With the House of Representatives recently passing the $819 billion stimulus package, people believe that this piece of legislation somehow will lift the United States out of a recession.
The main purpose of the bill is to increase spending on infrastructure. The term “infrastructure” is used vaguely though. For instance, the bill would spend $355 million to fund programs for the education and prevention of sexually transmitted diseases. Projects such as this and numerous others in the stimulus bill are not only irresponsible but can harm the economy.
To understand how any stimulus package works, people must understand what really is going on instead of listening to political rhetoric. In order to stimulate one person, there must be someone else who is unstimulated.
In essence, the money within the bill comes from taxpayer dollars. In addition to this, there are some people who don’t even pay taxes.
Income redistribution takes money from the rich and gives it to the poor. In essence this redistribution is Robin Hood economics. Senators and even President Barack Obama have claimed that this redistribution is a “tax cut.” One problem with giving an individual bailout is that the money has to come from a source. To resolve this issue the government can either print more money (causing inflation), borrow it from another nation (China) or tax future generations.
Who will the stimulus bill really help? Economists are not quite sure how beneficial the stimulus will be. The plan is to create new roads, highways and create jobs by updating the energy grid. While on the surface all of this sounds exciting, we have to analyze what is really going on. While unemployment is under 8 percent, Congress and the president feel the need to decrease unemployment even further. I must point out that an 8 percent unemployment rate means that 92 percent of people are employed.
Obama is by no means an economist, but he does have an arsenal of economists at his disposal. If he really wants to boost the economy, then he could cut taxes for everyone (both rich and poor). Lower taxes give people more money, which can help fuel the economy. Increasing taxes as Obama proposed during his campaign could crush the economy and lead the country into another depression. The current economy may be in a recession, but it helps people become frugal and induces savings. A recession can ultimately bring people back to their senses. In the end what doesn’t kill you will only make you stronger.