To paraphrase Jim Lowell: Washington, we have a problem.
With the economy floundering in January 2009, many people are following Keynesian model asking the government to spend money to jump start the economy. The $700 billion TARP plan didn’t work, so President Obama has been pushing for a new plan during his transition.
His Democratic cohorts in Congress have put together a plan: $825 billion more.
But there is a snag: it seems most of the money, the portion designed for infrastructure improvement, will not take effect for years. YEARS.
According to the Associated Press, the Congressional Budget Office has issued a non-partisan report:
Less than half of the $30 billion in highway construction funds detailed by House Democrats would be released into the economy over the next four years, concludes the analysis by the Congressional Budget Office. Less than $4 billion in highway construction money would reach the economy by September 2010.
Overall, only $26 billion out of $274 billion in infrastructure spending would be delivered into the economy by the Sept. 30 end of the budget year, just 7 percent. Just one in seven dollars of a huge $18.5 billion investment in energy efficiency and renewable energy programs would be spent within a year and a half.
Most economists expect the economy to rebound in the latter half of 2009. So that means 93% of the money will be “stimulating” an economy already turning around on its own.
Now, the other $550 billion in tax cuts and assistance to states is not included in the CBO report. Those funds will have a more direct effect this year.
However, liberals should really learn from this: they cannot spend their way out of a recession. The best way to create a greater supply of money in the economy is to take less of it out of our paychecks: cut taxes and the economy can rebound.