September 10, 2011

Does A Stimulus Help?

Will investment in infrastructure result in the creation of new jobs and the reduction of unemployment? The answer is yes; however, will such investment result in long term jobs for the economy? The answer is maybe. Maybe is not a bad answer in this case.

If you start with the premise that America has a future and the depression that we are in will end sometime, we will need to upgrade our roads and do other infrastructure work in order to compete in the future, it makes sense to do it now rather than later. Interest rates are low and  we have an excess supply of labor. We should take advantage of the movement.

Further, the theory of a stimulus is that these new jobs, even if they are temporary, will increase the demand for goods and services throughout the economy. This in turn will result in other jobs, which will be more permanent. being created because of the need to add to staff to meet the new demand. If this happens the stimulus will have been successful.

Either way, We end up with upgraded infrastructure which makes us more competitive in the future. We win.

The stimulus will result in an increase in our deficit; however, we do have the capacity to borrow and if we are to solve our long term deficit problem the economy does need to start growing. The key with the deficit is we must get serious now; not later. We need to develop a plan to reduce it over time and stick to the plan. This must be a part of our long term strategy.

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