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April 16, 2010

The stimulus debate

Debate over the economic stimulus plan's impact continues. It was passed over a year ago, and rather than increasing, jobs have continued to be lost. Does this mean the stimulus plan was a failure?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"This was a source of intense debate not only in the public, but among economists, so let me lay out some of the points here of contention.

"Supporters of the stimulus plan recognize, yes, jobs have continued to go down, but they argue that, hey, they would have gone down even more without that plan. So that's one point of disagreement.

"Another source of disagreement is whether government spending at all can create jobs. Detractors say, no, that when the government has a stimulus plan like we've had they are simply borrowing money, so they are shifting money from private hands to public hands and there is no net job impact.

"Supporters of the stimulus plan say, no, no, no, that money that was borrowed would have been idle. That happens during recessions -- that people have money, (and) they don't spend it because they are fearful, and so it makes sense for the government to borrow that money and then spend it.

"And then, finally, another point of contention is that we have to recognize that, yes, you have the federal government with its stimulus plan and its spending. You also have state and local governments, and what they were doing in the last couple of years actually spending less?

"So in terms of the public sector, you have to really look at the combined effect of the federal government and state and local governments, and when you do that the impact of the stimulus is going to be somewhat muted because of the downsizing of state and local governments."

Posted by deeshore at April 16, 2010 08:19 AM