“Before a joint session of Congress Thursday night, Obama rolled out a $447 billion economic stimulus package that he said would ‘jolt an economy that has stalled.’ It includes roughly $250 billion in tax cuts for workers and employers and $194 billion in federal spending on infrastructure, unemployment insurance benefits and new job training programs. Obama did not detail how it would be paid for.” –ABC
Of course! Another stimulus! How did we miss the obvious solution to our economic problems? Anyone with any sense should have come to the conclusion Obama arrived at! The clear solution to the economic woes that started with the government encouraging banks to give risky loans is more government. Certainly increasing spending with another stimulus package just a month after a hostile debt ceiling debate is the right thing to do!
If you are unaware of the government’s role in the sub-prime lending crisis read the except below.
“HUD (Department of Housing and Urban Development) loosened mortgage restrictions in the mid-1990s so first-time buyers could qualify for loans that they could never get before. In 1995, the GSE began receiving affordable housing credit for purchasing mortgage-backed securities which included loans to low income borrowers. This resulted in the agencies purchasing subprime securities. In 1996, HUD directed Freddie and Fannie to provide at least 42% of their mortgage financing to borrowers with income below the median in their area. This target was increased to 50% in 2000 and 52% in 2005. In addition, HUD required Freddie and Fannie to provide 12% of their portfolio to ‘special affordable’ loans. Those are loans to borrowers with less than 60% of their area’s median income. These targets increased over the years, with a 2008 target of 28%.”
Of course I’m being facetious. In all seriousness, simple supply side economics will tell you that cutting taxes should spur spending, and Keynesian economics will tell you that increasing government spending can help the economy–although it can hurt the private sector via the crowding out effect. That said, with the level of debt we are in, and the very recent debt ceiling debate this plan doesn’t seem very plausible. Moreover, it certainly doesn’t sounds very new or novel. Isn’t it just a third stimulus following the first two that didn’t work? About half of the money in the bill goes to funding programs that are already in effect like unemployment benefits and certainly won’t help the economy (some would say unemployment benefits hurt employment levels). This is some weak stuff coming from the President. I was expecting something much more creative. What do you think of the President’s plan?