Debate: 2009 US economic stimulus

http://wiki.idebate.org/index.php/Debate:_2009_US_economic_stimulus

After reading over 50 pro and con editorials and opinion pieces in this debate and breaking them down into roughly 25 pros and 25 con arguments on Debatepedia, I've concluded a couple of things. Government spending can work very effectively to boost an economy, assuming the appropriate managerial and supplemental steps are taken (transparency, efficiency, taking other steps to fight the liquidity crisis and mortgage crisis). So, let's assume, to keep all things equal, these steps will be taken. The reason why spending works is very clear. If you spend money on a major road project, for instance, you are paying a company to do the work (90% of work will be done by private sector), which means that a company must employ more people to perform the work, and more people that would have otherwise been unemployed will suddenly be employed, pay their bills, and spend in the economy. Almost ANY government project has a stimulus effect for this reason, while some spending has better effects than others. Shorter-term spending is generally better stimulus (although longer-term spending can have good sustaining-effects for a recovery), and most of the spending in the bill is short-term (within a year). And, 2/3 of the bill is spending vs. tax cuts. This is appropriate. Tax cuts are an OK stimulus, but not as good as spending DURING A RECESSION, simply because there is no assurance that people will spend the extra money they save through a tax cut (and saving or investing that money is not a great stimulus - although it does help liquidity). Spending programs ensure the money is injected into actual work - or, in other words, spending programs provide demand that was lacking before. For these general reasons, I support the legislation.

Some arguments that have little credibility: that the government can't simulate the economy...this really just does not stack up, largely for the simply logic described above, but also for historical reasons as well. The RIGHT government spending has worked countless times to inject capital into a market that is holding on too tight. Some say that you can't inject new capital into the economy without taking it out first in taxes or loans. Well, this is actually not how the stimulus works. The stimulus works by injecting money now (by borrowing or by printing it) and then repaying it later through taxes, yes, but only once the economy has recovered and new growth has essentially paid for the initial investment. The idea that you have to tax first to spend is oddly often stated, but is clearly wrong.

The last argument I'll touch on is the deficit. Deficits do matter. Balancing budgets is important. But, in a recession, fiscal conservatism is not a good idea. Balancing budgets during the good times is the rule of thumb. Balancing budgets during recession is a recipe for a continual tightening of spending, capital, and credit, and this can lead to bad, bad recessions.

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