by Frank James
This morning's employment report has clearly shaken economic analysts, many of whom are saying that the economy needs another fiscal stimulus sooner rather than later.
There's a lot of thinking today that instead of shoveling money to consumers as was done during the first round, what would benefit the economy more is spending on infrastructure that would not only provide jobs but improve the nation's roads, schools and bridges. Pumping money into state governments is also being pushed as a way to prop up the overall economy.
Economists suggestions for the size of a new stimulus package start at about $300 billion.
Here's an excerpt from Bernard Baumohl of the Economic Outlook Group:
Despite numerous government injections of financial adrenalin into the economy, it remains unresponsive. That's the quick conclusion one draws from the October jobs report. Clearly President-elect Barack Obama is inheriting the worst set of economic conditions since Franklin Roosevelt....
... The severity of the global credit crises, housing depression, and collapse in confidence is of a scale that the free market cannot cure on its own. The invisible hand in this instance is high up in the air signaling help. We may have no choice but to re-learn economics and policymaking at this point. Our contention is that only a massive government stimulus package on the order of $300 billion to $500 billion will be needed to jolt the economy out of its coma.
We're not talking about another round of tax rebates checks sent to households. Forget that. The $168 billion stimulus package last spring turned out to be a dud in large part because Americans chose to either save the money, pay off existing debt or they blew it on gasoline when prices reached record levels. No, this new package, which could come in two parts -- one during the lame duck session of Congress and another after the January inauguration --- should immediately go toward building roads, airports, bridges and other similar projects. This will quickly create jobs and increase demand for industrial material and capital goods. Monies should also be sent to municipalities who have had a difficult time raising funds in the debt market and now face the prospect of cutting vital services or raising property taxes. In this environment, a massive injection of funds to these two areas will have a much greater multiplier effect on the economy than if it were sent to households.
Sure, this will cause an even bigger hole in the federal budget. Obama will undoubtedly begin his term with the stigma of being the greatest deficit spending president in history. But we believe such spending is not only justified, it's absolutely necessary for this economy to recover. Worries of trillion dollar budget deficits have to take a back
seat for now. Let's face it, fiscal prudence is meaningless when you have an economy that is sinking deeper into a coma by the minute.
Heidi Shierholz of the Economics Policy Institute called for more spending on unemployment insurance and food stamps since those payments get pumped back into the economy by the out-of-work and low-income families.
An excerpt from her analysis:
To pull out of this negative spiral, it is imperative that policy makers pass a large second economic recovery plan--on the order of $300 billion--that is focused on elements that provide the maximum economic bang for the buck. High-benefit economic boosts include the expansion of unemployment insurance benefits, expansion of food stamps and heating assistance, aid to cash-strapped states, and spending on infrastructure projects that can be started immediately, including schools, roads, bridges, transit, and water treatment plants.
Comments
This economic failure was first felt in the building industries 3 years ago, and it will only get out of this slump by lifting this industry out. People do not realize all the jobs that are created due to the building sector: Tradesmen, architects, bankers, real estate brokers, appraisers, truckers, material suppliers, material manufacturers, logging industry, insurance agents, and when all these people get money in their pockets…..they spend it! We buy cars, and other big ticket items, which will in turn help other big industries. So while this stimulus bill will not fix everything, it is a great step in the right direction to help out the industry that has taken the brunt of this downfall on the chin for the last 3 years now.
Posted by: Xcellentform | November 7, 2008 1:34 PM
Frank,
Worst economy since FDR???
Where was Bernard Baumohl during the 70's in this country? Interest rates at 20% double-digit inflation, unemployment near 10%.
How bad is the economy really? Look at the stats in ollowing article - quite aways down and see what "necessities" Americans spend their money on:
http://seekingalpha.com/article/103202-the-shallowest-generation?source=article_sb_popular
Posted by: Terry | November 7, 2008 4:06 PM
Obama won't have any honeymoon at all.
In fact, the public is already regarding him as de facto President.
Paying far more attention to today's meeting than anything W does.
Contrast Clinton's "koffee klatch" quasi seminars he was doing about this time in 1992.
There is more pressure on Obama right now than anyone since FDR or Lincoln.
Posted by: ornery | November 7, 2008 5:26 PM
This is hilarious!. The guy hasn't even been sworn in yet and his sycophants are churning out his excuses.
Posted by: MJ | November 7, 2008 6:32 PM
This is hilarious!. The guy hasn't even been sworn in yet and his sycophants are churning out his excuses.
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And the likes of haters terrieee, juannie d, pillow et al, are going to lower the expectations so that when Barack does save the economy, they can say "It wasn't that dificult. He's just average, at best."
Posted by: tried and true American | November 7, 2008 10:05 PM
Remember democrats, when the economy is heading south, the new president gets full blame. I don't believe that, but that is ALL I heard from democrats in the year 2000. Then we moved into 6 years of consistent growth and full employment.
Posted by: Ted | November 8, 2008 9:49 AM
"...so that when Barack does save the economy, they can say 'It wasn't that dificult. He's just average, at best.'"
Posted by: tried and true American | November 7, 2008 10:05 PM
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No president can "save the economy", not even the Divine Obamessiah. Just as no president can ruin an economy, not even Bumbling Dub'ya. Economic cycles happen and as they do, presidents are always unfairly blamed or credited.
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What thinking people judge presidencies and parties by is how much pain is suffered and how fairly is it shared, as we cope with the economic busts. Also, are the infusions of money (tax cuts, Govt make-work programs) productive in the long run, or simply wasteful pandering to the mass of voters?
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Obama and the Democrats do not inspire confidence, but for my own sake and for the nation's I wish them success.
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By the way, are you actually John E using one of your dozens of alternate post names? You sound that dumb.
Posted by: MJ | November 8, 2008 2:06 PM
I hope that Bush leaving the worst economy since FDR was not the reason that the GOP and Rove appeared to do everything to have McCain lose the election to a Dem. It seems that Obama getting the worst economy since FDR--from the MBA president Bush--should get him a second presidential term automatically. It's a 'degree of difficulty' thing.
Posted by: Vivian | November 8, 2008 5:45 PM
Vivian,
Compare today's economy versus the economy of the late 70's and 1980. Compare interest rates, inflation, and unemployment. After you do that comparison, please tell me how this economy is worse than the late 70's.
Posted by: Terry | November 8, 2008 9:04 PM
Everybody needs to get on down the their socialist library and check out Studs Terkel's (RIP) 'Hard Times', a narrative history of the Great Depression, and one of his best books.
It's a good lesson in why capitalists can't be trusted.
Posted by: OldCreaky | November 8, 2008 9:11 PM
* * * * *
Posted by: MJ | November 8, 2008 2:06 PM
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Bravo. I couldn't agree with you more. We will recover from this downturn in spite of all government efforts, and not because of them. Those who think Obambi could save the economy if he were pointed in the right direction (and he isn't) are just deluding themselves.
Posted by: John W. | November 8, 2008 11:39 PM
Old Creaky,
When you get done reading Studs, please go read Adam's Smith "A Wealth of Nations" and you will see why capitalism is the only way for a society to prosper.
Posted by: Terry | November 9, 2008 8:23 AM
Terry,
I didn't say it (capitalism) wasn't. I said capitalists can't be trusted. 'Trusted' is the key word.
Posted by: OldCreaky | November 9, 2008 10:18 AM
Old Creaky,
Hard to have capitalism w/o capitalists - how do suggest capitalism be done w/o capitalists?
Posted by: Terry | November 9, 2008 3:27 PM
Terry,
Well, after losing their under-things on Wall Street and begging DC for a socialist bailout, you may be right.
Fact is, America is a hybrid. A social democracy which tries to combine the best of both systems, similarly to Western Europe.
Never fear Terry; There are capitalist everywhere; Under the rug, behind the woodwork, and in this economy, under the mattress.
Posted by: OldCreaky | November 9, 2008 6:06 PM
Trickledown Terri,
This country has been listening to clown "conservatives" like you for years and they only thing you nuts have produced is a unnecessary war in Iraq, $10 trillion dollars in debt and a nationalized banking system.
MISSION ACCOMPLISHED!
Posted by: huh? | November 10, 2008 11:01 PM