Clark Howard's take on the Stimulus deal.

[olger]

Feb 12, 2009 -- Clark explains how he would do the stimulus bill differently

When it comes to stimulus packages, people want to believe that Washington can just come up with an answer that spreads pixie dust and makes everything OK. That's just not the case.

This is not a knock against either the Democrats or the Republicans; it's just cold, hard economics.

President Obama has now signed into law the massive $787 billion federal stimulus package. Clark is not at all excited about this package -- just as he was unenthused last year when the $150 billion stimulus package was unveiled during former President Bush's tenure. At the time, he decried the $150 billion plan as the "Politician Protection Act of 2008" because he believed its chief aim was to secure re-election for the incumbents.

So as you can see, Clark has a history of not "doing" stimulus packages. If the problem is that we've all been spending money that we didn't have, you don't solve that by legislating more spending!

Clark also doesn't do politics. He will not engage in saying, "They designated this or that money to this or that worthless cause..."

However, he does want to share why he would have gone a different direction with a stimulus effort.

This Christmas tree with ornaments -- as Clark calls the stimulus bill -- has about $2 in new spending for every $1 in tax cuts. Most tax cuts apply to those who earn household incomes of below $200,000. They'll come in the form of rebates that will be anywhere between $250 and $800.

But the real problem here is that we're crowding out a private enterprise recovery by doing enormous amounts of government spending to artificially prop up the economy.

Then there's the issue of free trade that also irks Clark. "Buy American" may be a populist (and popular) sentiment, but remember that the Great Depression was hastened by trade barriers and trade protectionism. Clark is a dyed-in-the-wool free trade advocate. He knows some of you may have lost your job because of free trade. But the danger to our economy is even greater if trade barriers are erected.

Make no bones about it -- this $787 billion plan will create a temporary false recovery. But it will only be temporary and it could be followed by a possible second recession. What will the feds do then? They'll have no ammunition left.

If it were up to Clark, he'd want to direct up to $50 billion to provide a social safety net through increased unemployment compensation, increased food stamps/assistance to food banks and more money for health care.

And that's it.

In other words, provide the basics so people can limp along with food, health and jobless benefits until the economy starts to recover in a natural cycle.

The reality is that we will spend in the trillions to fix the banking sector in the United States. Clark is no fan of the giant banks, yet this too is necessary for long-term prosperity.

But you don't create long-term prosperity with a big dose of federal spending.

Clark doesn't want to sound like a Dr. No, but if we want to grow our economy, we need to deal with the tough times. Down cycles are fundamental in capitalism; we cannot outlaw economic cycles.

Selected by olger

[phkrause]

This sounds good. I actually like the plan. The thing I don't understand is, why don't they work for the government than.

pk

[Gerr]

Who is Clark?

[Cosmin M.]

http://en.wikipedia.org/wiki/Clark_Howard

[carolaa]

I would support that plan. I think he's absolutely right that we need to let the free market work. So far all we've done is make sure the CEOs get their bonuses.