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Does the Economy Need More Fiscal Stimulus?

July 10, 2009

Advertising and Quantitative Analysis: The Trial and Error Economy Comes to Madison Avenue
By Bill Conerly, Businomics, Conerly Consulting LLC

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.

  
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hsr0601 July 10, 2009

In regard to the stimulus investment, my understanding is as follows:

1. The current surging fuel cost (World oil prices doubled during the last 6 months) is overwhelming the market rally.
And the pending clean energy bill might serve as a second stimulus package world-wide boosting private investments.

2. People are so worried about losing their job, coverage, denial of treatment, which seems to increase bank deposit latetly. That means stimulus funding mainly goes toward bank deposit for a rainy day increasing jobless rate. It proves again that a healthy society yields better productivity, prosperity.
It is time to ‘Change’ the notion of the public health as a fundamental human right and install ‘a safety system for all’ like all of the other industrialized nations, I think.

3. The stimulus funding begins to mobilize just 11%, meanwhile, the auto industry has undergone its restructuring with the massive job-related impact.

4. The pandemic swine flu has been hurting the global economy seriously.

Thank You !

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