Do we really need to do this?
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1. Many, many economists from across the ideological spectrum say yes, although an increasingly vocal group of free-market thinkers says no. Those backing the plan say you have to look no further than the nation's shrinking job market to understand the need for the plan to become law. The nation shed 2.6 million jobs in 2008, and the pace seems to be accelerating. Last week, corporate stalwarts including Caterpillar, Sprint Nextel, Home Depot, General Motors and Texas Instruments announced 55,000 job cuts. Overall, the economy shrank by an annual rate of 3.8 percent in the final three months of 2008.
The hope is that the stimulus plan would counter the economic contraction and mounting job losses with a huge spike in federal spending. The money would include refundable tax credits -- $500 for most individuals, $1,000 for most working couples -- which many economists think would give a boost to flagging consumer demand and provide a cushion during hard times. Hundred of billions of dollars more would go to provide direct financial relief to financially strapped states, helping them avert planned layoffs and allowing them to expand unemployment and health benefits. Other money would go into infrastructure projects, mostly road and transit construction, that proponents hope would trigger hiring, mostly in two of the sectors most affected by the economic downturn: manufacturing and construction.
Opponents counter with a basic question: Will it work?
Some think not. These analysts think that government spending would largely supplant private investment, minimizing the impact of the former on the overall economy. Meanwhile, they say, the changes would only delay difficult adjustments taking place in the economy. With the sharp declines in housing and commodity prices, they say, those goods have to find a new, sustainable pricing level, and the pain of recession is part of that realignment. The huge infusion of government spending proposed in the stimulus plan, they add, would inevitably stoke inflation and leave the government deeper in debt, hindering future economic growth. "The effect of government debt is to lower the standard of living in the future," said Chris Edwards, an economist at the Cato Institute.
