Does The U.S. Need Stimulus 2.0?
When the $759 billion stimulus bill was passed earlier this year, promises were made by Congress and the president that this massive spending bill would keep us out of an economic abyss. Now, the unemployment rate is at 9.5% and rising as fast as summer temperatures in Vegas.

What happened?
According to Vice President Biden in a July 5 interview he gave to ABC's "This Week", "We misread how bad the economy was, but we are now only about 120 days into the recovery package."


The misreading part makes sense because the speedy passing of a stimulus bill with nearly as many pages as Tolstoy's "War and Peace" was debated on the Congressional floor for about as long as it would take to read Dr. Seuss' "Cat in the Hat."

He also makes a lot of sense on the 120 days because only 10% of the money has been spent. However, the rumor mill is abuzz with talk of a second stimulus bill.

Steps Towards Stimulus
Before any second stimulus bill is discussed, the following needs to happen in congress:





  1. Congress needs to be less stingy with the current package and distribute the money faster. If we are destined for an economic abyss, the government needs to ante up or rethink the investment and send part of the money to reduce the growing budget deficit – which is a strategy often used by corporations. In business school they teach that if you don't have a good use for the money, it's best to give the money back to your debtors.


  2. The non-partisan Congressional Budget Office (CBO) needs to be thought of as a trusted advisor. The CBO, which is staffed by financial analysts and policy advisors, crunched the numbers and said that in a report that the stimulus would hurt the economy in the long run because the massive debt would crush growth and actually shrink the economy – even if there is short-term economic rebound.


  3. Consider investment or tax breaks for private industry. According to the Small Business Administration, small businesses with under 500 employees represent 99.2% of all employers.


  4. Debate any spending bill – and multi-billion distribution of the current stimulus funds - for at least as long it would take to read a short novel.



There's no doubt that the economy is not in its best state, but a clear and focused plan has to be developed. And it seems the best Stimulus 2.0 that could happen would be to carefully mull over and distribute the funds from Stimulus 1.0 in a way that will create an economic boom not a deficit headache.


For further reading, checkout Free Market Maven: Milton Friedman, Do Tax Cuts Stimulate The Economy?, Is The U.S. Government Too Big To Fail, Fannie Mae, Freddie Mac And The Credit Crisis Of 2008, and Dialing In On The Credit Crisis.





comments powered by Disqus
Trading Center