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December 15, 2008
The next fiscal stimulus
There's talk in government circles that the federal government will pass a second economic stimulus plan in the near future. If so, will this plan be different from the one passed last summer?
Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:
"I think so. Last summer, we had a fiscal stimulus based on tax rebates. In essence, the government said we're going to reduce your taxes, temporarily give consumers money to spend. From the government's perspective, we didn't spend enough. Many people took that money and paid down on their debt, or they saved it, all of which made logical sense for individual households but wasn't the purpose of the program. The government wanted people to spend the money. So the talk now is that the next stimulus plan, which I think will happen probably in the beginning of 2009, will be based on the government directly spending that money. And there's talk maybe of a $150 to $200 billion plan. And this spending will be directed on things like roads and bridges and public buildings and other infrastructure, essentially public works. And I think the reason the government is favoring this is because they're going to get more spending per buck that they allocate. In fact, virtually all of that money will be directly spent, whereas if it goes to households, again, some of it will be siphoned off and paid down on debt and saved. And right now, the purpose, again, in the economy is to get spending up to end the recession."
Posted by Dave at December 15, 2008 08:00 AM