Obama's new plan will create a deficit of $1.5 trillion. This is the difference between taxes collected and money spent in just a single year. Outside of the US there are only 6 (six!) countries with GDPs that are bigger than this. This would be a mind boggling sum were it not so mind numbing.
I am going to repeat myself here. We're spending all this money in the hopes of a multiplier effect - in the hopes that the money spent by the government will trigger money spent by businesses and households - that will jump start the economy. But if that is the goal, why not go after it more directly?
I am having trouble letting go of the idea of a movement to fund new businesses that would be to our time what the GI bill was to the explosion of knowledge workers after World War 2.
If we are going to spend such a massive sum, why not be more direct in going after what we want? If we give households money, they are as likely to buy cars from Japan as wheat from the US. Even businesses are likely to subcontract work overseas. One of the problems rarely mentioned in this age of globalization is how much of a stimulus package might leak abroad.
We want jobs. Why not use the stimulus money to create companies that would provide these jobs?
The GI Bill really was instrumental in helping to create a new economy where professionals with advanced degrees did more to stimulate GDP growth than did captitalists and factory workers. People who would not have otherwise gone to college - who could not have afforded it - got degrees and careers that their parents could not have imagined. By creating so many knoweldge workers, the GI BIll helped to create the innformation age.
Why not look back in 30 years at the amazing companies that were started by the infusion of start up capital that triggered the creation of companies that found new industries and created new wealth? People who would not have otherwise started companies could become the new generation of entrepreneurs. This would not just stimulate consumption but two other things vital to a sustained economic solution to our current plight: new jobs and wealth. By creating so many entrepreneurs, this new stimulus package cold help to create an entrepreneurial age.
Ultimately, our twin deficits (trade deficits and government deficits) will not go down until we begin to produce more and begin to create wealth faster than we deplete it. Why not replace deficit spending with investment in our one remaining economic strength: innovation and entrepreneurship?
I love Biden and Barack. But until they can tell me why their plan of tax cuts and government spending is a better use of money we don't have, I'm going to wince every time I hear about their stimulus plan. As it now stands, it just makes me nervous.