"May I suggest you look at how much the national debt has increased since April (about $200 B), that fiscal stimulus (2% of GDP) will find its way into the economy providing the post second dip rise."
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Zeev...
I acknowledge that the US debt has risen greatly in recent months, and it will continue to rise sharply over the near term, but that in itself does not guarantee economic growth. I have factored that into my thinking also, but have come to the conclusion that it is not something that will lift us out of recession. First, the huge rise in the deficit is due more to a substantial drop in revenues than to an elevated rate of spending, and that is a very important distinction. Second, the spending hikes that are occurring are going into areas of the economy which are less supportive of growing the economy than traditional economic stimulus spending.
A lot of the money is being spent on international endeavors, such as military spending in Afghanistan, the middle-east, and elsewhere. A great deal is being pumped into military, political, and economic support of our putative allies in the world, and to attempt economic rescues of the likes of Argentina, and Brazil. I suspect that the sums spent on supporting the dollar and the US markets are substantial also.
Domestic spending is going for things like the farm subsidies (a massive welfare and pork program mostly for well-off "farmers") and other wasteful endeavors, and military spending that is going to companies that are not hiring that many new workers, if any. The programs strengthening internal defenses against terrorism are the only things that are truly economically stimulative, with the new hirings of 40,000 airport baggage checkers (at barely above minimum wage) the best example, as it supplied virtually the entire net national job growth for last month.
The tax cuts, largely focused on out years and in great jeopardy should the Democrats win control of both Houses of Congress, have been to a great extent offset by the tax hikes by state and local governments desperately seeking to replace rapidly shrinking tax receipts. The rise in the price of oil has also acted like a tax increase on the consumer, and while the PPI and CPI remain tame, no one can deny that the cost of living is rising, with increases mostly in the service, health, and insurance sectors which are poorly accounted for in the government numbers.
My conclusion is that the proportionally small increases in spending that are helping to increase the national debt are not sufficient to spark a recovery in the economy. The consumer has been running on deficit spending also, but unlike the US Government, the consumer cannot print all the money he wants, and the ability to acquire and service new debt is ending. Unemployment is rising and the consumer is running out of both the funds and the confidence to continue the spending binge of the past few years.
I hope your analysis is correct and mine is wrong, but for now I will stick with mine.
mlsoft
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