There's a lot to say about the Spend-Our-Way-Out-Of-Trouble plan. That's not its official name, of course, but it should be.
- The worst thing we could do is abruptly cut back on total Federal Spending with no plan. Fortunately, there's not much risk of this. But the states are already doing this, constrained by constitutional balanced-budget requirements. Government makes up almost 1/3 of our economy.
- The second worst thing we could do is to try to spend our way out of trouble. A big part of our current trouble is lack of available credit, and guess who the biggest consumer of credit is? And we'll be leaving all that debt to our children.
- The third worst thing we can do is nothing.
- ROI. No new spending without a clearly visible return on investment -- infrastructure that will benefit our children and avoid future costs, or investments that will result in future income (e.g. loans, limited capital investments in public-private partnerships. I'm not a fan of government ownership -- but I'm less of a fan of giving tax dollars away with no return).
- Leverage -- Dollars we invest should be overmatched by private dollars invested.
- Pay-as-you-go. Sorry, this means no broad tax cuts. If tax cuts provide leverage and ROI, perhaps, but just diffuse "stimulate the economy" doesn't cut it -- it just adds to the downstream problem. Our tax income is about to take a big hit anyway with unemployment and reduced corporate income. If we had maintined a balanced budget over the past 8 years, things would be different -- but we already used that bullet, and it didn't work.
- Bureau of Economic Analysis, US Commerce Dept.
- Federal Spending, 2001 through 2008, Center on Budget and Policy Priorities
- Cost Estimate, HR 1 (Senate), Congressional Budget Office
- Remarks by Governor Ben S. Bernanke, Federal Reserve Board
[Edit: Some of this is an outgrowth of a disuscussion thread, Cars aren't selling, SegwayChat.com]