What should be in the stimulus?
A colleague of mine at work sent me a link to a Time article that provided an in depth look at the stimulus plan being proposed. I had mentioned to him several times it’s time for some Keynesian economics to kick into gear. It is very apparent the American public and business are not going to jump start the economy any time in the next 3-5 years. Keynes promoted that at times like this it’s critical to have government take the lead and provide “stimulus” to help fuel investment and spending.
To do so would require increasing our federal debt but that got out of hand due to the failed policies of the last 8 years with very little to show (don’t give me the “America is safer” argument). What is needed is investment in the infrastructure of our country and development and well-being of our workforce, pretty simple priorities if you ask me. The question is what makes up those priorities. Hence, the food fights in the House and Senate.
Many Rs would say that we should let Smith “Invisible Hand” principles reign in times like this and let the market self-adjust. The problem is that business and our nation’s financial system are so screwed up right now that it’s unclear how that would ever happen. The credit markets are in shambles so there’s no money coming from that area. Businesses are facing continued losses so there’s no investment coming from that sector. The American public is so afraid to spend anything for fear of job loss or foreclosure that they aren’t going to pour any new money into the economy. So what’s left?
Cue “deer in headlights” looks from the Rs. It’s so important that they keep their party line of small government and reduced taxes that they can’t see the forest for the trees. BTW, the R message is also in disarray after the last election and they are having their own brawl trying to figure out what the new message should be (LOTS in the blogosphere about that).
The Time article is a good read and it points to the real reason for the stimulus. That is to use the money to invest in the country in things like repairing our crumbling highway system, increased broadband to small and rural communities, improved health care so workers are healthy and have peace of mind, job training programs to help retool our economy, educational investment and financial aid so our next generation is tooled and ready to go when we move to the front porch sipping iced tea, and many other priorities that help move the economy forward. The challenge with the stimulus is that the leaders of Congress and the administration asked for a wish list to help build the plan and that’s what they got – a wish list without any priority. That’s just plain politics and not good management.
Oh, and before I forget, we still have a financial system in shambles that needs restructuring. If you really want a solid read check out the GAO report on this topic. They make some very good points in their assessment. The problem is that there’s a long road ahead for something like that. It means unraveling a BUNCH of state agencies and laws as well as revamping a host of regulations that have amassed over time. It’s so badly needed but so difficult to achieve.
