4/08/2008

A Second Stimulus Package?

This article discusses the possibility of a second stimulus package. Up to $1200 per couple is expected to be mailed in May and a talk of another package is swirling in Washington. Democratic lawmakers are trying to pass a second economic aid package that would help homeowners avoid foreclosure and increase spending on bridges and transit systems. Lawmakers believe that bridges and transit systems are deteriorating due to the lack of attention brought on by the Iraq war. The success of the first stimulus package is still unknown; therefore, would it be smart to compose another package? Many believe that infusing the economy with money is not going to help the economic situation. If you believe the economic stimulus plan is going to help, what do you think about a second stimulus plan? I believe that the first stimulus plan will work; on the other hand, it needs to be watched carefully in order to determine whether a second plan should be introduced.

7 comments:

Grace said...

As enticing as it is to look forward to receiving $600 to $1200 in the mail from the government, I am a bit wary about the whole idea. I think the stimulus plan has the potential to help the economy depending on what people do with the money. Are they like me, planning to put the money directly into savings? If so, this won't really stimulate the economy. Or, are they planning to use the money to pay off existing debt? Again, this doesn't really stimulate the economy. However, if they use the money to purchase new goods, then it will stimulate the economy and hopefully we'll see some relief from the cries of a recession.

My biggest concern is: where is the money coming from? If we are already in a deficit, why are we spending more?

In view of a second stimulus package, I have to agree with Isaac. We need to see how the first plan affects the economy before we introduce a second plan.

Reagan said...

I don't think we have to worry about Americans saving their tax rebate. The last I read Americans saved -2% of their income and I don't think they are going to change saving habits with a struggling economy. We might put our rebates into our saving accounts but the majority of America will not.

Support and optimism for the current stimulus plan has been gaining momentum with Bernanke's comments last week. He told congress that he believes the stimulus package will soften the current financial crisis holding off more damaging effects. If the goal of the stimulus package and possibly a second one is to hold off a recession it will not accomplish its goal. If its goal is to soften the effects of a recession any money that goes into consumers pockets and back into the economy will help. However, we will have to pay for these stimulus packages sometime in the future because we all know there is no such thing as a free lunch. I think the politicians should bridle their thoughts about throwing more money to consumers until we see what happens with the first stimulus package over the next 4-5 months.

Trinity said...

I think it's always good to be skeptical of bailout plans from the government. I am very hesitant to think the first stimulus package will be helpful let alone a second. There is no guarantee these packages will help at all. Many people will just pay of debts or keep the money in the bank for a rainy day. I do believe supporting infrastructure is very important however. That would be one of the wisest things the government could do with the money instead.

Jacques said...

I am no fan of the rebate check stimulus package. Most attention paid to the issue by credible economists seems to be mostly critical of its purported merits. Sure, it might help a stagnating economy, but certainly other options are more sensible.

The threat of our crumbling infrastructure is staggering. Why not use our tax dollars to offset externalities in which only the general public can claim responsibility. We're all wearing and tearing our roads, bridges and water systems and we can't defer maintenance forever. The stimulus created by these jobs would surely do more than consumption for the sake of consumption.

Rearden said...

I'm also very skeptical of the current package. A one time handout will not create jobs or leave the taxpayers with anything to show for the money spent. I think the tresury should have kept the money and instead work on lowering corporate tax rates. Businesses need strong profits in order to confidently make further investments in labor and equipment.

TheFindlay said...

I love my stimulus package. Because we are debt free with saving my wife and I will be taking Uncle Sam’s money and buying some sweet mountain bikes. Three cheers for stimulus! I love free lunches and I enjoy them quite regularly.
The second stimulus does not sound so sweet. Why should we bail people out of their ugly greed? Homeowners are not suffering from the mortgage crisis, debt mongers that finagled their way into a home with unscrupulous financial practices are the victims. We need to let them suffer and hope that they learn. Valuable life lessons are not learned from bailouts!

Dr. Tufte said...

-1 on Rearden for a spelling error.

As a macroeconomist, the first "stimulus" plan was just wishful thinking. Most of it was neutral, and the bit about raising the lower-bound for jumbo mortgages was just inviting more problems.

I heard the plan described as your spouse walking in and saying "Hey honey, our credit card just mailed us a cash advance that we didn't ask for". Perhaps mountain bikes are not a great plan.

As to Isaac, Grace and Reagan's assertion that we should wait and see, I would say that if that is your attitude we probably shouldn't bother. By the time we can tell if it helped, the recession will be over.

I think the maintenance issue is just cheap talk. Yes, there are infrastructure repairs that need to be made. On the other hand, this is also a way to throw money at an industry with a lot of cashflow to direct towards elections. The question you have to ask here is why didn't anyone want to do this before Iraq? My guess is that no one did, but that it makes for a good soundbite now.