GOP Senators presented their alternative stimulus plan today. The plan is $714 billion as opposed to $819 billion. Small changes? Absolutely not. The stimulus plan is completely restructured towards tax cuts and away from government spending. Let's take a look at the numbers:
$430 billion for tax cuts
$114 billion for infrastructure projects
$138 billion for unemployment insurance
$31 billion to "address the housing crisis"
To be frank, this proposal will not help. Yes, it eliminates almost everything that I didn't want in the stimulus (i.e. the insane government spending). In the Obama bill, the one that passed in the House, there was $550 billion in government spending. This is/was a ridiculous amount of money. Furthermore, government spending will NOT create permanent or long lasting jobs in this economy. We need less government, in size and in scope. Creating expanded government departments does absolutely nothing to help the economy except create a temporary decrease in unemployment.
I fear that most of these tax cuts will be used for consumer purposes. I don't believe that these tax cuts will do anything except cause people to pay off debts or buy TV's. This is not the capital that this economy so badly craves.
Also, this plan gets rid of the only thing that excited me about the Obama plan (the large amount of money dedicated to primary and secondary education). I say the economy needs capital: both these bills are very scarce in that regard. The Obama bill will create a HUGE government in size and scope. The GOP bill will, in theory, create a lot of extra money to be used for capital or expenditure to kick the economy out of recession and restore confidence in the market. However, the effect will be light on capital and heavy on spending and debt payoff. The Obama plan will provide money towards human capital in the form of a more educated workforce (assuming throwing money at education will fix things). This encourages me. But it's only a glimmer of hope in a pile of 550 billion pitfalls.
I want to be clear; I DO NOT SUPPORT A STIMULUS PLAN. I want smaller government... the Obama plan will achieve the opposite. I want less consumer spending... the GOP plan will achieve the opposite. I want to see an increase in capital which I think can conceively be bolstered with business tax cuts. Both plans have far too many detractors for me to believe that they will provide any meaningful recovery. Obama's plan is a pork-filled, government-expanding bill the likes of which I don't think we have ever seen before. The GOP plan is the same thing they've been at for 4 years, just bigger.
I hate to be too much of a "doomsday" kind of guy. However, we should all expect there to be huge blowback in terms of inflation and government expansion (into the economy and into all other aspects of life) when the Obama plan is passed in the Senate (which it almost certainly will be after minor revisions).
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No plan is going to be perfect and I agree that we need to cut out pork barrel spending, but we do need a spending bill. GDP consists of consumer spending, business spending and government spending. When the consumer and businesses aren't spending, the government needs to step in and spend. This should not be permanent levels of spending, but should be temporary, until the economy can stabilize and the consumer and businesses start spending again. Spending on infrastructure and education is great, we should see a payback in the future on these projects. What we need today is a coordinated plan that helps find the bottom in the housing market, establishes confidence in the financial markets and confidence in the future.
ReplyDeleteI definitely agree we need a spending bill of some kind. But in this bill it's very hard to seperate the spending for the sake of economic expansion and the spending for the sake of government expansion. The real worry for me is all the money being allocated to new programs. I just keep going back to Rahm Emmanuel saying, "You never want a serious crisis to go to waste".
ReplyDeleteI definitely support things like infrastructure and education to provide better facilities, roads, bridges, and workforces. However, the things that really worry me are the expansions of things like Medicaid, unemployment insurance, environmental regulation, clean drinking water, Homeland Security, clean energy/energy independence, and etc. I think that Obama can make a strong case for the necessity of all of these things. However, these things, in my mind, aren't part of an ECONOMIC recovery plan and should be addressed in a seperate piece of legislation. These things do not improve the future capacity of the US economy. We must keep in mind that every dollar the government spends will be accounted for in inflation or taxes. Yes, it can provide a boost to short run AD. But, having marginally better drinking water and air is not something that the market is demanding right now. These things will not lead to a substantial increase in market confidence as they are not items that will have an impact on the health and stability of the economy in the future.
I agree that we need a plan to establish confidence in the financial markets and confidence in the future. I think this bill contains a fair amount of that. However, there is a lot of baggage there that I don't agree with.