Do We Really Need Another Stimulus Package?

Back in February, Congress passed and the President signed a $787 billion stimulus package. But the economy is still weakening. Does that prove we need another, bigger stimulus package? Not so fast, bucky.

Here's some information on timing courtesy of Business Week:

Certainly, based on key numbers, it looks as if the five-month-old spending legislation has been slow to unfold. Onvia (ONVI), a Seattle company that tracks federal spending, estimates that some $65 billion of the $420 billion that was in the stimulus package for contract and infrastructure spending has gone out the door. Federal officials offer similar numbers, saying $60 billion of the $499 billion in total stimulus spending has been disbursed. (The remaining $288 billion consisted of tax cuts.)

I don't blame the government for spending slowly. In fact, I anticipated it in this article for my local paper. It's simply impossible to suddenly pour massive amounts of money into infrastructure projects. Some of the spending is particularly inappropriate for recession-fighting, such as health care expenditures. (I have nothing against health care, but health care professionals have virtually no involuntary unemployment. Our medical schools, nursing schools, and medical technical schools are running full classrooms. Extra spending can only drive up wage rates--and even that not in the short-run.)

What does the weak economy tell us about the need for more stimulus? Not much. If you believe Keynesian stimulus really works, then wait around for its effect. If you are skeptical (as I am) and think the effects tend to be relatively small and temporary, then don't ask for more. In other words, let's just shut up on this subject.

Comments

[Steven Hansen:]

Dr. Bill,
i blame the government for:
* willful disregard of opposing opinion in regard to the size of the recession we were facing;
* a stimulus that was not a stimulus even with lipstick;
* lack of research into the historical results of stimulus;
* and bear faced lying about the speed stimulus would reach the economy.

i further blame the hoard of economists who legitimized this fiasco by offering support for the stimulus package.

www.washingtonpost.com...

Jul 09 03:50 AM

[CautiousInv...:]

Let's say $60 billion of the spending component has been spent and $43 billion if tax relief has passed through the system, so around 13% of the amount originally authorized is working its magic.

How can anybody in their right mind suggest more stimulus when when 87% of the original bill has not been spent? We could easily wind up transforming the current problem into one of excessive fiscal stimulus and then slamming on the brakes to avert price inflation.

As evidenced by the original bill, which contains 8,500 earmarks, congress cannot be trusted to act responsibly and pass legislation free of pork and pet projects. Even if an argument could be made that we need additional spending, the ineptitude of the current congress raises the spectre of another layer of wasteful stimulus spending.

Our country cannot afford another giddy spending spree tooled by Pelosi and Reid. As I argued yesterday, a more responsible course would be for Obama to ask congress for emergency powers to refashion the remainder of the current bill and transform it a package designed to produce jobs, not votes.

Jul 09 04:34 AM

[John Galt:]

I thought we had to hurry up and enact a stimulus bill or else we might "enter into a recession that we may never come out of."

We didn't have time to carefullu review it and debate it, and the voters didn't even have time to read the whole thing...

And to be technical, this was the 2nd stimulus. The 1st stimulus was the Bush rebate checks back to people. If we enact another stimulus it will be the 3rd one.

Jul 09 08:38 AM

[W.E. Heasley:]

Another stimulus plan?

The first quasi stimulus plan was an unread, non-debated, social engineering plan complete with 6000 earmarks.

Recall the current stimulus plan. We can't afford to spend any more money. We are broke.

Recall the first plan and try again. Skip the social engineering, skip the earmarks, and base the plan on Job Creation. Create incentives for Private Capital Formation leading to Private Sector jobs.

Maybe even read the plan this time around and even debate the plan.

Jul 09 11:07 PM