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A better way to stimulate the economy
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President – elect Obama has announced his approach to jump starting the economy, one that, to this observer, seems to make sense.
Some months ago, the Federal government sent cash to virtually everyone, within certain parameters, in the anticipation that everyone would rush out and buy a new refrigerator or stove or furniture or automobile, putting more money in circulation and employing theories of the multiplication effect. Every business would benefit. However, to some extent because of uneasiness and lack of confidence in the future by a large number of people, recipients didn’t go out and spend on new stuff. A noble idea but many people decided to pay off old credit card bills, other debt, or just not spend the money. They saved it.
This was, certainly, not a bad thing but it blunted the stimulus and when the money was spent, there was no visible usable residue. By the same token, the lowering of gas prices at the pump has resulted, in effect, in a 4 or 5 % increase in spendable income for individuals and businesses. The result has been a larger stimulus package than that last summer.
Unemployment in Florida counties range from 6% to 9 % and the state anticipates a continuing slide. Up to 40 % of the lost jobs in this state come from the construction industries. President Bush has approved a three month extension in unemployment benefits but this is correctly viewed as a stop gap measure, needed for immediate relief but having no or little long term answers.
While the full details of Barack Obama’s stimulus program will not be announced for a few days, it appears that it will involve construction projects, rebuilding and repairing infrastructure, schools and other public buildings, road construction and repair, fixing many bridges. All of this will put people to work, will generate income, build confidence and pride rather than the shame and pressure of being jobless.
Employed people will buy things; they will have the confidence to put money down on that new car, new furniture, and stuff.
Most important, as I see it is that when things get better, as they surely will, there will be something tangible left.
The new plan will put money directly into areas in which the automobile and oil industries have been slow to venture: the discovery and utilization of alternative energy sources and alternative fuels. In the 1970’s, at the time of the first “oil crisis” there were promises of such a focus. After the 1980 election, pressure was lessened. Where would we be now if the efforts started over 35 years ago had been continued in earnest?
We have many needs in this country and to use economic stimuli to address them is a good idea.
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