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More Fiscal Stimulus in 2010

As the fiscal stimulus law came into being in February 2009, the effects were not noticed in the beginning. With nearly a year gone by, and on closer inspection, you would think that if successful, more noticeable changes would be seen. Some have suggested that more fiscal stimulus in 2010 is needed, and more unemployment insurance need be brought into play. The Obama government is making all the right moves, but are they spending in the right areas?

A common thought amongst many is that major spending is being done in often the wrong areas, and that more spending should be done for the poor and unemployed. It is impossible to rely on a nation to pull through a global recession when they people do not have the resources to increase spending power, thus strengthening the economy. Tax cuts have of course helped, but it does not seem to be enough, as the growth stimulus seems sluggish at best, with minor confidence in the fiscal plan for next year.

Even as hard-liners call for more fiscal stimulus in 2010, Obama’s government hits back with evidence that there has already been a slowing of unemployment, from almost three-quarters of a million job losses in the first half to just over half a million in the second half. The real test would be to actually see a positive trend in the job market.

This would of course be impossible to monitor in the beginning, and can only be counted over a period of time, but with more buying confidence would come with more employment opportunities. Many maintain that should the unemployment rate have slowed down till approximately 300,000 by the third quarter, that the fiscal plan is evidence that it is working and that no further stimulus would be needed in 2010.

Many argue however that what should be looked at and prevented is the high rate of foreclosures that are happening, as once someone loses their home; they will always struggle to regain their status and might never be home owners again. This also has a negative effect on house prices and forces people to re-evaluate their affordability and their ability to continue with mortgages.

Many people are also predicting that a sense of false complacency might occur when another round of fiscal stimulus is introduced, as this might promote a short rebound effect where the economy receives a short-lived boost. This must be guarded against, and spending should still be prioritised and not wasted. Many economists warn that any surplus cash should be used to try and reduce the overall debt, as this will help with keeping interest costs down, therefore adding to the growth stimulus that is needed without external help from the government.

A secondary plan should however be put into place should more fiscal stimulus in 2010 be called for, as leaving it too late could have devastating effects on the economy for the American people, and potentially cause a ripple effect that will certainly spread globally.

Tags: cash, government, Insurance, law, market, mortgage, price, Stimulus, tax

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