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Yee Ong
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December, 2008
What are your thoughts on the government bailouts?

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 America.  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 have.