Friday, January 23, 2009

Head Down Or Feet Up?

The Lehmann Letter ®

Today the Associated Press reported ( ) that Democrats and Republicans continue to argue whether spending increases or tax cuts will have the swiftest positive impact on employment.

This is reminiscent of the argument over whether people grow from the head down or the feet up: Difficult to resolve.

The argument for spending increases says: If the government spends the funds, it’s done and fail-safe. The road gets built; the bridge is repaired. People are directly employed on the project.

Spending opponents disagree: By the time the funds are spent, the economy will be recovering of its own accord. If the spending is authorized now, it won’t occur until 2010. That’s probably too late. The federal project will pile on, not instigate recovery.

Tax-cut proponents assert: Cut taxes today and the recipients will spend tomorrow. No waiting.

Their critics say: The beneficiaries will save the funds, without any guarantee of any spending. Tax cuts may not generate any spending gains.

Who’s correct?

Who cares? There’s no time to waste. Do both. Neither will hurt. This recession will last so long and recovery will be so slow that any spending increase will probably not be late. And even if taxpayers save their tax-cut, the added liquidity will encourage additional expenditures before too long. Delayed assistance is better than none at all.

It will be expensive…….. Well over a trillion dollars, but worth it. There is no greater priority at the moment.

Head down or feet up….. It doesn’t matter.

© 2009 Michael B. Lehmann

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