Personal tools
 
Views

Debate: 2009 US economic stimulus

From Debatepedia

Revision as of 20:27, 10 February 2009; Brooks Lindsay (Talk | contribs)
(diff) ←Older revision | Current revision | Newer revision→ (diff)
Jump to: navigation, search

Write debate main question here...

Contents

Background and Context of Debate:

Write Subquestion here...

Pro

  • Large spending is right approach to stimulating US economy. Martin Feldstein. "Defense Spending Would Be Great Stimulus". Wall Street Journal. December 24, 2008 - "As President-elect Barack Obama and his economic advisers recognize, countering a deep economic recession requires an increase in government spending to offset the sharp decline in consumer outlays and business investment that is now under way. Without that rise in government spending, the economic downturn would be deeper and longer. Although tax cuts for individuals and businesses can help, government spending will have to do the heavy lifting."
  • Large stimulus is appropriate for large economic crisis Scot Lehigh. "A large stimulus bill for large problems". The Boston Globe. February 6, 2009 - "President Obama's call for a large stimulus plan is under assault by arguments as unpersuasive as they are uninformed. Is the stimulus plan large? Yes, and with good reason. Our economic problems are as well. With consumers poorer from $6 trillion in vanished housing wealth and $7 trillion in vaporized stock, we're set to suffer annual losses in overall economic activity of a trillion dollars this year and a trillion or more next year. It's not just consumer spending that has collapsed. Other traditional generators of economic growth - business investment, housing construction, and exports - are all anemic. You can trace the effects of the sharp economic contraction in frequent stories about massive layoffs. That leaves government spending as the nation's best hope for softening a major downturn. To address a projected loss of more than $2 trillion in economic activity, Congress is debating an overall stimulus package of $819 billion to $900 billion. Although those figures sound large, on a dollar-for-dollar basis they would plug less than half the growing hole in the economy. So the stimulus size is hardly excessive - and conservatives' calls for cutting it back make little sense."[1]
  • Stimulus risks being too small not too large. Robert Kuttner, co-editor of The American Prospect. - Stimulus "needs to be adequate to do the job. Eight hundred and twenty billion is about 2.5% of GDP. But the economy is sinking at the rate of five to six percent. So they may find out they have to come back and ask for more." Prominent economist Paul Krugman has also stated he believes that roughly $800b in economic stimulus is "too small".[2]
  • Vast majority of stimulus bill is good stimulus. Jim Horney, director of federal fiscal policy for the Center on Budget and Policy Priorities - "The vast majority of what is in these two bills is pretty good stimulus."[3]
Steven Pearlstein. "Wanted: Personal Economic Trainers. Apply at Capitol." Washington Post. February 6, 2009 - "Spending is stimulus, no matter what it's for and who does it. The best spending is that which creates jobs and economic activity now, has big payoffs later and disappears from future budgets."
  • Funding new government jobs will stimulate the economy. Steven Pearlstein. "Wanted: Personal Economic Trainers. Apply at Capitol." Washington Post. February 6, 2009 - "And then there is Sen. Tom Coburn (R-Okla.), complaining in Wednesday's Wall Street Journal that of the 3 million jobs that the stimulus package might create or save, one in five will be government jobs, as if there is something inherently inferior or unsatisfactory about that. (Note to Coburn's political director: One in five workers in Oklahoma is employed by government.)"
  • Longer-term spending is not "waste"; helps sustain stimulus. Steven Pearlstein. "Wanted: Personal Economic Trainers. Apply at Capitol." Washington Post. February 6, 2009 - "Let’s review some of the more silly arguments about the stimulus bill, starting with the notion that 'only' 75 percent of the money can be spent in the next two years, and the rest is therefore 'wasted.' As any economist will tell you, the economy tends to be forward-looking and emotional. So if businesses and households can see immediate benefits from a program while knowing that a bit more stimulus is on the way, they are likely to feel more confident that the recovery will be sustained. That confidence, in turn, will make them more likely to take the risk of buying big-ticket items now and investing in stocks or future ventures."
Arlene Specter. "Why I Support the Stimulus". Washington Post. February 9, 2009 - "I am supporting the economic stimulus package for one simple reason: The country cannot afford not to take action. [...] The unemployment figures announced Friday, the latest earnings reports and the continuing crisis in banking make it clear that failure to act will leave the United States facing a far deeper crisis in three or six months. By then the cost of action will be much greater -- or it may be too late. [...] Wave after wave of bad economic news has created its own psychology of fear and lowered expectations. As in the old Movietone News, the eyes and ears of the world are upon the United States. Failure to act would be devastating not just for Wall Street and Main Street but for much of the rest of the world, which is looking to our country for leadership in this crisis."


Con

  • Stimulus bill contains too much non-stimulus spending.
  • Stimulus may not work; an unacceptable gamble with $1 trillion. Martin Feldstein, chairman of the Council of Economic Advisors under Ronald Reagan, wrote in January 2009, "It is of course possible that the planned surge in government spending will fail. Two or three years from now we could be facing a level of unemployment that is higher than today and that shows no sign of coming down."[5]
  • US government is powerless to affect economy with stimulus. Eliot Spitzer. "Robots, Not Roads". Slate. Jan. 5, 2009 - "the capacity of even the U.S. government to affect the overall global economy is limited. Suppose the package is $800 billion over two years: $400 billion is less than 1 percent of the global economy and a mere 3 percent of the U.S. economy. In relative terms, $400 billion isn't all that much more than the $152 billion spent on the 2008 stimulus, which had nary an impact on the economy."
  • Spending and borrowing got US into crisis, won't get it out. Andrew Schiff, an investment consultant at Euro Pacific Capital said to Politico: "All this stimulus money is geared toward getting consumers spending and borrowing again. But spending and borrowing were the problem in the first place."[6]
  • Economic stimulus plan does not create any new demand. Brian Riedl, Heritage Foundation. "The Case for No Stimulus". National Review. February 3, 2009 - "That is a great question. The grand Keynesian myth is that you can spend money and thereby increase demand. And it’s a myth because Congress does not have a vault of money to distribute in the economy. Every dollar Congress injects into the economy must first be taxed or borrowed out of the economy. You’re not creating new demand, you’re just transferring it from one group of people to another. If Washington borrows the money from domestic lenders, then investment spending falls, dollar for dollar. If they borrow the money from foreigners, say from China, then net exports drop dollar for dollar, because the balance of payments must adjust. Therefore, again, there is no net increase in aggregate demand. It just means that one group of people has $800 billion less to spend, and the government has $800 billion more to spend."
  • US stimulus spends too much on roads and bridges. Eliot Spitzer. "Robots, Not Roads". Slate. Jan. 5, 2009 - "The 'off the shelf' infrastructure projects that can be funded immediately and provide immediate demand-side stimulus are almost by definition not the transformative investments we really need. Paving roads, repairing bridges that need refurbishing, and accelerating existing projects are all good and necessary, but not transformative. These projects by and large are building or patching the same economy with the same flaws that got us where we are. Our concern should be that as we look for the next great infrastructure project to transform our economy, we might rebuild the Erie Canal and find ourselves a century behind technologically."
  • Economic stimulus by government intervention always fails Robert Higgs. "Instead of stimulus, do nothing - seriously". Christian Science Monitor. February 9, 2009 - "As we wait to see how the politicians in Washington will alter the stimulus package the Obama administration is pushing, many questions are being raised about the measure's contents and efficacy. Should it include money for the National Endowment for the Arts, Amtrak, and child care? Is it big enough to get the economy moving again? Does it spend money fast enough? Hardly anyone, however, is asking the most important question: Should the federal government be doing any of this? [...] In raising this question, one risks immediate dismissal as someone hopelessly out of touch with the modern realities of economics and government. Yet the United States managed to navigate the first century and a half of its past - a time of phenomenal growth - without any substantial federal intervention to moderate economic booms and busts. Indeed, when the government did intervene actively, under Herbert Hoover and Franklin D. Roosevelt, the result was the Great Depression. [...] Until the 1930s, the Constitution served as a major constraint on federal economic interventionism. The government's powers were understood to be just as the framers intended: few and explicitly enumerated in our founding document and its amendments. Search the Constitution as long as you like, and you will find no specific authority conveyed for the government to spend money on global-warming research, urban mass transit, food stamps, unemployment insurance, Medicaid, or countless other items in the stimulus package and, even without it, in the regular federal budget. [...] Federal intervention rests on the presumption that officials know how to manage the economy and will use this knowledge effectively. This presumption always had a shaky foundation, and we have recently witnessed even more compelling evidence that the government simply does not know what it's doing. The big bailout bill enacted last October; the Federal Reserve's massive, frantic lending for many different purposes; and now the huge stimulus package all look like wild flailing - doing something mainly for the sake of being seen to be doing something - and, of course, enriching politically connected interests in the process."
  • Allowing recession will enable stronger economic recovery Amity Shlaes. "Obama's gift to GOP is challenge to supply siders". Bloomberg. February 9, 2009 - "Cut the tax rate on capital gains to 5 percent. Halve the corporate tax rate. Fund a new, super-strong Securities and Exchange Commission to monitor anything that's traded, including the haziest derivative. [...] Buy homeowners out of mortgages they can't afford, and protect the rights of lenders. Make Social Security solvent by curtailing the annual growth in benefits. Forget one "S" word, stimulus, and learn to use two "R" words -- rent and recession. [...] Too costly, you might say, or too extreme. But the ideas above are neither costlier nor more extreme than the almost- trillion-dollar stimulus package moving through Congress. And they are more likely to bring long-term growth than the legislation advanced by President Barack Obama."


Debt: Is adding to debt to stimulate the economy justified?

Pro

  • Adding to debt/deficit to fight recession is justified. Martin Feldstein. "The case for fiscal stimulus in U.S." The Korea Herald. February 3, 2009 - "Under normal circumstances, I would oppose this rise in the budget deficit and the higher level of government spending. [...] Now, however, increased government spending and the resulting rise in the fiscal deficit are being justified as necessary to deal with the economic downturn - a sharp change from the reliance on monetary policy that was used to deal with previous recessions. Countercyclical fiscal policy had been largely discredited because of the delays involved in implementing fiscal changes and households` weak response to temporary tax cuts. By contrast, the central bank could lower interest rates rapidly, which worked to raise household and business spending through a variety of channels. [...] Nevertheless, I support the use of fiscal stimulus in the United States, because the current recession is much deeper than and different from previous downturns. Even with successful countercyclical policy, this recession is likely to last longer and be more damaging than any since the depression of the 1930s."


Con

  • Adding to debt for stimulus will harm economy long-term. David Freddoso. "The Case for No Stimulus". National Review. February 3, 2009 - "Every penny of such a package must be borrowed, because the government is already running a $1.2 trillion deficit this year and faces a $703 billion deficit for next year, according to the non-partisan Congressional Budget Office. The question, then, is whether the government can help the economy by spending money if it can only do so by first sucking that money out of the economy."


Spending vs. tax cuts: Which provides a better economic stimulus?

Pro

Con

  • Tax cuts provide better economic stimulus than spending. Jason Furman and Douglas Elmendorf of the Brookings Institution wrote, "Fiscal policy implemented promptly can provide a larger near-term impetus to economic policy than monetary policy can."[7]


Write Subquestion here...

Pro

Click on the pencil icon and research and write arguments here





Con

  • The New Deal did little to nothing to end the Depression. James Glassman. "Stimulus: A History of Folly". Commentary Magazine. March 2009 - "Despite Franklin Roosevelt’s aggressive spending, unemployment reached 25 percent in 1933, fell only to 14 percent by 1937, and was back up to 19 percent in 1939.1 In the end, the New Deal did little or nothing to resuscitate the economy. Certainly, inept monetary policies helped prolong the Great Depression, as did tax increases, constant interventions in the conduct of business, and the erection of global trade barriers, beginning with the Smoot-Hawley Tariff in 1930, more than two years before Roosevelt took office. There was a stretch of twelve years from the stock-market crash to Pearl Harbor, and, during that time, fiscal stimulus simply did not jump-start the economy (or, in Keynes’s own metaphor, “awaken Sleeping Beauty”)."



Buy American: Is the "Buy American" provision justified?

Pro

Con

  • Buy American provision will cause protectionism and depression. "How to cause a depression". The Washington Times. February 8, 2009 - "Tucked within the economic stimulus bill the House passed last week was a clause requiring state and local public works agencies to buy American iron and steel for their reconstruction projects, and the Senate expanded it to all manufactured goods. It was modified slightly on Thursday as Senators had a second thought. If the nation is going to spend $43 billion to $100 billion on infrastructure revitalizing the civil engineering, architecture and construction industries, it sounded reasonable that the spending should also be used as a catalyst for other American products like U.S. Steel's steel, DuPont's plastics, 3M's chemicals and so on. But a brief history lesson will show them the folly of their ways.
In 1929, in an effort to stimulate the American economy after the stock market crashed, Sen. Reed Smoot and Rep. Willis Hawley, both Republicans, used similar logic to create the Smoot-Hawley Tariff Act, raising tariffs on foreign goods to record levels. President Herbert Hoover signed the bill against the opposition of more than 1,000 economists and numerous business executives. The result was a trade war with Europe, which increased its tariffs on U.S. products. Ultimately, U.S. exports and imports decreased by more than 50 percent in a single year, transforming the recession into the Great Depression (yes, the Mississippi Valley drought of 1930 helped, too). But at least Smoot-Hawley left open the freedom to import, whereas what the leadership of the 111th Congress originally wanted to eliminate imports outright."


Pro/con sources

Pro



Con


External links

Problem with the site? 

Tweet a bug on bugtwits
.