The time has come for another economic stimulus. It is the right decision to boost our modest growth and job creation figures, and it is the step being embraced by the world’s second and third largest economies: China and Japan, respectively.
Nobel Prize-winning economist Paul Krugman has been calling for renewed economic stimulus since 2010. The nearly $800 billion package was big on numbers but weak in the areas that mattered most. Just over $100 billion was spent on infrastructure projects – many economists and civil engineers believe that the necessary updates and improvements to American infrastructure are ten times greater. Just under $30 billion was spent on energy research and development, despite the enormous ongoing cost of importing petroleum products.
If this country wants a permanent recovery, it will need more concerted effort from the federal government. It is the only actor with the means to implement nationwide development projects.
President Obama has asked congressional Republicans to join him in a new stimulus provision as part of fiscal cliff and/or budget negotiations. Unfortunately, what he is asking for falls far short of what this economy requires.
The White House is requesting that, after the withdrawal of troops from Afghanistan, the government use half of the cost savings to pay down the national debt and half of the cost savings to stimulate the economy.
It sounds perfectly balanced. The war in Afghanistan is costing the United States roughly $100 billion annually. According to the president’s logic, nearly $50 billion will be used to pay off the debt while another $50 billion would be pumped into the economy. The intent of the projects is noble, but the scale is laughable.
We need bold conviction and decisive action, not drops in the bucket. The president’s plan equates to taking a tablespoon from the proverbial “debt bucket” and pouring it into a leaky “economy.”
He isn’t looking to shore up the economy, and he isn’t aggressively tackling the deficit or the debt. This plan would simply be a token move so that the White House could play the political point that they were not giving up on economic growth.
Direct government investment of $50 billion is better than nothing, but only barely. The Bureau of Labor Statistics is not going to rush through revisions to its unemployment calculations to account for a paltry stimulus in a $15 trillion economy.
President Obama’s stimulus plan does not go nearly far enough, but his additional debt reduction caveat accomplishes nothing at all. By the time the war in Afghanistan finally comes to an end the United States will have a more than $18 trillion national debt. Washington is not going to earn back a AAA bond rating by reducing that total by one-third of 1 percent.
The American Recovery and Reinvestment Act of 2009 worked. Most of it was wasted on tax cuts and the most stimulative projects (energy and infrastructure) were woefully underfunded, yet the stimulus was still able to catch a collapsing jobs market and turn our downward tailspin into a gradual climb. If we want our economy’s gradual ascent to pick up pace, we have to infuse it once again with more stimulus.