Last week was a busy one, so I’m behind with the news round up. Today’s links focus on the stimulus package. I have kind of had it with all this focus and talk about the government bailing us out. I have had it with hearing people say that they are just waiting for the government to do something.
We need to realize that we will be much better off if we focus on what we can do NOW.
Congressional Budget Office Report—The Budget and Economic Outlook:
Fiscal Years 2009 to 2019
CBO anticipates that the current recession, which started in December 2007, will last until the second half of 2009, making it the longest recession since World War II. (The longest such recessions otherwise, the 1973–1974 and 1981–1982 recessions, both lasted 16 months. If the current recession were to continue beyond midyear, it would last at least 19 months.) It could also be the deepest recession during the postwar period: By CBO’s estimates, economic output over the next two years will average 6.8 percent below its potential—that is, the level of output that would be produced if the economy’s resources were fully employed (see Figure 1). This recession, however, may not result in the highest unemployment rate. That rate, in CBO’s forecast, rises to 9.2 percent by early 2010 (up from a low of 4.4 percent at the end of 2006) but is still below the 10.8 percent rate seen near the end of the 1981–1982 recession.
Thoughts: I’m wondering why the CBO’s numbers aren’t a part of the stimulus discussion. The CBO report goes on to say that the House and Senate Bills, while helping in the short term, will create government debt that crowds out private investment in a few years.
The site includes links to both the House and the Senate versions of the stimulus bills, including all the add-ons. As the site puts it, “$850 Billion, 1588 pages, and counting… somebody needs to read it!”
Note: The site was timing out earlier, so if you run into issues, try the link later today or tomorrow.
Thoughts: Yes, time is a factor in the effort to improve the economy, but we’re talking about spending $800+ billion. It’s worth giving some serious thought to despite the pressure to act quickly.
Not Every Country is Opting for Stimulus
Ireland’s prime minister announced €2 billion ($2.57 billion) in public-spending cuts on Tuesday, saying the country desperately needs to shore up its battered public finances. Also Tuesday, the Polish government approved a contingency plan to trim public spending by 19.7 billion zlotys ($5.65 billion). The budget cuts come even as other countries are boosting spending to juice their economies.
Speaking to the Irish parliament, Prime Minister Brian Cowen said the bulk of this year’s cuts — some €1.4 billion — would come in the form of increased pension levies on public-sector employees. That is effectively a pay cut for those workers. Mr. Cowen also pressed forward with tax increases for higher-income workers and second-home owners.
Thoughts: If you read the full post, you’ll see in the comments that there’s an open debate about whether this approach will work and if Ireland will ride the “coattails” of other countries’ stimulus. I haven’t heard anybody say there 100% certain a stimulus package will work, so it’s worth keeping an eye on other solutions.
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Cutting expense vs. Increasing spending. Thats an interesting thought. Of course we Americans are trained to spend more, what a novel idea it would be for the government would try to cut spending instead.
-Nate
The cutback is in current spending which is running about 20% over tax receipts. Runaway government-sector pay rises during the glory years of rapid growth are being trimmed, but there’s more fat in that sector – target of 16 billion in savings over five years.
Without controlling current spending the government won’t be able to borrow for their scheduled capital program (roads, bridges, energy, rail etc), which is still on the table and will be called ‘stimulus’.
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