I believe that the success of any
bailout plan will be determined by how much economic benefit we get from
spending taxpayers’ money.
The argument for a bailout plan has been to create
jobs that will help consumers spend again.
Consumer spending is a huge part of our GDP and it
is critical that we do not let it collapse.
In the short term, creating jobs will indeed spur
employment and consumer spending.
However, the bailout plan must have “real” economic
benefits for it to be effective and non-inflationary in the long run.
For example, let’s assume that
we have $1 trillion to spend and that the modern freeway system did not exist in
Spending the fiscal stimulus on these
infrastructures will not only create jobs for the Americans in the short term
but also bring economic benefits for the many generations to come in the long
term, as trade and transportation between major cities become more efficient.
Now suppose, instead, if we were to use the $1
trillion stimulus to add bridges in areas where there are already more bridges
than people care to use, we will really be building the bridges to nowhere.
Although jobs will be created in the short term,
taxpayers’ money will go up in smoke after the project is completed.
Thus, when analyzing the effectiveness of any
bailout plan, we need to understand what, if any, economic benefits it might