Rank Collar
How will the stimulus package create help the economy?
I don’t understand how spending so much on health care and education are going to create millions of jobs. The DOL calculates the total unemployment for these two industries at just 792K jobs out of the total 13 million who are unemployed in Jan 2009. The simple math tells me that 6% of the unemployed work force are primed to receive 35% of the package! Sure, health care for the unemployed will improve their lifestyle, but I don’t see how it will get them back to work.
Likewise, I don’t see how education will help either. Perhaps the idea is to be able to train unemployed workers in other areas, but all that would really do is push the unemployed ranks of the blue-collar worker into the unemployed ranks of the white-collar worker.
What is the thought process behind giving so much to health care and education?
See John Maynard Keyens. If the government builds a road. It pays the workers a total of, say, $6billion dollars. The workers will save a portion of it, or pay bills etc. (say25%) the rest will go into the economy as new spending. which will again be saved, and re-spent. So say your demand curve (that is people buying things) drops by 36 billion dollars. Bythe government imputing 6 billion,with a multiplier effect of X 4 it will increase demand back to 36 billion. There are issues with this moddel, but that is the basic idea behind what Obama is trying to do. Tax cuts always has a multiplier that is 1 less then that of government spending. The difference is thatwhen all is said in done, the Private Sector will have more resources with tax cuts and the government will have more with spending.
Check out Keynesian economics and also check out The Paradox of Thrift.
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