Tea Party politicians have fostered a chant, “The 2008 stimulus spending program did not work”. Fact is it did work but not all.
Lets look at four parts; the General Motors (GM) bankruptcy bailout, money to local governments, tax cuts and infrastructure projects.
The GM bailout saved jobs! If GM had gone through bankruptcy many people would have been unemployed with no plan for employment. Who would maybe have bought the company? Kia or Hyundai? In bankruptcy would have the Volt project been cancelled? Some will argue that the Federal Government cannot run a car company. What has been proven is private companies can have dumb management. Case in point is the Hummer offer for sale, no one in the world was dumb enough to buy it. The GM bailout was a success in many ways. It reduced layoffs at a critical time and today a restructured GM with newly enlightened management is a viable company that is paying taxpayer back and providing a strong tax base for the future.
Like the bailout of GM, the stimulus money that went to state and locale governments prevented layoffs. As the money is used up, layoffs are now occurring, but the economy can better absorb the additional unemployed. John Taylor a Professor of Economics at Stanford, an economic advisor to Republican candidates and politicians did not stimulate the economy. Because it did not increase purchases of items or labor it was not a stimulant. This is like arguing if people must be laid of, then rehired for it to be a stimulus. This makes some sense in economic theory and provides good political rhetoric but is not good for a person who has house payments to make.
Income tax reductions are popular political policy, but is it good economic policy? Economic theory says individuals will spend money increasing economic activity. Or they will save it for future investment. Or will they buy a new Mercedes or Lexus with the tax savings? There is economic data that says individual tax cuts do little or nothing to increase economic activity. As a small profitable business owner we manage our profits for investment in manufacturing and marketing opportunities, deducting expenditures as a business expense. If we had small business tax cut would we park and store cash in a bank? Instead we invest in business growth. Tax cuts to individual may be good political policy, but there is no economic data that says it is good economic policy.
Today Tea Party Republicans are saying all government spending is money wasted with the exception of defense. In fact government of all levels are both good investors and wasteful spenders. In this paragraph I will focus on spending that is an investment that will increase the wealth and standard of living of all Americans. Looking at historical Federal spending program investments such as the federal land grant for railroads, federal land grant for colleges and public schools, Hoover dam, road construction in the thirties, GI bill, Interstate freeway system, a space program that gave us GPS, the internet and the list goes on. Some of those mentioned are grants and others are tax policy. For example to promote the exploration of oil, large tax credits were given to oil exploration and refining companies. Today the stimulus spending on infrastructure is working. As we continue to invest in transportation, research and education, our economy, will grow. And it is important to recognize, in our capitalistic economy, private companies are now running the stimulus investments.
The United States has a strong record of successful Federal government investments.
