What Kind of Stimulus Do We Need?

( – promoted by EaBo Clipper)

Crossposted at The Rockefeller Republican

When it comes to fighting recessions, there's a tendency to see “fiscal stimulus” packages as wasteful, as a form of “throwing money at the problem.” The critics have a point. But the conclusion that therefore we should do nothing is also wrong. Instead, careful attention should be paid to the details. Just as a family pinched for cash might find borrowing for the purchase of a new car or appliance prudent while taking a vacation in Las Vegas wouldn't be, some government programs to combat recession make sense while others do not.Three criteria are crucial for evaluating fiscal stimulus packages. First, does the program target the weakness in the economy that caused the recession, or is it largely peripheral? Second, are the funds going to be spent in a timely fashion? Third, does the program fundamentally strengthen the economy going forward into the expansion phase? A look at the economy's current circumstances suggests that a large fiscal stimulus is needed, but a badly designed one will, in the words of an old song, merely leave America “another day older and deeper in debt.” -Lawrence B. Lindsey in The Weekly Standard.

While he goes on to state that tax cuts would be the most efficient stimulus, which I do not necessarily agree with, his point about the stimulus fundamentally strengthening the possibility of future expansion is extremely pertinent. I argued earlier that any stimulus package should be focused on driving us towards energy independence and Mr. Lindsey's criteria support my thesis. First, our hyper-dependency on foreign oil, while not e direct cause of our current woes is certainly a central player in them. Second, work could be started very quickly on various projects if the requisite red tape could be cut through, which a national stimulus plan could do. And third, our collective future would be far rosier with the prospect of a self sufficient energy system in place for the next generation.

About SteveB

  • Vote3rdpartynow

    They really don’t do anything other than give consumers a false sense of wealth – temporarily.  I took the money from the Bush stimulus package and put it in the bank because I worry about job loss and rising consumer prices.  Many others did the same.  What Bush, and Congress, had hoped for was that everyone would go out and buy some kind of large ticket item that would help retailers report strong sales, stimulate sales taxes, change the pessimistic attitude of consumers.  It failed miserably.

    What truly boosts consumer confidance – and therfore purchasing – is the sense that people have fiscal safety and certainty.  People want to feel that even if they lose their jobs they can find another one in a reasonable amount of time.  Consumers want to feel that their income flow is safe and somehow guaranteed. Right now consumers are afraid that if they lose their job it will take a year or more to find another one.  Therefore they are protecting their savings.

    Aside from sending taxpayers a stimulus check the federal government has allocated billions. perhaps trillions, to bailing out Wall Street, the credit markets and homeowners.  But they have failed to give anyone a feeling of security in their jobs.  Government can’t do that.

    Instead of spending money, which the government has a horrible record of, they should cut back on government spending and reduce taxes on businesses.  The feds should give businesses financial incentives through tax breaks to invest in research and development.  Those tax breaks should be directed at companies whose R&D can significantly improve technological, medical, manufacturing and agricultural industries.  In other words I wouldn’t want Dunkin Donuts to get a R&D tax break for inventing a new flavor donut.  I would give R&D tax breaks to the 3 big Auto companies for efforts at inventing a better and more fuel efficient car – or an agricultural company for creating better crop output, etc.  I would give R&D tax breaks to medical companies that look for a way to significantly reduce health care costs.

    What the federal government should not do is allocate billions or trillions of dollars so that politicians can feed it to their friends in the name of economic stimulation.  That is what is happening right now in Washington.  AIG got billions without blinking an eye because they were politically connected.  At the same time other less politically connected companies were allowed to go out of business.  It is a political game going on right now and the taxpayers know it.

  • Bailout money

    divided by

    the number of taxpayers that pay any tax on their income.

    equals

    Tax Rebate check for every American taxpayer.

    Want to stimulate the economy??? That will do it.  

  • It seems that the real question is what’s the return on investment for your government spending. If it’s just a matter of pumping money into the economy, then building the bridge to nowhere is as good as building roads and bridges to somewhere.

    Personally I don’t think these stimulus bills work, but Bush signed at least two into law and therefore the national Republicans are helpless when it comes to opposing them.  

  • A cessation of tinkering!

    You cannot LEGISLATE prosperity or happiness.  They happen independent of government actions, often despite them.

    Leave Us Alone!  An economy isn’t a lab experiment to have different variables applied from above, its an organic being.  Truth or dare, virtually all government action is solving the LAST problem, not the one that’s now or in the future.

    NOTHING is too big to fail – so let’s have some crashes, and see what arises from the dust.  I’m not going to lose sleep if Linens ‘n Things and the Bombay Co. go under, and the talk about bailing out RETAIL is where the bailout jumps the shark.