Is the Stimulus Plan working?

The USA Today conducted a poll asking Americans if the stimulus plan is working.  Of 1,010 adults surveyed from August 6^th through 9^th, 57% say the stimulus package has had no effect or made the economy worse.  Over the long term, 60% think the stimulus package will have no effect or make the economy worse.

Economists are still saying the economy would have been worse without the stimulus, though they vary in how much the stimulus has helped.  The poll will make for great debate in Washington, D.C., as the continuation of stimulus measures are contemplated.

Comments we have received on prior blog posts have been thoughtful and instructive and would like to see that continue with this one.  I have two questions and you must answer both!  Since many of you reading this blog are CPAs — recognized financial experts — your input is important.

• Question 1 – Do you believe the stimulus efforts have helped the economy?
• Question 2 – What would you do to spark the economy?

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– Mark Koziel

Comments

The stimulus efforts may have had a very short term positive effect on the economy that has allowed Obama and the current Congress to save face. However many Americans have now come to the realization that the stimulus was more of a political power grab than anything else. Long term this stimulus will have negative effects on the economy and potentially the American dream.
To help the economy, first get the government out of the private sector. Then provide tax breaks to companies that are hiring, especially small companies since so many people that have been off are finding work there. Require every high school junior to take a basic personal finance course that goes over bank accounts, car loans, mortgages, preparing a budget, etc. Beyond that, it is time for some of these failing business to fail so they stop draining the economy.

The stimulus has NOT worked. Only an immediate tax cut, followed by immediate cuts in payroll tax withholding, will put billions in the pockets of millions of Americans. These millions will, on average, spend their money in a much wiser fashion than nameless government bureaucrats.

Our nation as individuals and as a Government entity has accumulated grossly excessive debt and the entire stimulus approach radically added to it. The GAO reports of recent years have highlighted concerns of unsustainable debt levels and the likelihood of Government inability to sustain current commitments. Massively adding to the Governmental debt load has only made a bad situation substantially worse. The stimulus has functioned much like giving a drug addict more drugs to keep him from going into a major crash. Our financial system is far too debt-dependent. The stimulus approach only made that worse. The GOP first embraced the approach to attempt to look good and save face right before the election. The Dems have locked on to it because it makes great sense politically for their party.

No, I do not believe the stimulus spending helped the economy a bit.

The best way to spark the economy is the give tax breaks everyone, individual taxpayers, small business owners and large corporations.

Stimulus DID NOT have a significant impact on the economy. In my opinion, the impact was minimal. The ARRA funds for Construction are very late and there are no significant projects started and money spent in New York-the implementation of the stimulus was weak at best.

The stimulus should have been an immediate cash infusion to each taxpayer by providing a check that needed to be used by spending it for home improvements, car purchase, or similar capital or retail spending. Perhaps a federal bank card that could only be used for specific purposes. If you were not a taxpayer you did not recieve this spending bank card.

Another idea was to provide businesses with a spending card again for specific capital purchases or to fund the hire of new additional employees. This would have put money immediately into the economy more efficiently than government run programs.

Question 1: No. Jobs are being lost and then there will be no tax revenues. Companies that took the stimulus are still giving large bonuses therefore not changing their ways. When the tax revenues don't come in next year then maybe the government will wake up.

Question 2: I would provide incentives to companies that retain employees. If people are working and bringing home a paycheck then they might be willing to spend more and foreclosures will slow down.

Overall the current government administration needs to slow down and stop trying to fix everything at one time. Organizational behavioralists state that businesses can only handle up to 3 major projects at one time. The current administration is just slapping bandaids on major injuries thereby making them worse.

All indications I see are that the stimulus efforts have not helped the economy. There has been some psychological effect, which is probably half the battle. But in terms of real economic activity, I see no evidence that there is any true sustainable private business improvement. Much of the money has been budgeted or has actually been spent by governments. So if your idea of stimulus is to expand local or state or federal government, including services and employment, it can probably be argued that that has happened.
I don't believe in "sparking" the economy. Any true improvement comes from private individuals attending to their own best interests. This means lower taxes and increased access to markets, which leads to increased competition, increased demand for goods and services that people actually value (not what some government bureaucracy tells them they need), and real accountability and personal responsibility for ourselves. Limited regulation is needed, as are safety nets for the small number of those who truly cannot produce enough to earn their keep.

No the stimulus package did not help the economy. The best way to stimulate the economy is to start at the bottom of the pyramid not at the top of the pyramid. Give tax breaks to the people so that they have more disposable income to spend on consumer products, cars, and homes. Consumer spending is what keeps the retailers in business. Retailers and car manufacturers can have a backlong of inventory but if no one is buying, what's the use?

Also the Capital Loss deduction should be increased to allow people to take a much larger deduction for the considerable capital losses many have incurred due to the struggling economy and bank fiasco.

The stimulus helped slow the recession and possibly prevented a full depression. However it did not slow job loss. Jobs must be created more quickly. Until consumer spending picks up significantly, the economy will continue to falter.

I think the government should concentrate on job growth by reducing BUSINESS taxes, or creating broad business tax credits geared to job creation. These reductions in tax and/or credits should have very strict phaseout dates.

No, the stimulus did not help the economy. It failed (or will shortly be recognized to have failed) because it did nothing to address the root cause of the recession. There is no cure until the root cause of the problem is recognized AND dealt with. Congress did what it does best - throw taxpayer dollars at symptoms and claim credit for fixing a problem (the fact that they created the problem is not mentioned).

The way to "spark" the economy is as it always has been - ease cash flow by cutting taxes. This has two benefits: it frees up cash for investment and expansion and increaes tax revenues.

Two more quick comments: one can not borrow their way out of debt, no matter how big they are, and there is no such thing as too big to fail (remember the Soviet Union?).

I do not believe the stimulus package helped the economy, in fact, it may have hurt the economy by letting people believe that the government would fix things instead of letting the market forces start to go to work sooner. The sparks needed for the economy are STOP the stimulus payments, STOP any additional programs that increase the deficit any more than they are now, DECREASE taxes on all taxpayers, and help companies retain and hire new employees.

The stimulus has not helped. It was back end loaded (most of the funds were to come in later years) and the gov't tried to push too many dollarrs too fast thru it's bureaucracy. Also, the bureaucrats are keeping most of the money to stuff their own cabinets instead of getting the money out where it will help.

The way to recovery is thru a national lottery. One dollar per ticket. You can buy a month's worth at a time. A drawing every day and a million dollar winner every day. The money not paid out in winnings pays down the national debt only and cannot be used for any other purpose.

1) NO, the stimulus has not helped the economy. In fact it is only making things worse by delaying the day of reckoning and making the economic pain larger and longer than it needs to be. Creating zombie banks, increasing bureaucracy and regulation, and spending ridiculous amounts of money on worthless social programs does not create jobs or foster investment. At a minimum they could have at least spent 100% of the stimulus on infrastructure so we could have something to show for it. Unfortunately, when only 2-5% of the so-called stimulus is spent on infrastructure and the rest goes to pork projects, you're doomed to fail.
2) Cut all income and payroll taxes by 75% and you would see a recovery like no tomorrow. Abolish the federal reserve, allow all insolvent banks to fail, cut the size of government by 50% (to start), put term limits on congress in order to limit the damage they can do while in office.

The stimulas package is first and foremost a political tool, deferring the vast majority of spending into 2010, a mid-term election year. Most 2009 spending has been directed toward maintaining individual ecomomics through jobless benefits and other direct subsidies. If we are to believe most politicians, and many economists, the recovery has already begun, or at least the recession has bottomed out. If either of those assertions are correct, then whatever funding is not yet committed to infrastructure projects or shoring up state and local government buget shortfalls should be cancelled, thereby reducing the deficit. It makes no sense to keep pouring gasoline on a fire that is already lit.

No individual, company or government can print, borrow and spend its way to prosperity. The porkulus/scamulus/spendulus "law" is nothing more than a political payoff plan that only digs our hole even deeper.

The only way to save America is to return to our founding fathers' vision of individual liberty, constitutionally limited government power and free enterprise economics. To do this, we must repeal the 16th and 17th amendments and the Federal Reserve Act, thereby shutting down FedGov. Since the major-party incumbent politicians will not endanger their power/money racket, the only way to do this is to "fire 'em all, no elephants, no jackasses, no prisoners, no exceptions, vote third party."

The "sparking the economy" question presupposes that some type of purposeful, governmental intervention will make the economy "better". I believe the Federal Reserve is to be commended for its actions in averting a complete lockup of the financial system. Having said that, I am very concerned that the resulting low interest rates will not be properly increased ahead of the recovery curve, creating an overheated economy. Coupled with our politicians insatiable appetite for spending borrowed (or worse yet, printed) money, we are destined to experience inflationary pressures that will reduce our remaining wealth.

#1 - No, the Stimulous did not help the economy, as very little of the money has been spent that would increase employment. Employment creates tax revenue, increased spending and higher GDP, retail spending and more jobs. Paying off foreign creditors such as Credit Suisse and Fiat does little to help the US economy. The money given to the banks to cover mortgages that should never have been issued only impacted a small percentage of the population. The largest foreclosure impact has been and will be the most serious resulting from the unemployed or underemployed, not those with subprime mortgages.

In Colorado, it is estimated that the Stimulus money to date has provided less than 100 full time new jobs, mostly in construction, which is predominantly seasonal, temporary work. The high paying jobs in Colroado have not been impacted at all by the Stimulus money, therefore more jobs have been lost and disposable income which increases taxes and spending has decreased. Perhaps in the 2012 election year, more jobs will be saved or created by the emergency Stimulus, but that will not help the economy for 2009 and 2010.

#2 - Jumpstarting the economy will only happen if job losses are stopped, new jobs created and business regains confidence that they will not be facing new and burdensome taxes. People are afraid, businesses see high risk to investments that cannot be mitigated as they cannot trust the government to not raise taxes beyond their profit margins. By stopping the rhetoric by the administration advising businesses and people that the tax rate will increase, burdensome legislation will increase and that "the wealthy must pay more to support the poor," this will stop the spreading fear and aversion to risk. Jobs are only created when a company is willing to take a risk by expanding. No company will expand if they know that the gains resulting from risk will taken by the government and lost to them. Simple question: why take a risk of loss with no possibility of gain?

Small businesses often pass their business revenue through the owners' personal income tax return, on a Schedule C or Schedule E. Many of the "wealthy" reporting over $250,000 per year are in reality small businesses employing 2 or more people, with a net income to the owner of less than $75,000 per year. These are not "wealthy" people, who should redistribute more of their wealth to others. They already redistribute their wealth to others by creating jobs and providing services that support other businesses that provide employment. On and on. This is commerce, American style. Also known as capitalism. In summary: lower all business taxes, stop threatening small and medium sized businesses with increased health care costs and new taxes and new legislation, stop giving money to huge multi-nationals that will take the money out of country to employ workers in countries with lower corporate income taxes. In simple terms, stop out of control government spending. The federal budget is not a spending spree with an open checkbook without a pay off date. To paraphrase Shakespeare: Shylock wants his return on investment.

Every American (except Congress and the White House apparently) seem to "get it" that borrowed funds need to be paid back with interest and interest equals new taxes, which equals inflation in the near future, which equals more lost jobs and lost revenue. For every action, there is a reaction. Lenders want to be paid back sooner rather than later and if the economy continues to falter, they will want their money back earlier, while the money (US Dollar) is still worth something somewhere.

No the stimulus bill did not work. The bill was the culmination of 9 years of earmarks which was politically possible to pass at the time of inauguration. It was poorly designed to accomplish the task intended.
To spark the economy it must be considered in terms of global and US benefit. For the US the government should accept and retire TArp loans and remove the government programs as soon as possible without trying to profit at market rates on repayments. At the same time continue global opportunities in treaties and in establishing better tax consequences for US corporations. Do not attack global corporations but encourage trade.

No, I do not believe the stimulus plan helped or will help the economy. You cannot spend your way into prosperity, and you cannot borrow your way into solvency. We now owe foreign governments so much money that if they called their debts, the United States would fold.

I would let the market forces have their play, and get the government out of the way. If it had not been for government regulations requiring lending to people who could not repay, the financial industry would not have built such a big bubble to burst.

Ditto the auto industry. Union contracts and government emission regulations have made it impossible for US companies to compete.

Let the businesses that are failing fail; there are none too big to fail. Had the market been allowed to operate freely over the last two or three decades, we would not have had a buildup of such mammoth proportions.