I read an article today that said that Obama wants to give congress only a week to consider the $1,000,000,000,000 stimulus package he's submitting when he takes office. If we don't act swiftly and decisively, we're facing 10% unemployment and the next great depression.
There are others, however, who say that running up the deficit now is foolish, that it will only prolong our economic misery. A popular argument among conservatives now is that the New Deal actually deepened, if not outright created, the great depression.
I have my doubts about that argument. To state that, we would need a parallel universe where the New Deal didn't happen so that we could measure how long it took to get out of the depression. In the absense of this, the most we can say is that the New Deal didn't end the Depression--the massive deficit spending of WWII did. The US ran deficits of 40% GDP during that time. And no conservative can argue that this deficit spending wasn't good for the US economy. However, a few minutes of thought show that we purchased something useful with that spending.
Our WWII debt purchased a massive industrial base that stimulated the consumption of every raw material America produced and trained millions of people in the art of industrial production. The workers who were building tanks and jeeps didn't go back to farms after the war... they stuck around and produced cars, televisions, appliances, etc. When they did go back to farms, they took industrial and factory techniques with them. Chickens, cow, corn, soybeans, etc. stopped being small family businesses and instead became agro businesses. Meanwhile, overseas, our military actions produced a new world order where former enemies became trade partners. We took our 40% GDP deficits and made investments that created the modern world.
The biggest and best argument against further deficit spending today is that our economy is already soaking in 10 trillion dollars of federal deficit spending. This is an inarguable fact: We have already thrown trillions into our economy and it did stimulate spending and comsumption. The US consumer took part in this deficit spending by creating their own deficits using credit cards and mortgages to produce historically quite lavish lifestyles. Today, our homes average 2300 square feet. In 1970, the average home was 1400 square feet. Our homes got larger as families got smaller, so all that new space is mainly being filled with stuff... and many families rent storage lockers to hold the excess stuff that no longer fits under their roof.
Some deficit spending is wise. Borrowing money to go to school might be a good investment. Borrowing to buy a house is generally a better use of your money than renting, even today. I borrowed to buy my car, since in my area a car is pretty much a requirement for having a job. The money I make driving to work more than offsets the debt of buying the car.
Mindless deficit spending is unwise. Americans have built up their personal debt buying televisions, iPhones, and pizzas. The government deficit spending has been mostly unguided. We haven't been making long term investments with the $10 trillion, we've been paying interest, enriching bankers, maintaining military presence in all corners of the world, and funding staggering entitlement programs that send both Ross Perot and my grandmother social security checks each month. Ross is worth a few billion, my grandmother isn't, but I'm guessing he gets the larger check.
I am firmly opposed to a trillion dollar stimulus package passed within a few weeks of Obama's swearing in. If we act with haste in the interest of "doing something," this trillion is going to just be wasted, and will leave us in a weaker position than we were before.
I am open, however, to a well thought out investment. If Obama announced that he was going to use the trillion in a three year plan to tranform the US into a single payer health care system so that US industries no longer had to price this cost into their products... I'd give it some thought.
Don't like the thought of the government taking over health care? Well, what about spending a trillion to produce a next generation high-speed wireless network that would cover the entire US? Might this be as much a stimulus as the interstate highway system investment was? Show me some numbers. If I'm being asked to go into debt, I'd at least like to be informed what I'm buying.
The reality is, alas, I won't be shown the numbers. The trillion will be spent and stuck onto the debt we're already piling on our children. We'll never get to rerun history and see what would have happened if we'd taken a wiser path.