Thursday, February 4, 2010

Wasteful spending in the stimulus, but it's not what you think

The stimulus package signed into law by President Obama last year has been criticized by many for not creating jobs and for generally being a program of wasteful spending that only makes conditions worse. There is some truth to that, in fact 36.6% was wasted in an attempt to achieve Republican support. That 36.6% was tax cuts like accelerated depreciation (multiplier .027) which time and again has been shown to create substantially less economic activity than direct spending on things like schools and bridges (multiplier 1.59) or extending unemployment benefits (multiplier 1.64). Government spending increases by the Roosevelt administration stopped the economic free fall America suffered during the Great Depression. Tax cuts like Reagan’s trickle down economic policies led to greater deficits and no new jobs.

Much of the remaining stimulus funds went to state and local governments for use in paying our policeman and teachers among others. Without those funds our children would have found themselves in classrooms with substantially more kids per class and we know that leads to poor education. So while the stimulus didn’t create as many jobs as we need it did prevent things from getting worse.

If we want our economy to start making new jobs paying more than fast food wages we’re going to have to spend some big money and the best way to do that is to invest in infrastructure because not only does it provide jobs but we also end up with something of value when it’s done.

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