The more I read this thing the more I know it is just billions of dollars poured down the rathole. First of all these economists are probably pretty smart people but their statements don't sound right to me.
“There is an argument from behavioral economics that people react differently to big lump sums versus these smaller increases in take-home pay they’ll get every paycheck,” said Joel Slemrod, an economist at the University of Michigan in Ann Arbor and an expert on tax policy.
The problem is that the smaller increase amounts to $16.66 extra per paycheck for a single middle class person. I'm sorry but that isn't much money and this Slemrod guy should know that. It isn't enough to incentivize the person to do anything other then maybe buy a morning Starbucks again. I guess that may get more baristas hired or something but I don't see many jobs created by this measure.
I mean you can't pay off your credit card bill, pay the rent, or have it take care of your car payments. You can't even buy a video game for that money or take a date to the movies. Most people don't stay awake at night thinking "If I only had $16 extra a month I could get out of this mess." If it was like $200 per paycheck or something then we could talk.
This is regarding the $60 billion that goes to handouts for the poor:
Funding such programs is particularly effective, said Alan Blinder, a Princeton economist and former vice chairman of the Federal Reserve. “These are hand-to-mouth consumers. If you put cash in their hands they’re going to spend it right away,” he said.
The problem is that the cash you put into their hands can't help them not be poor. I wish they could have been in the form of grants for them to go to ITT, provide financial education, or job placement assistance or something more tangible. You need to use that $60 billion to lift them up and not keep them in poverty. Also I'm not sure how many jobs giving handouts to poor people actually creates. I guess there will be more bureaucrats shuffling paper or something.
However, if a poor person enters into a middle class lifestyle due to an upgrade in education or a better job then that stimulates the economy by $1000s per person. That person now has the chance to save for their kids college, their own retirement, or just live a more secure life. Instead this bill gives people a few dollars extra per month but keeps them in a perpetual cycle of poverty.
Here is the red meat of the bill:
The legislation includes $29 billion for highway construction projects; $16 billion for investments in public transit; $7 billion to expand access to broadband; and $11 billion to renovate the nation’s electrical grid. The measure also would provide $5 billion to weatherize low-income homes and $4.5 billion to make federal buildings more energy efficient.
I just wish that all of these numbers could have been bigger because these measures will actually create more jobs for certain industries. A new highway construction site helps the construction company, the planners, the heavy equipment maker, the aggregates miner, and the construction crew. There are jobs all along the way. Of course the projects must be planned meticulously so there aren't billion dollar bridges to nowhere that sunk the Japanese stimulus.
If the aid to states and consumers and the government spending all have the desired effect, there could be 3.5 million additional jobs in the U.S. economy by the fourth quarter of 2010, according to Fair’s model.
I hope this happens but I am highly pessimistic. There are just too many places where this money can be wasted and not actually create a job. If Congress asked themselves how many jobs would be created from every spending measure then this would have been Obama's first big win. Now, I can see it falling far short of 3.5 million jobs and could cost him his second term if the economy goes even more pear shaped from here.
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