President Obama is proposing a two year $775 Billion ($6,805 per U.S. household) bill to stimulate our economy. Although the details of the bill have not been worked out, it would consist of massive new Federal spending and tax cuts. The proposed massive amount of new government spending in the bill is a departure from tax cut approach to stimulate the economy primarily used in the last 30+ years.
Government Spending Will Restart Economy
Main Reference: US News and World Report
- The US economy urgently needs a large dose of fiscal stimulus to counter a sharp retrenchment in the private-sector spending.
- The Federal Government needs to counter this drop in spending by becoming the spender of last resort.
- The normal stimulus approaches of monetary credit easing is not and will not get get the job done.
- Economists at Goldman Sachs say that as currently written, the Congressional two year $825 Billion stimulus, might not be large enough.
- The rate the economy is dropping, mandates that something be done to prevent a major economic shutdown.
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Government Spending Is Not The Answer!
Main Reference: www.reason.com
- The proposed spending and tax cut plans may help short term but the resulting huge deficits could capsize the economy and cause hyper-inflation in the future.
- Much of the proposed "stimuli" spending will not have much immediate help. It takes years for highway and new building projects to occur and by the time the project is far along enough to create construction jobs, the recession should be over.
- There are some economists that site the example of Japan's major spending on public works programs doing little to shorten their decade long recession.
- Government spending does not create economic growth. Every dollar that Congress "injects" into the economy must be taxed or borrowed out of the economy. Government spending merely redistributes money from one part of the economy to another.
- Stimulus spending bills do not allocate the funds according the most economical use, instead they fund projects that are more political than productive.
- Stimulus spending often does not create sustainable jobs that will continue after the stimulus spending stops.
- Contrary to popular belief, the government economic stimulus spending programs implemented during the Hoover, Roosevelt, Ford and George W. Bush administrations did not create sustained economic growth or reduce unemployment long-term.