So we’re in a recession. I know last semester I was in denial but that was my optimism (or ignorance) kicking in and hoping that the slow down would be confined to financial markets, but unfortunately the contraction has trickled through the rest of the economy from banks to retailers to builders and to manufacturers.
What to do now? Do we let the economy be and hope that the recession goes away on its own or does government take a stand in the matter?
Free market purists claim in theory that recessions will correct themselves in due time with no government intervention, but the unknown element is how painfully long will it take for the economy to naturally bottom out before it goes on the upswing again. Realistically, the government isn’t going to sit back and let economic events take their course considering economic prosperity is related to political mandates and I doubt Obama’s ready to give his up quite yet.
That leaves two camps on how government can realistically intervene and prevent this from spiraling out of control. “Keynesians” believe government should be a counter-cyclical force to balance out the economy during the good times and the bad. Unfortunately, most times Keynesian economics is used to justify indebted spending regardless of economic prosperity. Supply-side economists believe tax cuts to the wealthiest brackets will lead to more private investment in business thus creating more jobs.
Obama’s plan, while noble, misses out on some big opportunities and seems to do nothing more than serve his Presidential agenda. Too many of the provisions are long term investments that don’t have the immediate impact needed. Investment in research and development is fine but how much bang for the buck is that going to get when we’re looking for maximum impact in terms of jobs? Obama missed a golden opportunity to repair failing American infrastructure that, according to American Society for Civil Engineers, could use a $2.2 trillion facelift. Some of our roads are the same ones that were created by Eisenhower in the 1950’s and I think the conditions of our levees during Hurricane Katrina and the collapse of the bridge in Minnesota nearly two years ago highlight the urgency for infrastructure repair.
Call me a “supply-side Keynesian.” There needs to be a proper non-partisan stimulus plan to get us out of this mess that balances tax credits to business, creating jobs and government spending that targets shovel ready projects like schools, buildings, universities and roads. Excess environmental expenditures and reforms to the medical system are all extremely important objectives but those items on Obama’s agenda need to take a backseat until our economy is stable again. We need stimulus, not spending, if the taxpayers are going to commit to spending another $812 billion to correct a financial crisis that’s already seen $8.7 trillion in aid or pledged help from the federal government.
