Friday, January 25, 2008

Economic Stimulus

(Image stolen from distributorcap, who has a great post up on the same topic)
Isn't it nice to see our government in action, racing to address our economic crisis? Now we can all stop worrying...right?
The problem is that none of the current stimulus plans address the fundamental problems facing the economy. It's a band-aid and some soothing words, when major surgery is called for.
It started with the week on the stock market. Can't have investors in a panic. So the Fed cut rates, effectively punting the market drop to a future date. But the stock market is not the economy. Sure, a lot of people have their retirement invested, but the big money is in the hands of corporate speculators. Most of us paycheck-to-paycheck types are only marginally effected by the Dow Jones numbers (although I actually talked to a tourist woman on Tuesday who was moaning that her "portfolio lost $19,000" in one week. You can imagine how sympathetic I felt). Simply put, the rate cut protected the rich from reality for a while. It doesn't solve anything.
Likewise, the bailout of bond insurers is a short term fix. The bond market is what allows the government (municipal and national) to borrow money. Without the guarantee of bond insurance, the government is bankrupt. Given the decline in the value of the dollar, this, too, is only postponing the inevitable.
Then we have the "stimulus" of "rebates", where a lot of people get some money that the government hopes they'll spend. Given the amount of debt that the average American has, they will spend it quickly. And they'll still have more debt. It's a nice "feel good" tactic that may take the public mind off the problems for a while, but it wont solve anything.
There is only one way to actually repair the American economy, and that is to invest in strengthening the domestic infrastructure. If the billions were poured into alternative energy, reducing the dependence on foreign oil and creating thousands of domestic jobs, it would strengthen the dollar. If a massive WPA style project toward domestic sustainability were initiated, it would create new opportunities for average Americans to improve their quality of life, and their future. In short, we need to be planting, not eating, our "seed corn" to use a native analogy.
Oh, and that $11 billion a month we're spending in Iraq?


Demeur said...

Thanks for summing up nicely my post from yesterday. You may want to see the comment a troll left there and my response.
Nothing like borrowing our own money to make us feel good eh?

Distributorcap said...

py -- you are always welcome to steal and borrow and use from me

nicely put