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New Stimulus Plan: The Fiscal Menace or The Economy Strikes Back?

This article was written by in Economy. 10 comments.

(Or perhaps Episode IV: Obama’s New Hope.)

In a few weeks the Senate will be debating another stimulus plan. This one is billed as a jobs creation package with a $154 billion price tag. It’s an extension of the American Recovery and Reinvestment Act of 2009, and its purpose is to increase public funding for some of the “greatest hits” from last year’s economy stimulus.

The new bill in its current form, after passing the House of Representatives last month, calls for new funding of $50 billion to be used for infrastructure, $50 billion for state aid, $2 billion for green technology, $2 billion for improving water quality, $1 billion for police officers, and under $1 billion for other items such as Amtrak rail improvement, airport projects, and living assistance for the poor.

It’s going to be difficult getting this bill through Congress after the chaos surrounding the health care bill. The Democrats may have missed their opportunity to get additional stimulus passed without significant concessions to Republicans.

Here is my prediction: If the economy doesn’t recover soon, the stimulus will be judged a failure. Democrats will blame the failure on the inability of the Congress to pass a strong enough stimulus bill and Republicans will instead blame the idea of a stimulus based on government intervention in the market. If, on the other hand, the economy does recover, Democrats will give the credit to the stimulus and Republicans will praise the economic cycles or the free market. Both sides will support their position with data from polls, surveys, economic studies, and think tanks, none of which are ever as independent as they say they are.

What is your opinion about another economic stimulus? Is more cash injection needed to jump-start the economy? Is it more important to stop adding to the federal deficit? And if more stimulus is needed, is $154 billion enough to make a difference?

Published or updated January 7, 2010.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 10 comments… read them below or add one }

avatar 1 Anonymous

Too little, too late IMHO.

The government should have made job stability and job creation its #1 priority in the initial round of massive stimulus. #2 priority should have been real estate market stability. A very distant third should have been Wall Street interests.

Instead, we got the complete opposite: Wall Street was the wounded soldier who received immediate care, real estate markets tanked, and people got laid off or “underemployed” at levels not seen since the Great Depression.

Of course, when you lose your job and home, this undermines your confidence and ability to buy products, new investments, etc. So consumer confidence plummeted.

Had they kept consumer confidence high, Wall Street would have done all right on its own. It did not need a bailout, although the government SHOULD have saved Lehman to prevent the crashing house of cards that ensued.

Moral of the story: middle class Americans were ignored. Now many of them are jobless. And $154 billion won’t do much to help. Most of that money will be gobbled up by big contractors. Sure, some folks will get new jobs from these contractors, making $7.15 or $10 an hour. But that’s not enough.

Government needs to provide businesses, small and large, with massive one-time tax incentives to take on new workers full-time — instead of relying on freelancers and temps, as they are doing now. This will get people back to work, will give biz owners temporary relief, and will ensure that the work is at least SOMEWHAT market-driven (i.e. people working at a company that needs more staff, and not just a 1,000 ditch diggers employed by a large construction contractor).

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avatar 2 Anonymous

We need to be worried about the federal deficit first and foremost.

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avatar 3 Anonymous

The theory is: save during the good times, so you have money to spend to get out of the bad times. The problem (on both a government and individual level) is that it all got shifted: spend everything you have during the good times, then go into debt and spend even more during the bad times.

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avatar 4 Anonymous

We’ve borrowed too much already. Personally, I’m kinda tired of borrowing from the year 2040 to pay for stuff in 2010.

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avatar 5 Anonymous

We should not have “helped” so manny so often strting with the first homowners bailout. I have carpal tunnel from writing to Harry Reid.

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avatar 6 Anonymous

With the way this country is going. Border crossing to Canada might not be a bad idea in the not to distant future. Maybe I won’t be taxed to death there. Plus the healthcare there might actually work.

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avatar 7 Anonymous

Throwing money at the problem will not work. Why don’t they throw out some incentives for small business start ups. The govt created jobs are short lived and don’t sustain the economy. Boo for bailouts!

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avatar 8 Anonymous

Steve is so right.

That is how it should work. Build up surpluses when things are good to draw them down when things are bad. The story of Joseph and the Pharoah’s dreams from the Bible is based on this exact principle.

How I wish organizations could do this. And with the access to easy credit, now individuals can’t seem to do it anymore either.

American finances are being handled abysmally from top to bottom. It’s such a sad state of affairs. One wonders if any financial sanity can ever be returned without the near elimination of credit. Credit has not been used to invest but to spend beyond people’s (and the govt’s) means. When credit is used to invest in the future it can have great outcomes. When it is used to buy now what you can’t afford until the future, it’s like cancer. Most americans are not responsible enough to be allowed access to credit and as a result they have financial cancer. And we demand our govt behave the same way and give us goodies without paying for them and thus the govt has the same cancer that the rest of us do.

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avatar 9 Anonymous

Simple Reaganomics – Cutting taxes spurs economic development, not Government waste.

Besides, all of this stimulus money is going to corporations, not individuals. Wall Street is paying out massive bonuses, while Main Street is stuck with exploding mortgages and high unemployment. How many jobs are they claiming to create for $154 Billion? Instead, they should give companies a tax break for each new employee they hire.

My vote is for the Government to put their own house in order, before they try to figure out what is best for the economy. They don’t have a very good track record in regulating the economy. And, the only jobs they know how to create are Government jobs.

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avatar 10 Anonymous

The bill is definitely something that needs to be passed. I don’t think the Republicans can obstruct this one. Construction and manufacturig have been hit hardest by the recession. The $50 bil in infrastructure is a great idea. States also need aid to continue operating local government efficiently. $1bil to police officers seems like a waste of funds. It’s wrong to deny people services only to turn around and spend the money on police and prisons. That’s just common sense. In America, though, I’m a minority.

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