Stimulus Bill Fatally Flawed - Tax Cuts and State Subsidies Won"t Help Economy
Most economists agree that a large economic stimulus package is necessary to mitigate one of the most significant recessions since the Great Depression of the 1930s.
However, the $825 billion stimulus package moving through congress is fatally flawed.
This recession must be fought on two fronts.
First, we must fix the cause of the problem, which is the housing crisis.
And second, we must stimulate spending which accounts for two thirds of the US GDP.
The challenge with the current $825 billion bill is that it spreads out the money over too many areas without addressing these two core investments.
There is only a limited amount pledged to help mortgage holders (which does address the cause but insufficiently).
There is also a massive amount of wasteful spending to bail out the states, and that money isn't going to into new or expanded programs that would stimulate the economy.
It will just plug the huge state deficits without any increased local spending.
Another problem is that there are huge tax breaks spread across broad income brackets.
That's just a huge waste of money.
Do you really think anyone is going to go out and have the confidence to start spending anew because they have an extra $15 in their paycheck every other week? That's just crazy.
The economic stimulus package should be solely about boosting employment and extending benefits for the unemployed:
Once we address and fix the underlying cause, and get people working over the next 2 years, we can discuss tax cuts.
Yes, tax cuts are great great and can stimulate long term growth.
But in the short term, targeted programs will do much more to get people back to work.
However, the $825 billion stimulus package moving through congress is fatally flawed.
This recession must be fought on two fronts.
First, we must fix the cause of the problem, which is the housing crisis.
And second, we must stimulate spending which accounts for two thirds of the US GDP.
The challenge with the current $825 billion bill is that it spreads out the money over too many areas without addressing these two core investments.
There is only a limited amount pledged to help mortgage holders (which does address the cause but insufficiently).
There is also a massive amount of wasteful spending to bail out the states, and that money isn't going to into new or expanded programs that would stimulate the economy.
It will just plug the huge state deficits without any increased local spending.
Another problem is that there are huge tax breaks spread across broad income brackets.
That's just a huge waste of money.
Do you really think anyone is going to go out and have the confidence to start spending anew because they have an extra $15 in their paycheck every other week? That's just crazy.
The economic stimulus package should be solely about boosting employment and extending benefits for the unemployed:
- People without jobs aren't going to have the money to spend (obviously).
- People collecting unemployment will spend, that is true, since they have no choice.
So unemployment benefits extensions help the economy, but it's not sustainable long term. - People who get new jobs created through government spending programs will not only create value for society through productive work, but they will then also have the confidence to spend their new found earnings and even finance some of their spending (an American tradition).
- People who already have jobs will feel more confident to spend more when the labor market tightens.
That's because (1) they will feel it is less likely they will lose their current job, and (2) they will feel even if they do lose their current job there are others out there.
Once we address and fix the underlying cause, and get people working over the next 2 years, we can discuss tax cuts.
Yes, tax cuts are great great and can stimulate long term growth.
But in the short term, targeted programs will do much more to get people back to work.
Source...