As the effects of the $787 billion stimulus package of last year begin to wear off, the Obama administration is now looking at the option of passing yet another “limited” stimulus package to help dig the economy “out of a deep valley”. Without it they fear that the slow gains our economy has made this year could be lost. The Financial Times explains:
The Obama administration made a strong plea to Congress on Monday to grit its teeth and pass a new set of spending measures – dubbed the “second stimulus” by some economists – in order to help dig the economy “out of a deep valley”.
The call for action, which was made by Lawrence Summers, Barack Obama’s senior economic adviser, who urged Congress to pass up to $200bn in spending measures, came at the same time as Mr Obama asked Capitol Hill to grant him powers to cut “unnecessary spending”.
The combined announcements were made amid rising concern that centrist Democrats, or those representing marginal districts, might vote against the spending measures, which include more loans for small businesses, an extension of unemployment insurance and aid to states to prevent hundreds of thousands more teachers from being laid off.
On the heels of a $787 billion stimulus package, $200 billion doesn’t sound nearly as large, but the fact is – it is money that we don’t currently have. A lot of people aren’t quite as sure another stimulus package is a good idea, they say it’s throwing good money after bad.
The M3 figures – which include broad range of bank accounts and are tracked by British and European monetarists for warning signals about the direction of the US economy a year or so in advance – began shrinking last summer. The pace has since quickened….
It’s frightening,” said Professor Tim Congdon from International Monetary Research. “The plunge in M3 has no precedent since the Great Depression. The dominant reason for this is that regulators across the world are pressing banks to raise capital asset ratios and to shrink their risk assets. This is why the US is not recovering properly,” he said.
The US authorities have an entirely different explanation for the failure of stimulus measures to gain full traction. They are opting instead for yet further doses of Keynesian spending, despite warnings from the IMF that the gross public debt of the US will reach 97pc of GDP next year and 110pc by 2015.
So there is quite a bit of debate as to whether the first stimulus actually did very much, and now we’ve got quite a bit of debate as to whether there should be another one.
What do you think? Should there be another stimulus? Will another $200 billion in unemployment extensions, small business loans and aid to states make a difference? Should we stop the spending now in light of ballooning deficits? Tell us your thoughts in the comments.
To answer your question directly…absolutely NO more stimulus spending! This is terrifying what our leaders are doing and makes no sense. I still remember when Vice President Biden said “if we don’t spend we will go broke” our personal finances don’t work that way and neither should our government.
Peter Anderson says
I agree completely, it is a bit scary how they think they can just keep increasing spending, adding new programs/etc when we’re in the middle of a recession. Our public debt 97 percent of the GDP within a few years? That’s crazy!
This was a concern when it was first done by the Bush Camp in 08. Once government starts a spending program–what ever it is–it becomes a fixture. We can probably expect the same anytime the economy begins to weaken.
Let’s be honest about something–thus far, they’ve gotten away with it. In fact, a credible argument can be made that it’s worked. The economy is looking healthier than it did a year ago, and the sky hasn’t fallen on the debt.
The debt won’t matter until it matters, and when it does we’re going to need a lot of buckets and mops to clean up the mess.
Seems like the administration should take some of the $200B and investigate the efficiency of their various departments, learn what works where and why and what doesn’t work where and why. Then apply that nationwide (if applicable) and hopefully that will help more people and save some money in the long run.
Hear that? It’s the sound of my head banging against the keyboard.
Chris, I hear there are meds that can control that… ;-)
Naaaah. Me and drug induced haze don’t get on well. At least this way, I can take responsibility for my visit to the emergency room…haha.
Effects? What effects? The first stimulus did little more than nothing to help the economy. But I’m not shocked that Obama would try this again. What a waste of money we don’t have.
Peter Anderson says
It had plenty of effects! For example, the deficit is larger and growing faster than it ever has before!
that’s the truth Peter. It’s just a matter of time before our government becomes insolvent and can’t pay it’s bills. Will be interesting to see what happens then.
Peter, if only that were a GOOD thing! :)
Like many others, I am 100% against this. I don’t think this will pass, if it does, the media wont cover it much because if they do, Obama’s approval rating = crap.
Khaleef @ KNS Financial says
I think it’s a horrible idea! The problem with this nation’s economy was/is debt…so the answer to that problem is…MORE DEBT!!! How insane is that?
Hopefully we can sweep all of his supporters out of office in November before he can get this through.
The country is still trying to recover from the first one he shoved down our throats.