787 Billion Answers to Unemployment

In keeping good hope during this economic meltdown I turn to the quote, “mistakes are a fact of life, it is the response to the error that counts.” With Obama’s recent $787 billion stimulus package we may finally be responding to the errors. Current discussion on Wall Street and Main Street has revolved around the heart of the stimulus plan; tax breaks or spending.
The plan’s focus on infrastructure is the white knight that will restructure this domestic economy to what it once was. Obama, as well as many economic analysts, say we will know the bottom when we start to see the soaring unemployment rate, currently at 7.6%, begin to reverse. In past recessions, America has been attributed as a productive, manufacturing nation that seeks national growth within its borders. During such recessions, tax breaks were all necessary as household spending from the rebate went directly back into the American economy. However, today is a different story. Over the past quarter-century, America has shifted from the producing country we were, to the service country we are today. The service sector currently comprises upwards 70% of our annual Gross Domestic Product. This means that money from tax breaks will simply go two places: 1) pay off outstanding debt 2) automobile, clothing, electronic imports, and thus aiding foreign economies. Also, with the consumer confidence at a low, and the current state of frugality within the American household, the rebate may be saved, which will do nothing to fix the recession. With the ailing problems in our domestic economy, infrastructure is the important focus of the package as it will secure future growth through the restructuring of American jobs, and thus the American economy.
As I am a part of the future generation that will inherit this plan and economy, I understand that to fix the current conditions means the addition of future debt. If this plan will bequeath my generation with piles of debt, at least leave us somewhat better off—with infrastructure, and alternative energy, and improved education and health care.
Another questions comes about as to if $787 billion is enough to stimulate. From my research, this plan is a necessary amount for today; however, we will need more in the future. Alongside the lagged affect of fiscal stimulus, this package will do its job to keep the consumers, markets, and housing from falling much further, but without another plan in the near future, we will see sideways movement for years similar to that in the 1970’s. We have been trying monetary policy; however, the Federal Reserve is running out of bullets. Fiscal policy is next on deck, and although we would rather stay away from the medicine cabinet, we must allow steroids into this game.