If you believe in America’s future, we should stimulate.
The purpose of a stimulus is not to create permanent jobs. Its purpose is to increase the demand for goods and services produced by the private sector, which results in the private sector hiring more permanent workers so they can fill the new demand from the market. Once the stimulus kicks in, the cycle of creating permanent jobs continues as demand continues to expand..
The problem is the nation must go deeper in debt to fund the stimulus and the average American has been “burned” by his debt load and he is in no mood to increase his debt burden, personal or national. For the past 20 years, the average American lived beyond his means. He maxed out his credit cards and used his home equity loan as a piggy bank to consume way more than he was earning. When the housing bubble burst, he not only was unable to use his home equity line to maintain his life style, but his net worth dropped as a result of a 40% decline in the value of his home.This is also why the stimulus should be significantly funded by those who benefited the most from our recent excesses – The super wealthy.
Many Americans looked at the equity in their home as a nest egg for retirement and their children’s education. This was wiped out. Who can blame them for being adverse to more debt, whether personal or national? He has experienced first hand what can happen by excessive borrowing.
To further complicate the problem, to get back to the employment levels of 2006-2007 we must match the demand for goods and services that was present during the period when everyone was maximizing their debt. This cannot, should not and will not happen. This demand must be made up by concentrating on increasing our exports to growing countries such as China, India and Brazil.
A stimulus can help. The question is do we believe in America. Can we overcome the problems that we all helped create? Yes, much of the blame can be placed on our leaders. We should have never invaded Iraq. When we went into Afghanistan we should have taken austerity measures, including raising taxes, to pay for the war. Our government failed to properly regulate Wall Street, banking and the rating agencies that all heavily contributed to the housing bubble and sub-prime loan debacle.
If you believe, we should be upgrading and building infrastructure. Competition from the rest of the world demands it. Without it, we cannot compete. Now is the time to do it; interest rates are low and there is an excess supply of labor.
If you believe, we must invest in education. Competition from the rest of the world demands it.
If you believe, we must invest in research and development. We cannot compete with the low labor rates of developing countries. To offset this, we must be the leaders in the development of new ideas, inventions and processes. We then must do a better job of protecting what we create.
If you believe in America, we also need to amend the constitution outlawing campaign contributions from corporations and unions. They cannot vote for our elected officals. Why should they be able to buy votes.
If you believe in America we also must demand our elected offical enforce anti-trust laws. We have lost our “Free Markets” to oligoplolies and monopolies. This must change if free markets are to work.
Can we afford it? Can we afford not to do it?
The Director of the Congressional Budget Office, Douglas W, Elmendorf, recently said,
“There is no inherent contradiction between using fiscal policy to support the economy today and imposing fiscal restraint several years from now.”