A Second Stimulus Package to Help the Economy
September 30th, 2008 | by admin |
Although the complete economic effects of the first American stimulus package remain to be seen, some economists are arguing that a second stimulus package would further protect the American economy from lapsing into a full recession. The Economic Stimulus Act of 2008 provided $158 billion in tax refunds to the American public, with an estimated $124 billion being returned into the economy in the 10 years to follow.
A second stimulus package would provide American consumers, who have been hit hard during the downturn of the economy and are facing increased debt with very little room to cut adjust the household budget, with cash that could be saved, used for investment purposes, or spent. A second stimulus package would give American households a greater resource pool with which to plan their money management for the years to come, relieving some welfare systems and increase consumer spending.
Is a Second Stimulus Package Needed?
Whether or not the American economy is headed into recession is a point that can be argued from both sides. But with household savings down, household debt increasing, and the average consumer left without much spare income to spend, there’s no doubt that the finances of the American households need help.
A second stimulus package would provide American households with the cash they need to meet their budgets and re-structure their money management strategies. The ability of the American household to invest has been diminished by the economic downturn, and many American households are going to be burdened by the debt they’re currently incurring for years to come. A second stimulus package would help alleviate some of the pressure that Americans are currently facing by having to live paycheck to paycheck.
A second stimulus package would also help American businesses by providing consumers with the money they need to buy goods. American businesses are facing decreased demand as households attempt to shore up the family budget by cutting back. American businesses are the cornerstone of the economy, and they are having to cut investment in key areas to make up for decreased demand. These investment cuts, much like the debt being incurred by households, will affect their output for years after the economic downturn has ended.
What Would a Second Stimulus Package Cost?
A second stimulus package, much like the first stimulus package, would cost billions of dollars and affect the government’s ability to allocate money to other portions of its budget, like social welfare programs. This is the source of the debate over a second stimulus package: whether alleviating household debt and providing households with money that can be used for investment and consumer spending is a better method of countering the economic downturn than government spending.
There is no general consensus on this questions, and both sides of the argument put forth valid points. But arguing against the American household is a difficult position to defend politically, and many politicians have opted to support the idea of a second stimulus package over the “bottom-up” strategy of welfare programs and otherwise increased government spending.
The costs of a second stimulus package, households claim, will be recovered in the form of increased household investment, decreased household foreclosures as a result of less household debt, and the re-organization of household money management strategy. Households see these points as achieving a more universally beneficial long-term result than increased government spending, and politicians are
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