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How do you think the government can create more demand?
What are some things that you think our government could be doing to create a higher demand for US-made products? What do you think companies can do to create more demand?
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2 Answers
This is an extremely important question and I am surprised that no one has taken it on so far. The big question for our upcoming election is the one you have asked. Republicans are telling us that we should do nothing to create demand; while the Democrats brought us the stimulus package and support government demand creation. So the American People's answer to this question will be our support the the tea party folks, or the current administration which so quickly has fallen out of favor.
In general, there have been two schools of thought, one to cut taxes and let general demand increase from more money in people's pockets. The other school says to direct the money to projects such as road building. Regretfully when the administration set its stimulus policy, too much of the stimulus was on tax cuts rather than the projects which in fact do employ people who otherwise would be out of work. The thing I like about projects is that they result in a tangible product, such as a road or bridge, that we did not have before. It is hard to quantify the benefits of a tax cut and consumers may purchase products such as automobiles or clothing made outside of the US allowing us almost no jobs benefit.
Polictically I believe we have seen the last of the stimulus bills that can get through congress. In my opinion, the existing stimulus was useful in employing persons that would otherwise have been laid off. However the effect of the stimulus is short term and we may experience some adjustment as the effect wears off and no other stimulus is put in place. However the current low interest rates are a form of stimulus and can increase consumer and corporate demand, so we will get some additional help from this. Our unemployment rate remains high and will not fall for some time; at this point, we may have to live with this result and let the economy recover on its own over time.
IMHO, As a consumer driven economy, consumers need to have more cash in their pockets to consume goods. However, when they are competing with spending by the Federal Government, State Government and Local, they are giving their precious disposable cash to taxes.
Government employment needs to be reduced, tax burdens need to be reduced, and tax payer need the confidence that their economy is strengthening so they are comfortable enough to go out and start spending their hard earned cash.
Small business's need to have incentives to hire and spend, as they drive our economy.
I agree that spending on project with infrastructure will help the economy, as long as those projects are needed, cost effective, and benefit the local economy. Building interstates for interstate commerce was a great example of a project that primed the pump. But, building a new local bicycle trail does little to help generate revenue for local business, or reduce expenses - they are better build during good economic times.
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