We Need a Bigger Stimulus Plan Now

The Congressional debate over the stimulus plan is being used by the Republicans to try to create an issue for the next election cycle. If we still have economic problems they will claim "we told you so". If it helps they will say, "we made it better". They think that they can benefit in either case. They are wrong. The stimulus plan is too small under any stretch.

In 1930 our GNP was about $77 billion. Today our GNP exceeds $12 trillion, a multiplier of more than 12,000. Our population in 1930 was about 127 million people. Today we have a population of about 310 million, a multiplier of about two and one-half. The average workers wage in 1930 was about 50 cents an hour compared to about $15 per hour today. This amounts to a multiplier of about 60. In 1930 the unemployment rate approached 20% of the approximately 40 million people work force, or about 8 million people. Today we have a total unemployment rate of 7.6% of the approximately 140 million workers who are employed normally, or nearly 11 million unemployed plus millions more who are not included in the count because they lost unemployment long ago and are not counted.This is a multiplier of 1.38.

Congress is now considering a stimulus plan of about $800 billion spent over two years, or about $400 billion per year. This is in addition to TARP that will cost about $800 billion or more. The $800 billion slated for stimulus includes not only labor costs needed to create jobs, but also all other costs to do the required work projects including energy, materials, and equipment.

The $800 billion estimated for the eventual stimulus plan in 2009 is equivalent in 1930 dollars to $320 billion. Corrected for average wage this would decrease to less than $3.2 billion, and if the total unemployed were made proportional to wages, this would decrease to less than $2.3 billion dollars, or compared to the GNP in 1929,just before the market collapsed, about 3%. This was considered about normal prior to the Great Depression. When FDR took office the New Deal increased the Federal expenditures to over 25%. In today's world, taking into account all the factors discussed above the required stimulus should be over $3 trillion per year for the next two to three years.

The actual stimulus plan will ultimately will likely be about $1.5 trillion spent over two years (including TARP and $400 billion for the stimulus plan per year). The FDR New Deal substantially helped put people back to work. Millions were reemployed. However WW II created the vast majority of government jobs ever, and ultimately produced the middle class we once possessed, and are now losing by the millions as jobs disappear. Today we must end war involvements and spend the additional $500 billion per year so recovered to recreate the middle class in our country. We must stop the adversarial bickering in Congress and help the people in our country now. We must help create millions of new jobs immediately to avert another even Greater Depression. Tell your representatives in Congress to spend the trillions of dollars needed for job creation now.