Hooray, the decline in employment appears to have halted its downward spiral. The Obama Administration points to the “stimulus program” as having played an important role, and indeed it has. But this leaves one to consider what could have been accomplished if the stimulus funds had all been spent? The Feds say that they have spent about one half of these funds. Since these funds are producing new jobs and stemming job losses they should been spent more rapidly. My question is why are there any funds left?
Given that the stimulus funds are still not entirely spent, one should not be surprised when few support the creation of new funds. As I have already said, the chances of a second stimulus getting through the Congress are the same as a snowball transiting hell. Given this reality President Obama is now turning to making delivery of the stimulus funds more rapid.
And we hear calls from the Administration and others, as I stated in several previous blogs, for private sector businesses to step up to the plate and follow the lead of the stimulus plan, i.e. spend money to generate jobs. However, this idea misses an important point, no business will spend money on investment when the market for its goods and services is flat or declining. Stimulus from the private sector must come from recovery in consumption that in turn will induce business investment.
But those who call for the private sector to step up to the plate at the same time reject the profligate consumption that supposedly caused the “Great Recession.” They continue to put the cart before the horse. Let me make it perfectly clear, we must stimulate consumption before we stimulate business investment.