What are we stimulating?
As you’ve read the past weeks headlines, specifically today’s, you are sure to come across something about the latest and greatest ‘Stimulus Package.’ After reading countless articles in print and on the web, the question I still have is, what the heck are we actually stimulating?
I finally came across a great article (actually 3 of 3) on the stimulus package on Motley Fool. If you read all 3 parts and parts of the CBO you will be well educated on what the stimulus package is doing and is not doing. Here are a couple of my favorite quotes from the article:
“After the tax credits are backed out, only half (52%) of the money in the plan will be put to work over the next two years, supposedly 15% in 2009 and 37% in 2010. Hmmmm, that’s a lot smaller than I thought it would be, but at least it’s something. Well, it’s worse than that because I doubt that it backs out things like the $87 billion is for a temporary increase in the Medicade matching rate, $43 billion for increased unemployment benefits, $39 billion in healthcare for newly unemployed workers, $20 billion for food stamps. All of these things are nice and they help people who are in need, but they do almost nothing to stimulate the economy.” by TMFDeej
“I just want America to actually produce stuff that other people want. The problem with this country is we spent all of our time and resources creating money out of thin air using leverage and smoke and mirrors or serving each other lattes. America needs to produce actual stuff in order to get back on our feet. The government can spend money wisely to steer us down that path…or it can continue to piss away the tax revenue of future generations on short term Band-Aids that don’t solve our problems.” by TMFDeej
I also managed to find a sweet board game (on-line) that adds a bit of comedy to our current situation, check out ‘The Bailout Game‘!
With all of this said, what are others opinions on the stimulus? Do you understand what these massive packages are doing? Do you think they will work? Ideas on what will work?
I could not agree more with the article about the wasteful spending that the stimulus package is creating. All I have seen from any government action thus far is nothing but a prop up of companies at the tax payers expense. The part of the article I most agree with is below:
“We need to make things and shift our energy consumption to domestic sources and we need to do it ASAP. Think how much better off the economy would be if you could purchase a plug-in electric vehicle manufactured by a domestic company and plug it into the wall to recharge it with electricity generated by a domestic resource like natural gas, nuclear power, wind, solar…whatever anything that doesn’t ship money and jobs to the Middle East and manufacturing jobs to Japan.”
While I totally agree with this notion and think that the single most important issue in America over the next few decades will be energy independance, I believe there is a fatal flaw in this arguement. Domestic companies would still be likely to send the majority of the manufacturing jobs overseas where they can get cheaper labor. The wider margins offered by cheaper labor force will always reign supreme over the “do-gooder” approach of keeping manufacturing jobs here. I certainly think the electic car idea is a great one and if we can produce our own enery here in the U.S. then that frees up money that would be sent to the middle east to be spent here. However unless there is a fundamental shift away from the importance of the bottom line (which is completley against the large corporate structure of shareholder ownership), manufacturing jobs will continue to be sent elsewhere.
On a quick side note I read an article a while back about a man named Shai Agassi and his idea on how to make an electric car dominated society a reality. I highly reccomend reading up about his organization “Better Place” at http://www.betterplace.com. The unique business model and impact this plan would have on our society is not only interesting reading but is the kind of outside-the-box thinking that stimulates real change.
Great article, fundamentally I disagree with bailouts. I do believe that our economy needs stimulation and that if bailout money were in fact actually devoted to this cause it could be the solution. However when the money will be used inefficiently at best I stand on the side that it would be much more effective to let the market self correct. As this will be the case in the end, the only difference we will have a huge bill to pay for that did nothing to stimulate the economy.
Here is something we are supposedly stimulating.
http://www.youtube.com/watch?v=9vO0lqnyk20
Our government has turned on the people like a cancer on its host, and we party on.
We are in financial trouble because we spent our wages years into the future. Now we are trying to restart the excess spending with borrowed money. We already can’t pay what we owe. Wake up.