Word: dollarization
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...truly effective stimulus plan jolts the economy by lifting consumer confidence, since tax cuts can only increase economic activity when people spend, not save. A bigger plan would undoubtedly lead to more consumer confidence, especially if Obama had been brave enough to break the trillion-dollar mark. The flurry of news headlines and television news stories that would accompany such a big figure would show the public that Obama is serious about bringing up the economy, and hopefully motivate them to spend...
...should be - we can't afford to leverage tomorrow to build the infrastructure equivalent of buried banknotes, not when the deficit is a record $1.2 trillion and the debt a staggering $10.6 trillion. A depression would make both problems worse - tax revenues plunge when incomes plunge - but every public dollar we spend on depression avoidance also plunges us deeper into our hole. It's a bit galling to hear Republican leaders warn that Obama wants to spend money borrowed from our children when their own appetite for pork and tax breaks helped double the debt during the Bush years...
...Just a Deal - a New Deal Obama hasn't yet released details of his plan, so the debate has so far focused on the overall dollar amount (liberals want more, conservatives less) and general makeup (liberals want fewer tax cuts, conservatives more) rather than specific strategies for priming the pump. But the clichés are true: God - or the devil - will be in the details...
...example, if you want to upgrade infrastructure, there's a big difference between fixing and building. When you fix a road, the dollars you spend reduce your need for future road repairs. When you build a road, you increase your need for future road repairs. Repairs are also quicker to get moving than new construction, and the Federal Highway Administration has calculated that repairs create 9% more jobs per dollar spent. And while repairs eliminate potholes and other problems that cost motorists time and money, new construction tends to produce rural or exurban sprawl roads that promote speculative development, overstretch...
...warming, volatile gas prices and our addiction to foreign oil; transit projects also create 9% more jobs. Then again, transit projects like high-speed rail lines and subway stations tend to take more time to build than roads or repairs. And while a recent study calculated that the average dollar spent on infrastructure ricochets into $1.59 worth of short-term growth - a bit better than aid to states or broad-based tax cuts and a lot better than tax cuts for businesses or investors - increasing food-stamp or unemployment benefits packs even more bang for the buck...