Obama's Stimulus Is Only Boosting the National Debt

The stimulus DID save and/or create millions of jobs; it is clear that it did or we'd be an even bigger mess. Obama can't fix the mess Bush made overnight. When Bush left office, the unemployment rate was already 8% and rising. Jobs continued to be lost at an alarming rate. Was all this supposed to suddenly change on January 20th, 2008?

Obama ran on a platform that included a fiscal stimulus plan. Those still unemployed are angry and blame him for their continued suffering. This is absurd. McCain's tax cuts of a further 10% off the top margin would have made federal deficits even worse with still no job creation. It would not even have put a bubble on the stock market since the market was already depressed having lost more than half its value. The fact that the Dow has regained more than 55% of its value to date is proof that the stimulus worked. The fact that the US treasury bond market is still growing while paying only 3% annual interest on long term bonds is proof that the bond market fears neither deficits nor inflation; the US treasury bond market is the safest place to put one's money right now. All other options are either too risky or likely to return less than 3% average annual profit.

This is why there is no investment, spending and job creation; The private sector is saving not spending due to fears of deflation NOT deficits. It was the recession that created the current deficits, not the other way around. The federal government has amassed trillions in private savings with which to stimulate the economy. The private sector wants to save, not spend. There is no crowd out effect. Interest rates are declining not increasing. The government should spend to stimulate the economy. The private sector isn't doing this; they're saving their money. Two renowned economists, one of whom was a former FED vice chairman, assess the stimulus in a new study;

"...effects of the fiscal stimulus alone appear very substantial, raising 2010 real GDP by about 3.4%, holding the unemployment rate about 1½ percentage points lower, and adding almost 2.7 million jobs to U.S. payrolls. These estimates of the fiscal impact are broadly consistent with those made by the CBO and the Obama administration."

http://www.economy.com/mark-zandi/documents/End-of-Great-Recession.pdf

The WSJ explains one cause of anti-stimulus sentiment;

"An urgent need to draw new investors to buy muni bonds gave birth to the taxable, federally subsidized "Build America Bonds." The experiment worked. It helped revive the muni-bond market, keeping local construction projects going...Build America Bonds pay more than corporate bonds with similar ratings, even though municipalities rarely default. The big losers: High-end taxpayers who have fewer tax-exempt bonds to buy."

http://online.wsj.com/article

/NA_WSJ_PUB:SB10001424052748704398804575071170893255254.html

To this we might add corporate bond sellers who must now compete with the new Build America Bonds.

steve of IL 8:17PM August 13, 2010