Europe has a better idea...

My problem with President Obama's overall idea about how to stimulate the economy is that it is fundamentally "supply-sided." What I mean is that Obama and his Treasury Secretary Geithner are giving taxpayer money to banks in the hope that they'll lend money instead of giving it to their management in the form of bonuses. This is the equivalent to giving income tax cuts to really super rich people in the hope they'll use the savings to invest in meaningful industries. As we know, that didn't work out so well...See also this article from the Democratic Leadership Council, which tends to be enablers of the supply-side tax cuts for the wealthy they are criticizing.

I have been arguing for a demand-sided stimulus, one that puts money in the hands of working folks and taxpayers in general--and protects homeowners directly. See here for my last soapbox post on the subject.

And now, the NY Times from March 26, 2009 reports that Europe seems to have a better sense of how to spend government money on the regular folks, and lo and behold, they don't need to give money to banks. The article describes how people are paid when they are furloughed in a "one week off work for one week on" type of job situation. That is an example of a demand-side government stimulus package. And of course, they already have national health insurance programs and other subsidies that help people in times like these.

The common sense (and uncommon sense) truth is that regular folks spend money when money is put into their hands. Rich folks tend to spend less of their income and what they spend on is at most frivolous, and worse ridiculous. Regular folks tend to buy basic goods and services with their money, which goes to help businesses providing those basic goods and services, thus stimulating more of the economy than a supply side solution.

Why this is so hard for the DC Villagers to understand is due to the fact that the financial industry has paid off too many politicians. The financial community has certainly increased its share of lobbying over the years, particularly during their full bodied (fat) years. That is the sad truth, though there is also the ideological aspect of the past thirty years where people really believe the supply side nonsense that bubbled up on Capitol Hill in DC back in the late 1970s, and won't really go away until that generation retires for good.

(Edited)