right?

What do you folks make of the economy and the government's attempts to turn things around?

Special Reports /

Is Stimulus Package A Magic Elixir Or Placebo?

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