The Basic Choice Of A Politician Seeking To Stimulate A Moribund Economy

Submitted By degrasse
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The basic choice facing any politician seeking to stimulate a moribund economy is whether to catalyze the supply side with tax cuts on business or the demand side by way of spending increases. Obama obviously made that choice years ago: He will work the demand side.
Talk about you equation stuff

Famed conservative columnist Dick Morris points out that in all federal capital projects, only about one-quarter of the funds appropriated are actually spent in the fiscal year. According to his studies it takes that long to plan, engineer and begin construction. Also he stated that for every $6 spent in the Bush stimulus, only $1 actually got spent on goods or services. Five dollars out of every six in the Bush stimulus package of 2008 went to pay down debt items such as: mortgage, credit card, student loan or home equity (Dick Morris). Now if his numbers are correct dick Morris points out that, only 25 cents out of every dollar actually is spent in the fiscal year, and only one-sixth of that sum actually gets spent by the workers who get paid on new goods and services, only about 4 cents from every dollar actually stimulates the economy. Lastly he brings up an interesting statement, for the cents spent on the economy who says it’s going to be spent on domestically produced product, couldn’t it just have gone to feed Chinese imports (Morris).
A year after the bill was passed the White House released its summary of 150,000 reports submitted by recipients of federal grants or contracts under the 2009 stimulus program. According to the Wall Street Journal, a Kentucky shoe store owner gave credit to the stimulus program for creating or saving 9 jobs as a result of an $890 contract to supply work boots to the Corps of Engineers (Morris). Now this claim is clearly inflated for reasons not clear to us all but it is clear that these reports lack any real weight behind the validity of their numbers. According to the Administration’s summary, the reports offered evidence that 640,000 jobs have been directly created or saved as a result of spending or promised spending under grants or contracts funded by the stimulus package (Burtless).
Now in defense of the bill Jared Bernstein, the Vice President’s chief economist, emphasized that the 640,000 count represents an incomplete tally of the total jobs added or saved as a result of the stimulus package. It ignores, for example, the jobs created or saved as a result of personal tax cuts or hikes in unemployment compensation checks (Burtless). We cannot collect data from hugh companies telling us how many jobs have been produced by higher consumer spending induced by the stimulus package. For example when a customer buys food or takes a vacation in Vermont, how can we tell what percentage of the spending was induced by a tax cut or a bigger unemployment check? When the indirect effects are included, White House economists estimate that over a million jobs have so far been added or saved as a result of the stimulus (Burtless). A White House report said it bases job projections on increases in the gross domestic product that result from stimulus spending: Every 1% increase translates to 1 million new jobs. Yet Keith Hennessey, former economic adviser to President George W. Bush, called that "an invalid metric," because no one knows what employers would have done in the absence of the stimulus bill (Barone).
But to understand the effects of the bill it’s important to break down the individual aspects of the bill and to test and check to see if they have worked as well as they were intended. First off according to the TownHall article, the president's economic advisors projected that in the stimulus would halt unemployment at eight percent. In its absence, they warned, unemployment
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