No Stimulus

When the stimulus bill was being debated in Congress, there were many critics saying that it would not stimulate the economy. Even some who voted for the bill admitted that it would probably not have much effect, but believed it should be passed anyway in order to promote certain sectors of the economy.

Now that the economic numbers are in, it is becoming obvious that the stimulus bill did not stimulate the economy. While it is true that household personal income rose, it did not stimulate the economy through consumer spending. The money that did make it to consumers went into savings or paying down debts. It is also true that much of the stimulus money has not made it into the economy yet. But if the current trends continue, it is reasonable to assume that the stimulus bill will not stimulate the economy.

There was reason to doubt the stimulus bill would be effective. Last year’s tax rebate put checks into people’s hands, but it did not stimulate the economy. For that matter, the various stimulus packages passed by the Japanese government in the 1990s didn’t work either.

It is also worth remembering that the President and Congress moved quickly to pass the stimulus package and warned that unless it was passed, unemployment would pass 9 percent. But they also promised that unemployment would peak at less than 8 percent. At the moment, unemployment is at 9.4 percent.

The stimulus package also increased America’s debt. The deficit has quadrupled, but I think it may go higher. It is likely that this budget cycle will end with a deficit much higher than the $1.8 trillion currently being predicted.

As I point out in my new book, Making the Most of Your Money in Tough Times, these mounting federal deficits require the U.S. to borrow more money and undermine our currency and financial stability. And if we cannot borrow the money, then we will have to print it (thus fueling inflation).

All of this is the result of hasty, ill-advised action just a few months ago. I’m Kerby Anderson, and that’s my point of view.