Will Straw on a Second Stimulus
Why do we need another stimulus?
So, earlier this year there was a stimulus package passed, which was in the form of tax rebate checks. So, people got money through the post and were able to spend it on whatever they wanted to. And that worked pretty effectively, but since that there's been a real collapse in the economy, starting off in the financial services sector with the freezing up of credit so that businesses couldn't get money to pay payrolls and so on, and they're still struggling there. And that's starting to have a knock-on effect in what the call the real economy, so this is people losing their jobs and people deciding to spend less and being concerned about a rainy day to a much greater extent. So there's an overwhelming case, particularly when we learned this morning that nearly 2 million people have now lost their jobs in 2008 alone, there's an overwhelming case for a second stimulus package.
What are the most important elements to include in a new stimulus?
So last time the focus of the stimulus was on tax rebates, so giving money straight to consumers. That seems less relevant this time because consumer confidence is very low, so there's no guarantees that people will spend this money to the same extent. They're much more likely to save it or use it to pay off debts. So, we've looked at a different way of spending this money. Most important is giving money to those people most in need. So, this is the extremely poor and those that have become unemployed, and helping them out. Secondly, the states have real gaps in their budgets and are going to have to cut back on really important services to do with health and education and so on. So we recommend a large transfer of money from the federal government to the state governments to make sure that those programs aren't cut. And finally, there's a huge infrastructure need in the U.S., particularly relating to how to improve the energy efficiency of many different buildings and also to create green jobs to look toward some new clean technologies. So a lot of money needs to be put into those programs, as well.
How long will it be before we start seeing results?
So, all of the proposals in our $350 billion plan will have an impact in the first year. Some of these will have a very quick impact. For example, if you give money to people who have just become uninsured or you increase the level of food stamp benefits, that will have an immediate effect, because these are people who are really really struggling to make their payments day to day, and you're giving them money that they can then use to spend on food or on their rents, so it's going straight back into the economy and having a stimulative effect. Secondly, the states have this huge budget shortfall, which we can plug with about $70 billion, which we propose. What that means is that they don't have to cut back on some of the services like health and education. So that means that people keep their jobs, and the money keeps flowing into the local communities. With infrastructure, as well, we've targeted ready-to-go projects. These are projects where the planning's been done, the workers are ready to go; they just don't have the budget for it. So by plugging that gap you can really get the projects to come on tap immediately.