There is little doubt Americans are feeling anxious and uncertain about the U.S. economy. According to a CBS poll, 83% of Americans think the economy is in “bad” shape; 37% even say it’s in permanent decline. Economists are uneasy as well. As we pointed out last week, GDP growth for the second quarter of 2010 was just revised down to a dismal 1.6%.
So begins a new push for a second stimulus. Laura Tyson, a professor at University of California-Berkeley’s business school, advocates for one in The New York Times today. Tyson argues the first stimulus worked well, but because it’ll run out soon, Congress must pass another. She then lays out a laundry list of spending initiatives Congress should pass.
Tyson believes the nation’s debate about economic policy has focused too much on reducing the deficit and too little on reducing unemployment.
As we’ve noted before, Harvard economist Robert Barro has explained why government “stimulus” spending is a bad deal for American taxpayers and is not an effective means for creating jobs. In February he explained, “[V]iewed over five years, the fiscal stimulus package is a way to get an extra $600 billion of public spending at the cost of $900 billion in private expenditure.” In other words, the federal government was trading $9 for $6 dollars. A month earlier he suggested Congress concentrate more on “incentives for people and businesses to invest, produce and work. … [W]e should not be considering massive public-works programs that do not pass muster from the perspective of cost-benefit analysis.”
Economists in a new survey by the National Association for Business Economics (NABE) seem to agree more with Barro than Tyson. Those surveyed do not think a second stimulus would help growth. 58% are against allocating more federal money. NABE President Lynn Reaser sums up the survey: “The near-term focus should be the promotion of economic growth…Respondents also do not believe another stimulus package is necessary but think the various tax cuts should be extended beyond their scheduled expiration at year-end.”
If they ever had the nerve to try and pass another one that will be the call to take up arms and have another revolution.
A tax cut for the wealthy is not likely to help. Most likely it will not be spent on further job creation, as the demand outlook is so poor that corporations have little reason to hire. At least with a stimulus we would know that the money was creating jobs and of sufficient size it would set into motion a job creation multiplier. The stimulus is more likely to work in creating jobs and improving monetary liquidity due to the fact there is a greater probability that the money will be spent when it is put into the hands of low income and middle income people, due to the fact that they must spend most of the money to survive. While, with a wealthy elite, they would not have to spend any of the money, since they are so wealthy already they can live on just in many cases 1% or less of their wealth. It is clear that when we create demand through stimulus we give the corporations a reason to hire. They will not hire out of the blue with a poor demand outlook. Stimulus fulfills several obectives, it will help us recover the economy in a timely way, and will help to address at the same time the humanitarian crisis by providing the resources directly to the low income and middle income families that need them, it will give us an opportunity to address critical energy infrastructure through a retrofit of our cities for conservation, to move us off of fossil fuels, and in clean renewable energy, so that our economy is no longer dependant on oil, oil of which we do not have a significant conventional domestic supply so which we will always be dependant on foreign countries for it, the domestic drilling will make no real difference.
It is clear from economic data that recessions are not the time to cut public spending. After the recovery we should balance the budget. For years Republicans continued concurrent useless trillion dollar wars, often unfunded, creating tremendous debt. Democrats have sought to pay for their essential programs that save lives right away.
IF you want to kill the poor and starve people looking for work in the name of your low taxes ideology you need to be honest about that.
The idea that taxes on the wealthy are bad for the economy is wrong. From 1940 to 1970 there was a top income tax rate on millionaires of 90% and the incomes and prosperity of the middle class rose during that period. since 1980 when the tax rate on millionaires have been lowered, the middle class has shrunk and most americans have become poorer.
Tax cut for millionaires mania is good by meglamaniac millionaires who control much of the economy and who have corrupted the political process so essentially they elect politicians, but it is terribly bad and will hurt average americans.
David… my friend I have not read as eloquent and well presented opinion such as yours in a while thank you. We need more people to read and look at history just like you have, so that everyone can understand that increasing taxes on large corporations such as FOX will benefit the lower to median income families without hurting the very wealthiest its simple. hurray!!