Even if the entire sum were to be stolen by federal employees and spent entirely on fast cars, fancy homes, gambling junkets and fancy clothes, it would still be an $800 billion increase in the demand for goods and services -- a pretty good working definition for economic stimulus.
It comes from an opinion piece in the Washington Post by Steven Pearlstein that makes an excellent point: our Congressmen in Washington do not have any financial literacy. To say that the Stimulus Package that is being worked through Congress is a spending plan but not a stimulus plan is to say that ceasing to live is not dying. And, as expected, this type of Orweillian "black=white" dialogue is coming from the Republican party. How do they do this and look themselves in the mirror late at night? It's clear that they would rather delay or destroy any chance of resolving the economic crisis quickly by standing on flawed principles.
The creation and evaluation of the Stimulus Plan should focus on three things:
- What will have a quick impact? The quicker we get the money into the market, the better.
- What will have the largest "multiplier"? Who will spend this money? Clearly, the rich in our country are very effective at hoarding assets. If you give someone with a high net worth an extra dollar these days, it will likely go back into their bank account in order to regain the investment funds they lost over the last year or so as they hunker down for an economic winter. However, if you give someone who makes less than $50K/yr an extra dollar, the probability that it will be spent and spent quickly is much higher.
- Spending should largely go towards either: Fixing large problems in our current society (see education and healthcare) or creating national strategic assets (see broadband, education or refreshing our civil infrastructure). Spending the extra money on both of these things will create assets that all businesses and citizens will be able to leverage for years to come in the future. The highway system is an excellent example of government spending that has probably resulted in a tremendous amount of wealth creation for every person and business in the U.S.A.
Investing for the future is the DNA of American progress. The question isn't whether it should be private or public capital, the question is how to do it well in either forum.