Stimulus debates leave human factor out of equation

Don Pittis, senior producer of CBC News Business.The long-awaited $787-billion U.S. stimulus package is finally law. So why isn't everyone celebrating?

Instead, as President Barack Obama's signature turned the plan into law, the markets were falling sharply. The news was full of more gloom.

Despite a deal with their workers and a new presentation intended to keep the government money flowing, the car companies just can't seem to shrink as fast as their markets.

Even the U.S. president sounded a little glum, as if preparing everyone for more bad news. "I don't want to pretend that today marks the end of our economic problems," Obama said.

Perhaps most ominously, Obama admitted that the hundreds of billions set aside in this law probably won't be enough. Odds are, he'll be coming back for more billions.

There are two main reasons cited for why the package won't work. One is that it is not enough money. The other is that it is too much money.

Those in the "not enough" camp point to the half-measures attempted during the New Deal of the 1930s, saying the sickly economy really didn't get the transfusion it needed till the massive spending of the Second World War.

The "not enough" camp also says the few trillions the government is pumping into the economy won't begin to replace the many trillions pouring out.

On the other side, those in the "too much" camp glance nervously at Weimar Germany and warn that printing money can lead to inflation and chaos down the road.

Money is only half of economics. And in the other half, which is human psychology, you can't put the clock back.

Either of those might be true. But I think there is a third and stronger reason why the president's plan might not work. And that is because, at this point, it's not about money at all.

Under the current rescue plan, fixing the U.S. economy is like a repair job on a broken down Chevy. Treasury Secretary Timothy Geithner, with his bank bailout, is replacing the fuel pump and tinkering with the carburetor.

A crowd of taxpayers is lined up behind the old clunker, using their stimulus money to push. Obama's up front, ready to pop the clutch so the engine can start pulling on its own.

In a purely mechanistic sense, that sounds as if it should work. That is, if everything else were equal.

But it leaves the human factor out of the equation.

Money is only half of economics. And in the other half, which is human psychology, you can't put the clock back.

Until less than two years ago, America was driving that Chevy hard, hootin' and hollerin', tossing empties out the window. But the mood has changed.

This is after the gold rush, when the Klondikers head home poor and frostbitten. The once-whistling soldiers come back from war to write sad poems.

The Masters of the Universe, just like American homeowners, suddenly discover they were only dupes in a giant Ponzi scheme they helped create. Even heaps of money cannot heal such wounds.

A true recovery will need more than money. It will need a new sense of purpose, a new enthusiasm. And we, all of us, have to rest for a while.

And then we have to invent that new purpose. It will take time.

Don Pittis has reported on business for Radio Hong Kong, the BBC and the CBC. He is senior producer of CBC News Business.