Here are two experts in Seattle expressing their different views on the measure.
Paul Guppy has a lot of reservations about the stimulus package.
It’s too big and could prevent the economy from making necessary adjustments to recover on its own, said Guppy, research director of Washington Policy Center, a think tank in Seattle. Guppy believes that the economy would rebound faster without overt government intervention.
“The government can’t spend a dollar unless it takes away the dollar from somebody else,” he said. “The government doesn’t create wealth.”
Guppy said that the stimulus package, pushed by Obama, has generated much support among the public and experts because it’s simple and visible. People want to see something done to stem the current crisis.
But new massive spending would increase the nation’s already-huge debt, passing on the burden to future generations, Guppy said.
“A lot of Americans have huge debts,” he said. “What our government leaders are doing to solve the crisis is to increase debt.”
The government should control its spending and focus on helping individuals with social programs such as unemployment benefits, Guppy said. He wants to see an “assistance package,” not an economic stimulus package.
“Political leaders over-promise when it comes to the economy,” he said. “They lead the public to believe that the government can fix the economy, which I don’t think is possible.”
Experts often compare the current recession with the Great Depression. Some give credit to President Franklin Roosevelt for combating the economic slump with a series of government spending and social programs.
Guppy has a different take on that. Federal officials created a bunch of new regulations back then, creating a chilling effect on businesses.
“A lot of what President Roosevelt did actually made the Depression longer,” he said.
Government intervention in a market often compounds problems, Guppy said. He cited the government’s $700 billion bailout for financial institutions as an example. The Treasury has pumped billions of dollars into banks, hoping to solve the credit crunch. But those banks have yet to change their underwriting practices.
“The government shouldn’t pick winners or losers,” he said.
The government’s job is to create conditions for prosperity, which comes from the private sector, Guppy said. He suggested keeping tax rates steady and increasing oversight on the financial market by the Securities and Exchange Commission.
“The government can provide stability and predictability in the market,” he said.
Historically, fewer regulations and lesser taxes have helped the nation prosper, Guppy said.
“We should be practical,” he said. “We should look at lessons from the history.”
* * *
Marilyn Watkins believes in the stimulus package.
“I’m supportive of it. It’s definitely going in the right direction,” she said.
America’s infrastructure has problems, as shown by a freeway bridge collapse in Minneapolis in 2007, said Watkins, policy director of Economic Opportunity Institute, a nonprofit organization in Seattle. It makes sense to spend money on infrastructure, which would create jobs and help the economy recover.
“This is going to come back and haunt our kids if we don’t invest in our infrastructure,” she said.
Improved infrastructure, combined with renewable energy projects, would make the economy more sustainable, she said. That would help future generations pay back the nation’s mounting debt.
“We need that infrastructure for a thriving economy and everybody,” she said. “Investing a lot of money when construction has been hit so hard is really good.”
Traditionally, the federal government has dealt with recessions by lowering interest rates, thus making it easier and cheaper to borrow and spend.
But the credit market itself remains paralyzed in this recession. That requires the government to rely on its fiscal policy, not its monetary policy, Watkins said.
“Obviously, playing with interest rates is not enough,” she said. “It’s going to take
public spending.”
The government’s $700 billion bailout for financial firms hasn’t made a difference because it counts on private companies to spend public money, Watkins said. Banks have held onto money from the Treasury instead of investing in communities.
The stimulus package is expected to require specific spending, which would revive the economy, Watkins said. It’s better than just sending checks to people.
“It’s much more important to create the demand,” she said. “When the government spends money directly, it will be spent.”
History shows that sometimes, the government needs to make major changes to save the economy, Watkins said. Today’s core social
programs such as unemployment benefits and Social Security were born in the Great Depression.
The Bush administration gave tax cuts mainly for the wealthy to deal with the recession after many information technology firms went down in 2001, Watkins said. That didn’t help middle-class, working families.
“It really took until 2005 before we saw any kind of job growth in Washington state,” she said. “That experience was pretty common in the country.”
Government spending would create jobs quickly, getting numerous people back to work, Watkins said.
“The government is the only way we can revive the economy at this point in this recession,” she said.
Reporter Yoshiaki Nohara: 425-339-3029 or
ynohara@heraldnet.com.
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