Why Stimulus Spending is Essential to Fiscal Responsibility

[Joanne98]

Thanks to the American Recovery and Reinvestment Act in 2009, the American economy staved off a second great depression, but the economic downturn that began in late 2007 was much deeper than most could imagine. While the economy is still making gains, those gains are slowing due to unemployment, consumer anxiety and lack of fiscal stimulus. Think Progress put together the handy chart on the right to demonstrate, with data from the Commerce Department. In the last quarter of 2009, our GDP grew at a healthy 5.6% annual rate, but that growth had slowed to 2.4% annual in the quarter that ended in June.

Anyone who is not ideologically and/or electorally invested in the ultra right wing economic policies that caused the Great Recession can easily realize this: in an economic downturn, consumers and businesses stop spending, which then has to be made up for by government spending. Without that, demand falls, which leads to more layoffs, which leads to a continuing recession. The government has to take stabilizing measures to help a fragile recover. That is why 40 prominent economists, including two Nobel laureates, signed a statement calling for additional economic stimulus immediately to help the lagging economic recovery. Because I can't say it better than these luminaries, here's how they put the need:


We recognize the necessity of a program to cut the mid- and long-term federal deficit but the imperative requirement now, and the surest course to balance the budget over time, is to restore a full measure of economic activity. <...>

The urgent need is for government to replace the lost purchasing power of the unemployed and their families and to employ other tax-cut and spending programs to boost demand. Making deficit reduction the first target, without addressing the chronic underlying deficiency of demand, is exactly the error of the 1930s. It will prolong the great recession, harm the social cohesion of the country, and continue inflicting unnecessary hardship on millions of Americans.

http://www.thepeoplesview.net/2010/08/why-stimulus-spending-is-essential-to.html