In recent weeks, I've gotten into some great discussions with people about the stimulus bill that was cobbled together by Congress last week.   At one point, one of the proposed versions of the package grew to a staggering $900 billion until it was wrestled back to a relatively trimmer $800 billion.  I suppose we should thank our wonderful leaders that they were somehow able to spare us the additional debt.

A lot of people are still preoccupied about where their stimulus check is, but let's look at the big picture for the moment.  Now that the stimulus package details have been released, I've found many people weighing in on both sides of the debate: is the plan justified? 

The Hotly Debated Economic Stimulus Bill

Some of the arguments and concerns I've read have been swirling around these points:

  1. We need to spend for the short term. Spending is expected to take us out of the hole we're in. Many students of Keynesian economics and past history will vouch for the effectivity of this approach.
     
  2. We'll be in deep debt as a nation for many generations. We are sacrificing our future and our children's future to speed up the economy's recovery.  Many personal finance enthusiasts maintain this concern, as many of us are debt averse.
     
  3. We need to define "stimulus". What kind of spending should this bill contain?  There seems to be spending provisions here that should be part of a different kind of budget (e.g. could some of these proposals turn into "pork")?  Many students of politics know that this bill can be a magnet for determined lobbyists who can spin a tale of "stimulus" into any cause they drum up.

How Effective Is This Stimulus Plan?

The hefty economic stimulus package is jampacked with provisions that try to please everyone. According to this CNN report, the big "winners" (whose piece of the stimulus pie grew larger by the final version) were in the areas of transportation, health and science whose allocations were in the multi-billions. As for us regular people, we'll be awaiting tax cuts to the tune of $400 per individual or $800 per family.

Issues With The Tax Cuts

Do you wonder whether this bill will be effective enough to resuscitate our crippled economy?  Will there even be enough consumer spending done at all?  Tax breaks and tax deductions are nice, but the question remains whether the general population will actually be putting that extra money to good use.  Here are just a couple of scenarios that can potentially deflate the consumer spending goals of this stimulus plan.  What if:

  • We spend the stimulus money on the wrong things.  Apparently, the first wave of stimulus checks didn't really achieve its desired effect. The spending was misplaced, with reports surfacing that consumers where using the money on imports.  So let's see how that works: we borrow money from foreign interests, from which we get funding for our economic stimulus checks. Then we turn around and spend the bucks on things manufactured abroad.  A vicious cycle if I ever saw one.
  • We bank our tax credits. What if people collectively take a step towards self-preservation, and decide instead, to keep and save the money they receive from the government?  Then any economic stimulation won't be coming from the consumers and those tax cuts will be for naught.

Issues With Government Spending

Well, we can at least expect that there's going to be some serious guaranteed government-funded spending. We can count on the majority of the package that's dedicated to national spending to hopefully get us out of the doldrums. Just please don't let the rumors be true that multi-millions will be going to green golf carts for government officials or to save the endangered salt marsh harvest mouse (a noble cause for a different budget).  

Our debt load has ballooned to an astonishing 1.5 trillion in just a year if you add up Bush's bailous and TARP funds to Obama's bill. Maybe we should enjoy our tax cuts now while we can, because we'll be paying the financial piper for a good long while.