The balanced budget stimulus

Nov 7, 2014 2 min read

To the editor:

One of the more useful propositions in economics is the Balanced Budget Stimulus, which involves simultaneously temporarily increasing government spending to stimulate the economy, and raising taxes enough to pay for it. Economist Robert Shiller calls this Debt-Friendly Stimulus, because not only doesn’t it increase debt, it actually lowers the debt to GDP ratio, thus improving a country’s debt position. (The increased spending increases GDP.)

This strategy works well and it means that we could stimulate our economy in the short term – creating many jobs -and, by investing in our badly deficient infrastructure, could improve long term growth rates, too. Current estimates by the American Society of Civil Engineers is that infrastructure Investment of $3.6 trillion is needed by 2020 to fix our roads, rail systems, bridges, ports and airports.

So why hasn’t the U.S. government used this approach to make large, badly needed investments in our infrastructure? Because Republicans have blocked it. But why have Republicans blocked such balanced spending? Two reasons primarily: first, they don’t want President Obama to get any credit for improving our economy, and second, because they stubbornly refuse to raise taxes. This is more evidence that Republicans do not deserve power.

Robert McKelvie

Fort Myers