In the 80s, Ronald Reagan responded to bad economic times with a tax cut. Dubbed “trickle down economics,” it masterfully did the trick, with the economy smartly rebounding, ushering in a period of prolonged economic prosperity.
An alternate strategy for economic recovery is for government to spend their way out of it — even if it means massive deficit spending. Of course, part two of the theory is that once good times return, the budget needs to be balanced and the deficit eliminated. (Like that’s going to happen.) However, the Obama administration does seem to have the first part down, but for it to work quickly, the money needs to be spent quickly. Funding projects that will take several years to complete, no matter how worthy, will not fuel a turnaround now. Strike one.
Additionally, much of the spending seems to be earmarks, aimed at pork-barrel projects, intended more to help an incumbent be re-elected than to help the country prosper — or grow the economy. Foul tip; strike two.
With this in mind, imagine my shock and dismay last week, when the governor of Michigan (which leads the nation in unemployment, with 1 out of every 9 workers unemployed) announced that she was going to save much of the funds allocated to Michigan — because we might need them even more in the future then we do now. How will that stimulate anything? Swing and a miss; strike three.
I am seeing early signs that things are beginning to turnaround, but the stimulus plan doesn’t deserve the credit — it struck out.