Friday, November 14, 2008

Throw Money at It

That’s the standard Republic Party reply when Democrats come up with a program. “Those tax and spend Democrats just want to throw money at the problem.” Let’s see how well that argument holds up.

Since the Depression, Democrats have preferred government-sponsored job programs for economic stimulus. The Depression was full of them: WPA, TVA, Rural Electrification. Whatever kept people working and off welfare. Build roads, bridges, buildings. Run phone and electrical lines. Keep people busy while preparing the nation for the eventual good times, because having to play catch-up can stifle an economic rebound faster than anything.

This approach has benefits. First and foremost, the money wasn’t just flowing one way. People who are working pay taxes, as opposed to just taking in money like those collecting unemployment insurance and welfare. (Republics shouldn’t have to be reminded of this.) Same thing for the companies who get the contracts to actually do the work.

Even better, the program doesn’t have to work as well as expected in order to reap its rewards. Even if the economy doesn’t recover as much as you’d like, you’ve still fixed the roads and bridges, laid cable and fiber (the 21st Century equivalent of electric and phone lines). These are tangible benefits that will be there, ready and waiting, when things finally do get going again.

The Republic Party, on the other hand, likes to put checks in the mail, in the hope that people will spend them on goods and services. This approach, which owes much to the “trickle down” school of economics, is unreliable at best. Sometimes it’s a downright fallacy, as is so much of trickle down theory.

Let’s take this year’s example, where millions of people got $300 checks. What was the root of the economic problem? Overextension of credit. What did a lot of people do with the money? They paid bills. A worth endeavor, but hardly stimulating to the manufacturing or sales segments of the economy. Even worse, when it didn’t work, all we had to show for it was a bugger deficit.

Getting real work to take place will create a “bubble up” economy by putting the money in the hands of the people who need it most, and will be most likely to recirculate it in the desired manner, namely those who actually need it to make ends meet. Why this remains such a revolutionary concept is the real puzzler.

Putting people to work to accomplish something, or sending checks and hoping for the best. Who’s really throwing money at the problem?

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