Don't criticize the stimulus package

There are several criticisms going rounds on the effectiveness of US stimulus package.The most prominent grumble about the amount being spent on industries which really don't need stimulus. There are also critics who are against the passage of such stimulus packages, as the amount is too big ajnd it will add more to the current US debt. But is there a better alternative than passing this stimulus bill? I don't think so.

Firstly, the president can't just allow the economy to drown without acting on it immediately. The most important thing at this juncture is to raise the confidence among the consumers and trigger the cash flow. Just proposing long-term policies would not create any impact. You have to do something which would create an immediate effect. This can be done only injecting money into the economy. Now, the next question is whether the package would help the industries to be back on track immediately? possibly not. Most of the companies don't need dollar bills, instead, they want the consumers to spend, which is directly related to the confidence. Only if the job layoffs reduce, consumers can gain some confidence. There are two ways in which the proposed developmental projects could create or save jobs. Firstly, these government projects directly create jobs for the people who were fired by the private companies. Employing them will reduce the unemployment rate. Though all of them cannot be employed, the number will reduce a bit in the initial stage. Secondly, these proposed projects requires equipments which can be purchased only from the private companies. These new orders could benefit the businesses. Though, we cannot see a dramatic increase in the job creation, it could save the existing jobs. These new orders in the private companies would also benefit other small businesses who are linked as sub-contractors.

By including every industry in the stimulus plan, you are literally bringing in some level of confidence and new jobs across every set of consumers. Increasing a little amount of share on the 'most affected' industry is less preferable than allocating the same amount to the small industries, particularly when the government wants to instill confidence across the board..

All the above activities would buy some time for the government to act on the toxic assets held by the banks. These assets serve as a great headache both to the Govt and the bank. Once some solution is found for those bad assets, the banks can see some stabilization and can start the lending process. Unless the consumers hear some good news from their banks, they would not do the spending. In the mean time, new regulations can be implemented in the markets, which would shun away the existing fears. One thing is sure;the recovery will definitely consume more time, but any hasty decision along the way could prolong the tough times.

On a final note, the passage of the stimulus package is certain and should be immediate. Considering the current stage, any further delay would worsen the economy. Best anyone can do is to avoid disparaging the current stimulus plan. Criticizing the plan will dampen the very purpose of instilling confidence among the consumers.

Tags: stimulus package, Recession, Stimulus pacakge criticism