Will the Economic Stimulus Package Work?
I had always wondered how my mom could remember the Depression, since it happened in 1929 according to my understanding of history. In fact the stock market collapsed in 1929, but the depression didn’t start until somewhat later. Roosevelt was elected in 1932, and the Depression peaked about 1937, 4 years after he took office. It was not completely over when WWII began, and was a major factor in Hitler’s rise to power. The war was partly an effort by Hitler to break out of the Depression.
President Obama commented that the Republican position demanding tax cuts was only a continuation of a failed economic policy. He is correct in the statement. Tax cuts cannot stimulate the economy. Tax cuts have no meaning to people with no income.
I wonder how many times I have been informed of a wonderful tax deduction, only to gain nothing from it because The cost to obtain it would be more than I could afford, as for example the Solar tax credit. I could not afford a system which would qualify, thus did not benefit, although I did use Solar heating on my home.
Obama is correct in his belief that the only way to escape the disaster is the creation of jobs. Unfortunately, many of the Democrats think that spending will produce those jobs, and both parties are looking for their own benefit. as a result the spending tends to focus on projects that have political benefit, rather than economic benefit. Obama has acknowledged this fact as well, and it is the biggest cause of Republication resistance to the program, since it will lead to increased taxes with less than optimal benefits.
It is well known that small businesses produce more jobs than large businesses for the investment, yet Government projects are almost impossible for small businesses to get. They tend to be beyond the financing capacity of the smaller firms financial capacity.
Governmental projects also are paid for by taxes, resulting on a bigger drain on those who do the jobs, reducing profits and hampering growth.
While it may be necessary to use Some government projects to jump start the economy, programs to encourage the development of small businesses are essential to ongoing economic health. As Ronald Reagan once said, “Businesses must be able to make economic decisions, not tax decisions.”
In recent years, many cities have offered tax incentives to companies like Halliburton to start a branch in their city. Greater benefits would have been received if smaller companies had been encouraged because smaller companies are less likely to relocate due to greater incentives elsewhere. Smaller companies have larger stake in the local community. Halliburton has sufficient financing that they should not need tax incentatives, as do many of the others.
If those larger companies cannot build their own plants and need incentatives, they are probably not well managed in any case.
