Ex-Clinton Adviser Gergen: Economic Stimulus May Be 'Far Too Little'

      Leave it to a former Clintonista to go on CNN in the middle of a presidential campaign with a Republican president in office to tell viewers how bad the economy is.

     David Gergen, who served under former President Bill Clinton as a counselor on both foreign policy and domestic affairs, appeared on CNN’s January 28 “Anderson Cooper 360º” following President George W. Bush’s State of the Union address and to give his “insight” about the proposed stimulus and claimed a “recession” is already here.

     “[Y]ou know, the head of the International Monetary Fund yesterday for the first time in 23 years called upon nations around the world to stimulate their economies,” Gergen said. “There is deepening concern around the world and this package may well wind up to be far too little to deal with underlying realities.”

     It is the media’s foregone conclusion that this type of stimulus is what the economy needs. But there are some who think this stimulus package is not only far too little, but the wrong approach completely. Their answer is in cutting taxes – as Bush proposed in his address.

     “Even from a Keynesian standpoint [1], all you demand-siders out there – you might get three-tenths of one percent of GDP [gross domestic product] for about 20 minutes,” CNBC’s “Kudlow & Company” host Larry Kudlow said on the January 29 “The Call.” “I mean look, I’ve never met a tax cut I didn’t really like – I’ll say that. But they’d been better off making the Bush tax cuts permanent, slashing the corporate tax rate, abolishing capital gains and dividends and the death tax. That would help capital formation, that would help businesses and that would help wages and jobs. Let’s operate this economy on the supply-side and get permanent tax incentives by slashing tax rates.”

     Gergen was critical of the president because he didn’t say the economy was destined for the worst, or what Gergen referred to as the “underlying realities.”

     “[I]t is very unclear whether the president had really come to grips with the seriousness of the economic situation,” Gergen said. “You know there are many in the financial community and many economists who believe this recession – we are in a recession and it is deepening rapidly.”

     But, Gergen neglected to point out there are also some in the financial community and some economists who don’t think we’re in a recession and it isn’t deepening rapidly – including Federal Reserve Chairman Ben Bernanke.

      Earlier this month, Mike DiGiovanni, General Motors (NYSE:GM [2]) chief sales analyst, said GM was “cautiously optimistic” the U.S. could avoid a recession [3]. First Trust Advisors, L.P. economist Brian Wesbury put the odds of a U.S. recession at 10 percent in a January 28 Wall Street Journal op-ed [4].

     A $146 billion economic stimulus plan was passed by the House on January 29 [5], but awaits approval in the Senate. CNBC Media and Technology Editor Dennis Kneale said the entire proposal considered in Washington is a “political gesture” and said the solution to an economic downturn is more efficient when it comes from the private sector.

      “A crisis comes and Washington has to show they’re going to do something and that’s what they’ve done here,” Kneale said on CNBC’s January 29 “The Call.” “And., it is largely a political gesture and it will have nowhere near the instant financial impact of what Wal-Mart (NYSE:WMT [6]) did today. They said they will cut prices 30 percent to help stimulate the economy and Wal-Mart has a million employees and stores all over the place. And, that’s far better a direct transfer into their hands instead of the going through the government as a middleman. It’s largely window-dressing. Rebate checks don’t work.”