Bring on U.S. Economic Stimulus Package, Part II

The U.S. needs a second economic stimulus package to help struggling Americans and invigorate the economy by putting more money into circulation. Pro or con?

Pro: Families Need Reinforcement

Our country is facing the worst economic crisis since the Great Depression. While Wall Street rides the roller coaster, too many families are facing immediate crises like layoffs, home foreclosures, and bankruptcy. Last month alone, our economy shed 240,000 jobs, bringing the year’s total to 1.2 million. The unemployment rate jumped to 6.5%, a 14-year high. We need to stop the bleeding quickly.

This situation requires urgent congressional action on an economic recovery package that dedicates enough money to really matter to working people who need help getting back on track. The recovery package must include an extension of unemployment benefits and increased funding for food stamps while providing aid to local and state governments to maintain vital services. It should also include an immediate investment in infrastructure spending to rebuild our crumbling roads, bridges, and schools and put people to work. Not only will these measures help struggling families stay afloat, they’ll boost the overall economy and put more money in the pockets of small businesses and others who are hurting.

While short-term solutions are important, we need to look further down the road to prevent a repeat of the current economic crisis. That means broad-based, commonsense economic changes to help save the middle class. Wall Street should be re-regulated to restore the integrity of the banking and financial sectors and protect working people’s hard-earned money. We must develop a new model for economic growth that bolsters U.S. competitiveness. Finally, to help the middle class, we need to ensure workers have the freedom to form and join unions to bargain for better wages and benefits by passing the Employee Free Choice Act.

Con: Use the Money to Create Jobs

I’m opposed to a second economic stimulus package similar in nature to the one delivered the first time in spring 2008, where $168 billion was wasted by sending $600 to anyone with a pulse and a post-office box.

If the true objective of an economic stimulus package is to "pump money into the economy in order to reinvigorate it," let’s be smarter this time. Sending $600 checks to millions of people did not solve the problem as proven by "here we are again." If that approach had worked, there wouldn’t even be this discussion.

Instead of gratuitously mailing checks, let’s pump that same amount of money into the system by creating hundreds of thousands of jobs: by repairing roads, highways, bridges, hospitals, and schools across the U.S. That same $150 billion would reemploy the unemployed and provide a direct stimulus to the local, state, and national economy. A well-funded national initiative similar to the Works Progress Administration (WPA) would solve this economic crisis the same way it solved a greater economic crisis during the Great Depression.

Such a plan would reduce unemployment to virtually zero, while pumping billions of dollars into those communities hardest hit by the recession and unemployment. The beneficial end product would be fourfold:

1. Gainfully employed citizens with a new lease on life (lower crime, drugs, alcohol, etc.)
2. "New" paychecks being spent in the local economy (direct infusion of money where it will be circulated again and again
3. Removal of economic blight in some of our major cities
4. Creation and repair of infrastructure

Opinions and conclusions expressed in the BusinessWeek Debate Room do not necessarily reflect the views of BusinessWeek, BusinessWeek.com, or The McGraw-Hill Companies.

Reader Comments

No jobs, no consumers

If businesses keep sending jobs overseas, how can they expect customers who can buy their products? Then how can you expect stimulus packages will reignite economic activities? They might have brief impact but soon will vanish. Remember that only people who have jobs can buy things. It's that simple.

Jeremy Oberlanders

God bless this guy Bartmann. Finally, a sane articulate voice of reason. Obama should get that guy in his cabinet.

What about everyone else?

I completely agree that we must do something to combat the troubling unemployment numbers; however, a revamped WPA is not the answer (or at least, it is not the entire answer). Repairing roads, hospitals, etc., creates a slew of new blue-collar jobs, but it does little to create jobs for the highly educated, highly qualified "mid-management" workers who are being let go at alarming rates. Are these people supposed to switch industries and become laborers?

Tara Landman

I agree that the U.S. needs to create more jobs to create a better economic future. However, the entire country seems like they're getting "bailed out." Major corporations that have spent tons of money on crazy vacations and bonuses--they're getting bailed out, or if you are not paying your mortgage and in danger of foreclosure, they're getting bailed out. (I understand that some have lost jobs and can no longer afford payments, and that's different.) But for those of us who are in the lower middle class and pay our mortgages in full and on time and to stay alive takes every cent that we bring in and then some with no extras at all during the month, "Where is our bailout?" Inflation is 5% each year. I get a 3% raise each year. That does not add up. I am automatically 2% behind each year. I work in human services. There have been a lot of budget cuts the past few years. My husband and I both make a few dollars above minimum wage, but struggle to make ends meet. Plus, we have to put out $500 a month to send one child to day care so we can even go to work. Something needs to change, and it needs to be quick.

Dennis

Throwing more money at the problem will not fix it.

The problem needs to be fixed at the core. What the core problem is I will leave to the people who are paid to figure that out.

Once the core is fixed, consumers will have to gradually develop trust back in the system.

Took years to bubble, years so far to burst, years to build back trust.

Companies should break out the long haul plan.

Keep It Coming

All this stimulus talk stimulates me, into thinking, forget it. The first $600 was a joke, plus the $700 billion and another couple hundred more the politicians gave away no strings, and we are still in the same situation. Bail out GM, Ford, Chrysler; forget it, let them file Chapter 11, start over. I don't want any of my tax dollars going to pay for some cushy retirement and plush health benefits the average person can only dream of. Average hourly wage for auto workers is over $70, about $28 for other workers. Toyota workers are about $43 and hour.

Go Figure. The unions are the majority of fault, for the auto industries present financial condition Go Chapter 11, bust the unions, and get things back in perspective.

Wesley

I don't see how this is a debate. Both guys are saying we should invest in infrastructure.

Deborah

I am having a hard time understanding why politicians think we would be better off if the stimulus was directed toward infrastructure. I do not, nor does anyone in my family, work for the construction industry, which would be the only ones benefiting from this infrastructure stimulus. I do not even know anyone in the construction business. What about the people that know nothing about construction, what jobs will this create for them? Nothing.

random

OK, so we get another check in the mail. Now what?

I can invest it and watch it plummet, put it in a savings account and watch it be worth less and less with inflation adding up at an alarming pace, or just spend it and watch it disappear.

When people don't have jobs, when money is made on paper alone, and when the only new ideas about how to make more money in corporations isn't R&D or hiring more people, but financial tricks and off-shoring, how is any wealth going to be built by anyone? Who will this money help?

Outsourcing headache

I think a large root of the current problem is from outsourcing. What good is dumping loads of taxpayer money into training programs when the jobs for these eventually get shipped overseas? The only way to grow the economy is to limit government taxation and give U.S. companies a competitive chance. If you want to tax, tax those who outsource.

Realist

No. The government needs to pay its bills like everyone else, a U.S. default on its debt obligations will cause massive harm to all. Adding more debt onto the the debt is going to do nothing. The figures from Washington on everything from Social Security funds to the cost of the wars is all smoke and mirrors; we are sitting on a powder keg of public debt.

Profgj

A stimulus package including spending money to households could prevent the stashing of the cash or bill-paying by awarding it in the form of a "gift card" or generic debit card with Uncle Sam as the payor. This might help assure that the infusion goes directly into consumption.

Pam

Like Tara, I am in basically the same situation. I pay my mortgage on time to keep my home but fork out that much per month in day care. I don't get raises. My question is, if we have a minimum wage, why don't we have a maximum wage? If I can live at poverty level and still survive, does someone actually need to make 10 times that to survive? No. And welfare recipients in line at the grocery store with soda, snack cakes, and sweets stacked to the ceiling, how is this fair? My children are not obese, because we can't afford for them to be.

Marco Montini

Part of any "liquidity" situation is "cash flow." Losses are usually associated with negative "cash flow" from operations, which puts a greater burden on the financial system to provide the liquidity ("cash") companies need to tide them over. Since the financial system is in such stress as it is, it might not be able to accomplish this task. Some otherwise viable companies (unlike GM) might go under because of the combinations of these problems. A "stimulus" would at least add some additional cash flow to the system. In so doing, it will also help to increase the liquid money supply in the economy, which will also further aid the financial system in this financial crisis.

I agree though on the other point. The best stimulus package involves investment in the nation's infrastructure (similar to the Roosevelt idea in the 1930s). In this time of rising unemployment (Citi let go of more than 53,000 jobs), this is the best way to directly provide income and increase spending in the economy, which benefits the entire economy (public and private). What's more, investment in infrastructure will also yield greater future benefits as well. A thriving infrastructure is good for business and the public alike. It will yield increases in future personal and business income, thereby raising tax revenue (to reduce the deficit) without necessitating a large rise in tax rates.

Linda Tucker

I agree strongly with the second stimulus package. Being a single working mother not receiving any welfare or government assistance but with a house payment, increasing living expenses, utilities and education, I appreciate any assistance I can get.

Katja

I agree: Infrastructure is the way. Some people are asking how that would save jobs outside of the construction industry. The answer is simple. Anyone who wants to get into construction can because that is where the jobs are. Anyone not in construction? Well, all of those newly employed people in construction need to buy cars and clothes and widgets. They will take vacations and stay in hotels, etc. Their kids will buy iPods and video games, and visit Web sites. As they do that, everyone else stays employed.

Also, construction cannot be outsourced, so the jobs will stay at home.

Rain

I actually agree with the billionaire, who will never feel an economic crunch, (billionaire meaning able to buy a small island), that the new administration needs to direct the money into raising minimum wage to $9 an hour, allow unions in commonwealth states or at least an advocate for workers being treated unfairly or fired because of receiving verbal and or mental abuse in the work place. I myself am a struggling divorced mother, and I still have to pay for my education without being able to afford to continue my studies. The stimulus I did receive went straight to bills. If I was making an adequate salary, I would be able to pay my bills and debts. Stimulate the workplace, I say, allow people to work for their money, they develop a sense of pride, and that makes them feel safe in buying products in a country that appreciates their hard work. Pay the teachers, fix the schools, fix the roads, and bridges. For God's sake, do right by the very people who put the politicians in the office they're in.

Don't send the checks in the mail--add the funds to the January first employment, unemployment, disability checks. The government is going to take taxes anyway. Happy people shop, secure people invest, and trusting people stand by their Commander and Chief.

oppie

I don’t believe investing in infrastructure is the answer. The small business owners and the future entrepreneurs are the answer. Giving business owners who are doing things correctly tax breaks and low interest loans is the answer. If we would have taken the $700 billion from the first economic bailout plan and instead of giving $600 to every working man and woman, invest it into small business. We would not be losing jobs at a alarming rate.

JerkyChew

Zeitgeist Addendum
The Venus project.
Capitalism fails.
We need real change.

Yu-Tai Chia

No free checks. Money has to be earned. Government needs to put the money where needed the most, and at the end it creates the maximum benefit. Mailing rebate checks/coupons is not an option. Creating new jobs through infrastructure building and investing in education should be considered first.

Andrew Z

Stimulus package, yes.
Check, no.

The majority of people saved, not spent, the check from the last stimulus package. However, what the economy dearly needs now is money in-flow to buy things, thus companies produce more and hire more.

Right now, two things should be done to revive the economy: 1. Government should pass trillion-dollar level package to directly build infrastructure, cut tax for corporate with R&D credit, and invest in green technologies. 2. Fed cut interests to zero, but it is not enough, because many banks still put a lot of makeup, so loan interest rate is still too high. The Fed should take an extra step to leverage some major banks to lend out money with low add-up at a close to zero interest end loan rate to credible business and people with proper collateral.

Mashuri

Wow, Keynesian solution 1 or Keynesian solution 2? Some choices. Both of you need to read some Rothbard and learn how economies really work.

Jai

It really doesn't make a difference at this point. American people need help, and the government is not getting the job done. Yes I paid my mortgage, then lost my job of eight years at good pay. Yes, I have always lived under middle class.

So do I agree with the jobs--plus we should get another stimulus check but much more than just $600. I put that on bills and food. Plus every American that is not making $35,000 a year with a family of at least two should get food stamps. That would help families get back on track with food being so high. I remember when potatoes only cost $1.29; now you pay at least $2.59 for a 5-pound bag. Quit playing and give up the money to the American people. I have always lived in a recession and lived. Now that all of America is feeling the hardship, maybe something will get done. As I always say I am not here to judge, only to listen. I leave that up to our creator. Have a very blessed day.

Jimmy Dean

You can't just give out money to anyone with their hand out. That is a very touchy feely way of looking at it, but giving more money to people for food stamps is not the answer. Give a man a fish, he eats for a day. Teach a man to fish and he eats for a lifetime.
Jobs and hard work is the answer.

Ben Casner

As long as the check cashes, I usually take it. But in this case, Bartmann is right on.
1. One estimate I saw when they passed GARVEE was every $10 billion in roads money creates 30,000 jobs (not just construction but engineers, nurses, teachers, and so on).
2. Don't bail out the autos. The airlines go bankrupt every other year. They should have figured it out a long time ago.
3. No bailout for the unemployed. Let's create another bubble in this country. An employment bubble. Maybe people could actually pay for their homes, gasoline, cars, speed boat, jet skis, and the 150-inch plasma, never having to file for bankruptcy or go into foreclosure.

tom

Jobs, jobs, jobs.

Bring back Glass Steagal, and force the banks to diversify back into separate entities.

Tax consumption rather than production.

Then put together the mother of all infrastructure projects.

It's time to rebuild the Main Street economy while the Wall Street economy sifts itself out.

Isaac Mihaeli

An economic stimulus package is a waist of money. That argument was good 30 or 40 years ago when products were made in the U.S., and consumers spent money and increased industrial output. However, today when most of the products are made in China or other countries, it increases the national trade in balance and the national deficit.

Tyler Stafford

Just to clarify all for all of those people who are wondering why we would invest in infrastructure as to think it wouldn't benefit them: Investment in infrastructure is one of the more efficient ways to invest because for each dollar you spend on infrastructure, you get more than a dollar back. This is due to the longevity of infrastructure projects. Think of it this way: For every product to be used, you need the electrical grid. For every product you buy, you need the transportation system. For every service rendered, you need some way to get there. The infrastructure is the underlying element in the exchange of goods and services. Improving/updating this will increase efficiencies in all aspects of business.

Strategery

Simply throwing more money at the problem will not fix anything. There are some fundamental flaws with our country and economic system that need to be fixed. First off, we need to reduce the tax burdens on businesses and individuals. We need to tax imports because American products/manufacturers are taxed through payroll and other taxes while many imports are virtually tax-free. We need to end our welfare society, which encourages laziness and irresponsibility. If someone knows that the government will raise their child, then why would they avoid having a child they cannot afford? To the commenter named: What about everyone else? One of the problems with America is that we have too many middle management types that do not want to work, want a 50k+ salary and 9-5 hours, holidays off, etc. Many of these jobs do not have a compelling reason to exist. It will take more manufacturing and exporting, along with lower consumption and savings, to make America's economy great again. Finally, the Federal Reserve needs to be brought under the full control of the U.S. government. Much of the national debt would be eliminated if this was done, and budget shortfalls could be made up using the so-called inflation tax, instead of the current system that also uses the inflation tax and keeps the U.S. in debt to private elite bankers.

Smedge

The most important part of making a loan for a house is that they make sure they put down 20% to hedge against risk.

silvers

"The $700 billion bail out," while well meaning, is doomed to fail. Giving to the banks, to loan money, to help Americans get out of debt, is a vicious cycle. Had the government given the dollars to the American people, children under the age of 18, their dollars should have been placed in at least a 3% interest-earning account with the interest paid back to the government when the child reaches majority. All Americans would have had the opportunity to pay off debts, actually put money in savings, buy new automobiles, and perhaps even buy stocks. Instead we have a stimulus package that doesn't even cover the amount most people had to charge last week for groceries and gasoline for their cars to look for jobs that aren't there anymore, We could have at least had a chance for success.

TAmano

I am a Japanese national, and from our experiences in investing into infrastructure, I know that the public expenditures will not generate sufficient tax revenues to offset the required debt, unless the expenditures will increase GDP by five times of investment.

Be selective in infrastructure investment. The smart pubic expenditures will be to encourage people to work harder to make the best products in the world, so that U.S. may export more.

Kathy

The government has never built roads (contractors do), and I don't think they will ever do that. Government socialist insurance will never work - just look at the state of the medical industry after years of legislating our health. For decades, our infrastructure has been crumbling with the excuse that we don't have the money. Now we have the money? Printing money does not help this country - just look at Wall Street every time they start a new deal. Hurried in-the-dark legislation has just about brought this country (and the world) to it's knees. Panic and fear mongering, spying on the people, and taxing us to poverty is not the way to be a leader. Everything that the government touches crumbles. Why? Because they can't keep the grease from their palms. What drugs are these politicians on, anyway?
While I'm not a big supporter of corporal punishment, it is my understanding that China has just executed the politician that was responsible for the melamine in food. Maybe a little bit of justice, morality, intelligence and sanity from our leaders would help our "confidence" problem in this country.
On the other hand, if you think that the plan from Washington has helped you - pop another pill (they will be "free"), and live in your campaign promised fantasies. Enjoy your third world country.

chris

Give money to small businesses who are closing all around us and being forced to lay off local workers. Also, consumers can be more loyal and buy locally instead of on the internet. This helps keep tax dollars for your own town and services like police, fire, public works that we need. Where is the help for the small businesses? The banks are hoarding the money injected recently. The government needs to feed funds directly to small businesses to keep them operating.

U.B. Zanga

What happened to the "Crowding Out" theory?

Some years ago, a "crowding out" theory took hold in the media. Excessive pubic financing, required to fund growing deficits, would, according to the theory, raise the cost of private borrowing. I don't recall anyone ever demonstrating convincingly that the deficits prevailing then were large enough to cause a material cost to private financing. Now, on the other hand, both current and anticipated public financing needs are massive and unprecedented due to stabilization packages, bailouts, and stimulus packages, one after the other with no end in sight. Meanwhile, lending through securities markets (40% of total credit extension per my sources) comes at extremely high costs/spreads. Are we seeing "crowding out" finally at work? In that case, both monetary (the Fed) and fiscal (the Treasury, the President, and Congress) policies are out of bullets.

Sidney Santos

I would like to get the money. Why not? The banks got the money from congress and the Bush Administration. Banks were responsible for this mess, and they got the money from a federal administration that is more from the right than Hitler.
We can not help the top without helping the base. If the banks got the money now, and the economy goes south, next year they will ask for more.
Why not fix the mortgage first instead of throwing money on the golden parachutes reward to CEOS that do not deserve?
That's it. Fix the bottom first, and the consumers will have the money to stimulate the economy.

noel

The rich get richer, and the poor get shafted. As always the bottom guy does not have enough say to get any of the good money. And no matter what any of you say, that's the way it will always be.

Sue

Congress needs to get off their duff and get some help out here for the hard working American and quite giving it to the rich who have gotten us where we are right now. They wanted more in their pockets and not butting it back where it belonged and now look at them. So I say give the people out there working everyday and trying to make ends meet a helping hand.

DJ

When do you want stimulus? If instantly, give tax breaks and longer unemployment benefits term. Infrastructure and education investment is long term stimulus. I would think we'd want both. But I wouldn't depend on the government for all of it.

Sadie

What's in this stimulus package for women who have lost jobs after 20 to 30 years? Are we supposed to go out and build bridges and roads? There are a lot of single parents (mostly women) in this country struggling to survive. What about our aged people who can't get food stamps because they make three dollars over the income limit...It's time this government take care of people like the ones I mentioned instead of the crooks in this ugly country.

TomasC

I agree with the saying about giving fish to a man or teaching him how to fish.

The bailout plan only makes sense when the economy is on the verge of collapse because its effects last very shortly.

Also, I believe that American society needs to admit that there is something wrong with it, inside it. I see this bailout as trying to deny this painful truth. We say, let's bail us out today, and we have to take a lesson for the next time... But where is the incentive to take a lesson from it, if we know that our irresponsible behavior is protected by government's safety net?

BryanL

Why are you people even having this debate? You can't fix the situation anyway and besides why not give another $600 dollars to the American people. At least it's a lot cheaper spending around $200 billion than giving $800 billion to all the corporations.

DC-AD

Mr. Bartmann is definitely on the right track. Personal stimulus checks are not the way to go--too much of this money leaves the American economy. Any stimulus plan can create jobs; the key is to jump-start this economy with a stimulus plan that delivers the maximum number of jobs for each dollar of public investment. University of Massachusetts at Amherst Economist Robert Pollin is on to something when he suggests a "green" stimulus. A combination of public infrastructure investment (educational services, roads, water management, and building construction) and green investment initiatives (smart energy grid construction, retrofitting of public buildings for great energy efficiency, and lowering mass transportation fares) will produce more than temporary jobs in dying sectors. Lowering fares on mass transit by even a dollar will inevitably put money back into the pockets of riders and encourage them not to drive their gas guzzling cars. Most important, this money stays in the American economy and delivers a product that benefits all for years to come.
The idea of retrofitting public buildings can be implemented almost immediately with existing technologies and workers from the construction sector (which has been hardest hit by the crisis) can be used to complete these projects. The reality is that manufactures will continue to create their products in China, India, and the other emerging markets where cheap labor offers increase margins; can you blame them?

America is the land of entrepreneurs and innovation. Instead of sending the world stretched Hummers and hamburgers, let’s reduce our dependency of non-renewable sources of energy, build a green labor force, and sell the fruits of our hard work to the rest of the world.

watever

Personally, I think it's time for the government to cut back on how much they pay their people. Considering they're the ones that got us in this recession. Let's stop trying to make sense of our ailing economy and get to the facts our government needs to change. Oh, and back 15 years ago when our mill people lost their jobs due to our government's helping the overseas plan, that was just awesome. My father-in-law grew up on mills; to find a job now with his education isn't easy. Going back to school is easier said then done, especially when you have people who suggest putting the money into roads and other unnecessary areas. As far as the welfare statements on here, remember a lot of your welfare recipients are young single moms trying to put their lived back together. I'm a day-care provider, and I see it every day--parents in tears trying to deal with this ailing economy. Yes, I do help with the cost. I work with the parents to keep the cost down. So for us to think another stimulus package wouldn't help, you're right it may not do a whole lot, but I agree that we should give out gift cards or some type of card that requires the people to put it back into the economy. Remember, it took decades to get this way, and it's going to take a long time to get fixed if it ever does.

sarah

I am a recent single mother of three children. I barely make the minimum wage an hour. While I agree that the governor should raise the minimum wage, I seriously think a second stimulus package for the American people is much needed, but it would have to be for a lot more the the $600 they gave last time. The more they give to the people, the more it would help the economy. People would use it to pay mortgages, bills, buy groceries, and clothing--and in doing so they would stimulate the economy--bank mortgage companies, stores, etc. But like I said, the check would have to be a lot more the a mere $600.

john

It would be better if the government would give each worker that files income tax for the last five years $1 million. That money would get back into the marketplace faster.

ANGELA

Stimulus package: Yes, Yes, Yes. I'm a single mother of two children, and this year has been the hardest year for me. I'm barely making $18,000 a year and can hardly afford to buy food. A stimulus check would be well appreciated this time of year.

Patrick

One word: infrastructure

RJ

Why was Bush/Paulson so hurried to pass a $700 billion stimulus bill to bail out the Wall Street fat cats and rich invester bankers, but the taxpaying poor and middle-class have to wait and wait and wait while our elected leaders debate it to death, whether or not to pass much needed help for those people struggling just to pay their mortgages and put food on the table? Write Congress immediately.

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