My own Position on the Stimulus Package

The Student should recognize the Points where aggregate models get into trouble. Read this Post, and figure where it fails; one should remember that it was written by a very good Economist with an excellent Track record. Hint: Mine Cleanup is a highly specialized Occupation, shrouded in major Safety and Environmental regulations. There are few Companies which devote themselves to Mine Cleanup (employing about 16,000 Employees who utilize highly expensive equipment), who treat specific Location cleanups in serial form; maximizing the utilization of the Equipment and steady employment for their Employees. The rest of the analysis is quite correct, there only being discrepancy in the Time Component; one can estimate the Time required will be about 15 years of duration. Readers should understand many Work Schedules cannot be hurried!

Casey Mulligan places this Recession among the three previous Recessions, and explains that the economic times are not so unusual. We are on par with two mild Recessions, but below the Recession of the 1980s which proved to be the worst of any of the Three. The trouble for me is the Question of whether the Stimulus Package passed will be a Plus or a Minus to economic performance. We have a relative stability based upon a steady Product Profit ratio, and the Stimulus will throw a huge amount of Cash into the Economy; which will have a huge impact upon the Product Profit ratios. The Stimulus will work as expected, if the actual change in the Product Profit ratio is mild; the Stimulus will actually be counterproductive, if that change is relatively severe. Unaffected businesses who are not impacted by the Stimulus (some 70% of the total businesses) will be adversely curtailed if their Product Profit ratios have to rise over 4% above the expected Inflation rate of 7%, simply to meet rising Resource Costs. Here is the core of the Problem, and where I believe the Stimulus Package was wrong!

I have been asked what Stimulus I would advocate at the current time. I replied that economies operate differently based upon their total and relative size. Stimulus packages acting upon the total economy did well when Employment was around or less than 100 million Employed; economies affected by capitalization per Worker, and total number of Employed. We are simply too large with massive Labor force to simply throw Cash around, and expect Things to get better by the spread of Cash. We need to create new Sectors of Employment, with an eventual Sector enrollment of 6 million highly-paid Jobs apiece; likely to require a minimum of three such sectors where the Work is of at least 15 years duration, and costing a minimal 30 billion dollars every year of that time interval. Understand that with the Stimulus Package which has been passed and will be spent, it will cost a likely $40-50 billion per year per Sector. This is the basic reason why I did not like the passage of the Congressional Stimulus Package. lgl