Politicians are debating an economic stimulus package for the U.S., with a figure of $150 billion being tossed around. Can this work?
Let’s consider the question from an employer’s point of view. A company needs to decide whether to invest in a new factory and whether or not that investment should be here in the U.S. In deciding whether to build a factory whose useful life might be 20 years, the company would look at long-term economic prospects, not short-term ones. In deciding whether to build the factory and create jobs here in the U.S., the company would look at tax rates, the education level of the workforce, and the costs of employing that workforce.
Based on tax rates, education, and costs, the U.S. is not looking competitive right now. Corporate tax rates are among the highest in the world. The quality of our high school graduates is stagnant or slipping while other countries have enjoyed big improvements. Our workforce is expensive to employ if only because employers are required to pay for health care costs that are now certainly the highest in the world.
Let’s consider the question from a consumer’s point of view. The average consumer has a crushing burden of debt and, unless he or she is one of the 40(?) percent of Americans who work directly or indirectly for local, state, or federal government, is concerned about being laid off. The consumer has been informed by the recently elected Democrats that new and higher taxes are forthcoming. The consumer thus reasonably expects his or her long-term spending ability to be lower than it is today. Anyone in that position would be reluctant to incur a long-term obligation, be it a car loan, a mortgage, a lease on an apartment. If the government sent a private sector employee a check, he or she would most likely use it to pay down some debt, not go on a spending spree.
Maybe the right answer is to send stimulus checks only to people with government jobs and/or think about actions that would give companies long-term confidence in the U.S. economy and consumers long-term confidence in their spending power.