Second Stimulus News Is Not Good

Nov 08, 09 Second Stimulus News Is Not Good
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According to economist Paul Krugman, without a second stimulus plan unemployment is going to continue to rise.  Mr. Krugman, among others, has stated that the first stimulus did stave off Armageddon.  However, those same economists insist that the initial stimulus was far too small to fix the economy.  The battle over the first stimulus was bloody enough.  There is little to no political will in either party to pass a second stimulus plan.  Although most economists believe that a drastic increase in federal spending is the only thing that will truly begin to pull us out of this deepening hole.

Even though the second stimulus news is not good, some tangible benefits came from the first stimulus.  According to Mark Zandi of Economy.com, “The stimulus is doing what it was supposed to do: short-circuit the recession and spur recovery.”  Mr. Krugman points out that if we experienced 3.5% growth for the next few years, it would take approximately a decade to return to full employment.  Private spending will have to take the place of stimulus spending if growth is to continue.  Unfortunately, there is little evidence that this will occur.

The effects of unemployment and decreased investment spending will have a negative impact on the economy for years to come.  If Mr. Obama and the Democrats would have passed a stronger bill initially, not only would the recession not have become a depression, but also we would be well on the road to recovery at this point.  Instead, in the face of incontrovertible evidence that federal spending works, the Obama administration lets opinions against a second stimulus calcify.  We keep traveling down this road of half-measures and our country will be hurting for many more years to come.  Stay tuned for any updates on a second stimulus.

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