A Second Stimulus? Really? Maybe for Small Businesses

According to the NYT, calls have begun for a second stimulus (or the third, if you count the Bush/Paulsen bailout) since the first, the American Reinvestment and Recovery Act of Feb. 2009, has produced lackluster results. The Obama Administration told the public the stimulus should produce 600,000 jobs by summer, and create or save a total of 3.5 million jobs over two years. Job creation estimates have come in around 150,000 so far.

The debate over whether any stimulus should have been passed continues from fiscal “invisible hand” conservatives who argue that no one should expect government spending to solve a severe downturn. And from political conservatives who claim it’s all just a big grab for a massive expansion of government, which naturally is the overriding goal of the Obama Administration. (Next, they’ll just start screaming COMMIES!!)

Would it be so bad to be Sweden? It certainly would require a tectonic shift in culture.

So what is the correct response? Republicans and fiscal conservatives argue that the stimulus was a mistake and that more tax cuts are needed to free up the economy to fix itself. The White House says wait and see. A number of prominent economists thought the stimulus was too small to begin with and call for another. According to a Bloomberg report, $12.8 trillion has already been committed to date, an amount nearing the country’s GDP for an entire year. Still, on Thursday, billionaire Warren Buffet called for a second stimulus. He feels the stimulus has done too little and gone to too many politician’s pet projects. MSN Money summarized the economy today:

The unemployment rate is at a 26-year high of 9.5% and is expected to reach 10% before the year’s end. More than 14.7 million people are unemployed. The number of folks struggling to find work jumps to 25.5 million after adding all the Americans who have either given up looking for work or are stuck in part-time or temporary jobs due to the unavailability of full-time employment.

Without a recovery in consumer spending, the economy will continue its downward spiral. The GDP declined about 5.5% in the first quarter of this year, due in large part to consumer cutbacks.

The government is hoping that private money will follow its public investments. In theory, funds for stimulus projects should flow to businesses spurring them to increase spending and create more jobs, ultimately leading to a recovery in consumer spending.  But, so far, the economy hasn’t seen much in the way of a consumer spending boost

If we reach the point where a second stimulus package is required, if we take the nation and our citizens even further into debt (currently at $668,621 per household and $11.5 trillion in national debt), make sure the funds go to the sector where we’ll feel the biggest impact. Not to the banks. Not to state or local governments. Fund new and small businesses in green innovation, new technology, energy innovation, and the myriad businesses that create and maintain communities. Fund the everyday people who don’t work for large corporations or government, the small businesses that make up 50% of US GDP. Spend the money where it matters.

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July 9, 2009 | Filed Under Perfect World 

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