This whole stimulus thing is getting a bit out of hand now… My wife and I spent some time talking about it last night and I think we both agree that while stimulus is needed, it’s being handled very poorly.<\/p>\n
From our perspective, the economy works kinda like this. Your average person spends money on necessities such as food, clothing, etc. In a good economy, people tend to splurge a little bit and by better cuts of meat, higher quality clothes, etc. When the economy sours, they tighten the budget a bit and settle for the generic brands. But, no matter how you look at it, the necessities of life continue to be bought and paid for.<\/p>\n
Those necessities, in turn, provide income for the local businesses and provide paychecks to the workers. Those workers are often the same people that are paying for the necessities in the first place. And so the cycle goes on. During an economic downturn, businesses don’t bring in as much and may have to reduce the workforce in order to stay in business.<\/p>\n
So now we have the unemployed. Unemployed people can obtain money to buy necessities in two general ways. First, they can apply for unemployment, assuming they had a previous job for a certain period of time. Or, they can apply for government assistance. The latter is, essentially, free money, though there are often strings attached. Of course, my personal opinion is that there are not nearly enough strings attached, but that’s another story.<\/p>\n
Now the unemployed have money to get necessities, which pays the workers, etc. The cycle is a little bigger, but still functional. Of course, because these people are unemployed, they tend to save as much as they can, effectively hoarding their money when they can. This is difficult, at best, but they really don’t have any other options. The job market dried up because of the bad economy, so getting a job is out of the question.<\/p>\n
All of the actors above pay taxes in one form or another. Generally, those on government assistance don’t pay taxes because their income is too low, but they still pay sales tax, real estate tax, etc. Those on unemployment still pay normal income tax.<\/p>\n
Ok, so once we get into this cycle of tightened budgets and unemployment, how do we break it? Well, the "perfect world" answer is to just spend more. Stop tightening your belts and start spending what you have. And that will work, but it’s against human nature. The problem is, FUD (Fear, Uncertainty, and Doubt) are the guiding lights of the times. Fear of losing a job, uncertainty and doubt about the future all help to kickstart our built-in self-preservation instincts. How do we protect ourselves? Well, if we need to have money to survive, we start hoarding whatever we can. That way, we have it later, just in case.<\/p>\n
Right, so let’s make more money available then. But how? How about tax cuts. If we cut taxes, that reduces the amount people have to pay, giving them more disposable income, right? Yup, exactly right. But, because those people are still unemployed, human nature says they’ll merely stuff that new income away with the rest to make sure they can survive for the forseeable future. Make no mistake, tax cuts help, but the average person will just squirrel away the money, not spend it.<\/p>\n
How do we get people to spend their money then? We’ve given them more, but it did little or no good. What will it take? Well, jobs is a good start. A person with a job tends to feel more secure as opposed to one that does not. This is true even if the job they have is not completely secure. The problem is, jobs are scare because no one is spending. Because no one is spending, there’s no demand for products. No demand for products means that businesses don’t need workers to produce or sell those products, so they don’t hire anyone.<\/p>\n
Crap! We’re still stuck in a rut! What now?<\/p>\n
How about we create some jobs? Ok, great. How the hell do we do that? Force manufacturers to make more stuff? Well, you can’t really do that, now can you. But we can create demand for products by buying them, right? But we don’t want to just buy stuff to create jobs, we should probably put that stuff to good use. And how can we do that? By building and repairing our infrastructure, of course.<\/p>\n
If the government spends money on repairing roads, renovating buildings, and other such activities, it creates a demand for raw materials. This, in turn, creates demand for workers both for the manufacturer of the raw material, as well as for the business being tasked with the infrastructure job. Workers get money, spend money, create demand, etc. Overall, this reduces the tightness of the market a bit.<\/p>\n
So infrastructure spending is the answer then, right? Well, sort of. From my point of view, we need to attack this thing on multiple fronts. Jobs won’t open up instantly, and people still need to survive today. My wife has come up with a plan that she believes will work. Let me lay it out briefly.<\/p>\n
First, create a bill that handles the tax cuts. Obama ran on a platform of tax cuts, and this would let him live up to that promise. Simple enough, tax cuts for those making under $250,000 per year. That’s it. Nothing else. Push it through and see what happens. Democrats should approve because that was Obamas platform. Republicans should approve because they seem to like tax cuts. Additionally, this gives Obama street cred and political capital to spend later.<\/p>\n
Second, create a bill that extends support for those out of work. Add additional time to unemployment benefits. Extend welfare, food stamps, and other government aid. Put a time limit on it! We don’t want this forever, just for the immediate future. Push this through. Not sure how much trouble this one would be, but I don’t think it would see much contention as there are existing provisions in the current stimulus bill to do this already.<\/p>\n
Last, infrastructure. Infrastructure comes in many parts. There’s traditional infrastructure such as roads and buildings, park maintenance, etc. That will likely be the destination for most of the stimulus money. Jobs created here would be on road and maintenance crews, industrial jobs, etc.<\/p>\n
There are other areas that can be tapped as well. For instance, the existing fleet of vehicles that the government uses can be converted to hybrid and eco-friendly vehicles. Obviously a one-shot replace everything approach would be foolish, but there are likely a lot of vehicles due to be replaced. And, of course, those vehicles need to be built, so car makers have jobs. An added benefit here is increased demand for hybrid\/eco-friendly vehicles which can lead to additional research in the area, producing better vehicles, etc.<\/p>\n
How about modernizing government buildings? This includes items such as adding infrastructure to the building for network connections, modern telephone equipment, etc. In addition, the buildings can be made "greener" by using alternative lighting, heating, and electricity sources. This adds a benefit of ecological responsibility to the equation. Jobs here would be in construction, HVAC, IT, etc.<\/p>\n
And there may be other areas that can be tapped as well. Care has to be taken, however, to prevent foolish spending from being added. First of all, spending that is not directly stimulus related should be ejected altogether. Second, let’s concentrate on items that will generate long-term jobs and inject capital into the economy in a rapid manner. So, for instance, as important as some people think digital television convertor boxes are, I don’t see this as something that will generate long-term jobs. Screening and preventing STDs? I don’t think that has a place here either.<\/p>\n
There’s a lot to be done, and I think there’s a clear path to saving our economy. But, if we squander the opportunity we have now, we may not get another. So please, let’s get this right. Let’s not have another bank bailout situation.<\/p>\n","protected":false},"excerpt":{"rendered":"
This whole stimulus thing is getting a bit out of hand now… My wife and I spent some time talking about it last night and I think we both agree that while stimulus is needed, it’s being handled very poorly. From our perspective, the economy works kinda like this. Your average person spends money on … Continue reading “You got your tax cut in my stimulus!”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-33","post","type-post","status-publish","format-standard","hentry","category-3"],"_links":{"self":[{"href":"https:\/\/rant.godshell.com\/index.php?rest_route=\/wp\/v2\/posts\/33","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/rant.godshell.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/rant.godshell.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/rant.godshell.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/rant.godshell.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=33"}],"version-history":[{"count":0,"href":"https:\/\/rant.godshell.com\/index.php?rest_route=\/wp\/v2\/posts\/33\/revisions"}],"wp:attachment":[{"href":"https:\/\/rant.godshell.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=33"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/rant.godshell.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=33"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/rant.godshell.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=33"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}