Thanks, Washington, but the economy doesn't need your help

I have a few cherished Philadelphia Phillies bobblehead dolls on a bookshelf in my basement. When M and I aren't looking, our 3-year-old son likes to play with them. So not surprisingly, one day I came home to find Mike Schmidt with his arms snapped off.

"I've told you before: DO NOT TOUCH," I admonished my son while super-gluing Schmidty's limbs back into place. "It's not your toy to play with. Now leave it alone because you'll break it even more."

The "broken" economy
I find myself saying the same things today--except directed at President Bush, Bernard Bernanke, Nancy Pelosi, and all the others in Washington scrambling to "fix" the economy. The stock market is swooning, economic growth is slowing, and people--make that voters--are screaming: "The economy stinks and Washington doesn't care!"

So to show they have a heart, our government officials will offer up what many want: $150 billion to spend in the form of tax rebates, and lowered interest rates for borrowing money "more affordably." But isn't spending and borrowing how we got here in the first place?

As I see it, economic and investing forces aren't broken; they're working quite well. For example, when demand exceeds supply, prices drop (as with the housing market today). And with high risk can come punishing losses instead of soaring gains (as banks and mortgage companies have had to relearn).

No short-term fixes
What is broken is general perception: that Washington must do something to fix the economy. No, it shouldn't. Tax rebates while fighting a multibillion dollar war fought on two fronts and running up a monstrous federal deficit is a bad idea. Making borrowing more attractive while more people are struggling to pay the debt they already have is a bad idea.

No doubt, things look bleak right now. They will likely get worse in the months ahead. Unwinding the housing bubble of the last few years will take some time and involve some pain. Believe me, I don't enjoy seeing that M's and my 401(k) is down about $13,000 since the end of the year alone, and that our townhome has lost about $15,000 in value over the last several months.

But I have little faith that Washington's short-term fiscal band-aids will make things better in the long term. They won't change $90-$100 per barrel oil or fast-rising health care and education costs. Or Americans' general tendency to spend more than they earn.

Instead, the President and Congress should just leave the economy alone. "Don't touch it. It's not your toy to play with. You'll just end up breaking it even more."

Then again, those warnings don't really work with my son, either.

Mortgage bailout is the object of my ire

Ok, I know it's been a while--more than three months since my last post. In that time, I've welcomed a new daughter into the world, passed another test on my way to a Chartered Financial Consultant designation, and scrambled to find and buy a replacement car for my Sentra, which unexpectedly died on the Pa. Turnpike. So I've been busy.

What prompted me to write today? Outrage. The culprit? The Bush mortgage bailout plan. It's even made me do something that I've never done before: write to my congressman and senators. (That would be Jim Saxton, Frank Lautenberg, and Bob Menendez--and you didn't even think I knew who they were, did you, Dad?)

Wish I had the government in step in to freeze the rate on the ARM I took out on my first house back in 1999, when I didn't know any better. Would have been nice to pay the low initial rate I got for an extra five years.

Better yet, wish M and I had used an ARM to buy that oh-so-nice $464,000 house we looked at a few years ago. We knew we could never afford it with a fixed-rate mortgage on our five-figure income. What were we thinking? We could still be living there, sitting pretty with an affordable rate until 2012. And who knows, by then I could have turned this blog into a money-making machine, become CEO of my company, or hit the lottery, so we could afford the payments when the rate resets then.

One anonymous poster on Real Time Economics sums up my feelings about the Bush plan pretty well, plus gave me a chuckle:

"I would like the government to help me out with my gambling debt in Vegas. The casino didn’t explain the rules very well. And I didn’t realize that the house had the advantage. I would like my life savings back. If you could just give me a little more time, I think I could win it all back. Please help me!"

Shhhh, anonymous...Don't give Washington any more bright ideas.