Financial Stimulus? What’s this going to Stimulate?
Posted by progressivethink on February 1, 2009
Okay, we can all agree that the economy is broken. Consumers can’t spend (or won’t spend), businesses are laying off people by the tens of thousands and also aren’t investing or spending money.. who else can prop up the economy? Government needs to pick up the slack. We have reached the last resort here. Government needs to step in with massive fiscal stimulus, and the current package is just not accomplishing this. While Republicans are hemming and hawing about spending TOO much on fiscal stimulus (probably at least until they lose THEIR own jobs) and congressional Democrats are pushing a package full of pork. I thought this package was supposed to be about infrastructure spending? What happened to that. How many roads and rail networks are going to get built with 50 billion dollars (nationwide)? This is clearly not enough investment. For example, since I’m from Boston, I’ll reference the “Big Dig” project. That project had a total price-tag of over $22 Billion! And that project was for ONE city. How much is 50 billion going to build nationwide, when our roads are falling apart and we need a large expansion in public transit development? An increase in support for infrastructure spending is the right play here. It will provide construction workers good paying jobs that are sorely needed in that industry (since they aren’t building homes anymore) where the work cannot be outsourced to some other country. And, as a bonus, these buildings, roads and public transit will last another 50 years from now. The downside is you are going to have a massive spike in debt (which maybe we wouldn’t be adding to if we hadn’t had tax cuts and two huge wars to pay for), but an overwhelming majority of economists agree that there is really no other option here. The problem is that within the package, the infrastructure spending portion is way too small to stimulate the economy nationally. We need a package at least over a trillion dollars, with at least 600 billion being dedicated to infrastructure spending alone.
However, I’m not going to knock some of the other things in the package. Aid to states is essential. Long term, if we want to make our economy strong again we need to fund education and health care; both of these areas will be drastically cut if money is not transferred to the states soon. Clearly more funding needs to be dedicated to strengthen the minimal social safety net we have (which unfortunately does not include national health care coverage —yet). People are losing their jobs, and are increasingly relying on unemployment insurance to make ends meet in hard times. Furthermore, the money given to the poor will be spent NOW, rather than later. People surviving on food stamps are not going to be socking this money away in the bank; they will be out there spending it as soon as they get it on daily needs. This will further help stimulate the economy. Finally, the energy infrastructure spending is sorely needed. Our electricity grid is vulnerable to attack and inefficient at bringing new green energy where its needed. The smart grid is something that will need to happen if we are going to move into the next phase of energy generation. It’s about time this has been put on the national agenda.
All these things are worth doing; it’s just the infrastructure spending in the package needs to be increased. I hope in the Senate the congressional delegations come to their senses and increase the spending on this aspect of the package. However, this will be a difficult sell to Republicans, who would rather watch the economy collapse then have the government take on more debt. Suddenly the party of excess for the past 8 years is now the penny pinching party of fiscal restraint. That’s a bit ironic.
… Don’t even get me started on the continuing bank/TARP bailout. We are now on the verge of nationalizing our country’s largest banks. I could explain what I think, but Paul Krugman puts it very nicely in his opinion piece for the NY times.