Contrary Opinions?

I like and agree with this Washington Post editorial:

"THE $700 BILLION financial rescue plan pending in Congress may or may not stave off short-term economic collapse. We both hope and expect that it will. One thing the bailout cannot do, however, is correct the deep and long-neglected fiscal imbalances that brought us to this day. The United States' twin habits of consuming more than it produces and of promising more government services and benefits than it is willing to pay for have made us dangerously dependent on debt, public and private, to sustain our standard of living and to fund our government. These habits must end, lest we risk the country's long-term prosperity -- and the federal government's stability. Paid for with borrowed money, today's rescue plan will actually make matters worse in the short term. But it will be money well spent if we use the time it buys to put America's financial house in order. "

However, Barry Eichengreen says the following in a Brad DeLong post:

That said, we are not going to see 25% unemployment rates like those of the Great Depression. Then it took breathtaking negligence by the Fed, the Congress and the Hoover Administration to achieve them. This time the Fed will provide however much liquidity the economy needs. There will be no tax increases designed to balance the budget in the teeth of a downturn, like Hoover’s in 1930. Where last time it took the Congress three years to grasp the need to recapitalise the banking system and provide mortgage relief, this time it will take only perhaps half as long. Ben Bernanke, Hank Paulson and Barney Frank are all aware of that earlier history and anxious to avoid repeating it. "

If we cannot raise taxes or reduce government spending during a downturn, it's hard to see how the long term goal of putting our financial house in order is going to work in the near future.

Please read both posts.