Ignorance of Economists

It was somewhat refreshing to read that economists do not know how best to package a stimulus plan that will result in desired goals. They agree that there is a need for a stimulus, a big one in fact, but they have not delved deeply enough into how such a stimulus would be constructed.

Many of us struggling to make sense of our nation's fiscal situation know that they don't know how to fix it! We may have thought that the economic gurus knew. Now we know differently.

I admit that the reduction in taxes does not make much sense to me, as a stimulus to economic growth. I never understood how a relatively small increment in available funds would change a person's consumption habits. $500 does not let you buy a plasma TV, far less an automobile. I see a need to change the tax structure out a sense of fairness but to think that small increments of money will change help us out of economic plight does not seem to make sense.

I easily support the idea of putting money into situation where jobs and necessary projects are married. We can all agree that infrastructure has to be renovated and repaired. No one travels anywhere without noticing bridges and roads in need of repair. In spite of the costs of such tasks, it has to be done. So, this is a good way to get onto the future.

Same can be said about his intention to invest in industries that our future will need, e.g., alternative energy sources. Other nations subsidize such efforts. It makes sense because private investors are wary to invest in projects with unknown return on investment and surely, a long time before such a return would occur. This is a good role for the government.

But, having said this, I don't see how even these targeted improvements will help so many others who will not be working in the construction industry or technology. Our service industry is also hurting. Our manufacturing and retail industry is hurting. Our housing industry is still sinking. I am not sure that the economic package will do more than stabilize the situation until the other parts start to improve over time. Everything tends to get better with time, but as they say, with time we also all die!

Thankfully, Paul Krugman brings some insight to my specualtions. His mathematics suggest that the stimulus plan is too weak to compensate for the horrendous hole we are in which is getting deeper as we go forth into the year. Until something else comes to light, I will side with Paul.