Why We Need a Second Stimulus

[dtotire]

(edited for copyright purposes-proud patriot moderator Democratic Underground)

Why We Need a Second Stimulus
By LAURA TYSON
Published: August 28, 2010





OUR national debate about fiscal policy has become skewed, with far too much focus on the deficit and far too little on unemployment. There is too much worry about the size of government, and too little appreciation for how stimulus spending has helped stabilize the economy and how more of the right kind of government spending could boost job creation and economic growth. By focusing on the wrong things, we are in serious danger of failing to do the right things to help the economy recover from its worst labor market crisis since the Great Depression.

The primary cause of the labor market crisis is a collapse in private demand — the same problem that bedeviled the economy in the 1930s. In the wake of the financial shocks at the end of 2008, spending by American households and businesses plummeted, and companies responded by curbing production and shedding workers. By late 2009, in response to unprecedented fiscal and monetary stimulus, household and business spending began to recover. But by the second quarter of this year, economic growth had slowed to 1.6 percent, according to a government estimate issued Friday. Clearly, the pace of recovery is far slower than what is needed to restore the millions of jobs that have been lost.

Households and businesses are on a saving spree to rebuild their balance sheets. Their spending relative to income has fallen more than at any time since the end of World War II. So there is now a substantial gap between the supply of goods and services the economy is capable of producing and the demand for them. This gap is starkly reflected by the 23 million Americans who are looking for full-time jobs and the millions more who have left the labor force because they could not find one.

The situation would be even worse without the $787 billion fiscal stimulus package passed in 2009. The conventional wisdom about the stimulus package is wrong: it has not failed. It is working as intended. Its spending increases and tax cuts have boosted demand and added about three million more jobs than the economy otherwise would have. Without it, the unemployment rate would be about 11.5 percent. Because about 36 percent of the money remains to be spent, more jobs will be created — about 500,000 by the end of the year.

(snip)

more:
http://www.nytimes.com/2010/08/29/opinion/29tyson.html?_r=1&ref=opinion

[maddezmom]

1. dtotire

Please be aware of DU copyright policy:

If you wish to reference an article, provide a brief excerpt and include a link to the original source. Generally, excerpts should not exceed three or four paragraphs.

Thanks in advance.

[Clovis Sangrail]

2. a new WPA style program is what is needed /nt

[USA_1]

3. Stimulus?

Good idea but not as done previously. Instead of borrowing money to finance it, just extract the trillions sheltered overseas in tax free accounts. The president has the authority to declare all such capital Federal property and the foreign banks will have no choice under the law but to surrender them immediately. This is all that is needed to finance recovery and the rebuilding of the infrastructure. This will also end the Republican created deficit.

The most minute stroke of the pen will end the recession overnight. All it takes is for President Obama to develop the will to do so.