pk500 wrote:wco81 wrote:That said, this crisis may become the most important issue of our times. Either we return to economic health or we're broke for generations again.
That's my big question: With $815 billion in stimulus and $700 billion in bailouts, how the hell are we ever going to close a huge budget deficit that just had $1.515 trillion piled on top of it?
Sure, the Treasury can print more money. Hello, inflation.
Take care,
PK
The economic consensus is that only governments have the resources to spend at a time when consumers and businesses are retrenching or "de-leveraging."
Nobody knows for sure whether this will work. But there seems to be even greater fear of doing nothing and seeing what may happen -- arguably, we let markets sort things out until last year when things melted down.
Of course, many economists say the lessons of the Depression was that there wasn't enough spending to ignite economic activity until WWII, while a vocal number of revisionists argue that New Deal programs prolonged the Depression. I haven't heard whether these revisionists are now saying the govt. should now let the markets play things out. Even conservative govts. like Germany are being dragged into higher fiscal stimulus than they want to undertake.
The fears about inflation are valid but right now, we're more likely to see deflation in the near term, as plunging demand will put downward pressure on prices -- although when you go to the stores, a lot of things still seem to be higher than they were 2 years ago.
Deficits have to be addressed but economic historians will point out that after spikes in budget deficits as percent of GDP, economic performance returned and those deficits closed. Some high points for deficits as a percentage of GDP were during WWII and in the early '80s.
Thus, some people argue that the stimulus isn't enough because it's not as high a percentage of the GDP as those points. One problem though is that there aren't enough shovel-ready projects for infrastructure (incidentally, I find it interesting that even conservatives and libertarians don't seem to oppose infrastructure spending now, whereas in other times, they'd argue that things like roads, bridges and other civilian infrastructure should be privatized).
To plan and manage huge infrastructure projects take years, even if the funding is approved, it takes a long time to marshall the resources to get to the point of building. So the argument is to funnel money directly to the states, rather than try to have the federal govt. plan all these projects.
In fact, the society of civil engineers said there are some 150k bridges which need work. But the govt. hasn't been able to prioritize which of them need immediate work.
The opposition to the stimulus plan is unfortunately more political than substantive. The illegal immigrants getting money out of this plan sounds like a red herring. Also some GOP politicians railing against the fact that the NEA will be getting $50 million is ideological and more symbolic than anything else. Their plan instead is just to give more tax cuts to the higher brackets, which have thus far failed in this decade to product a large number of new jobs.
Obama has been in office less than 2 weeks? Either this stimulus will work and he'll sail through re-election or it will fail and revive the GOP in 2 or 4 years. If they really believed this is a bad idea, then they should just give Obama and the Democrats enough rope, especially since the electorate voted for them partly to take the country in a different direction.
