New School Politics

Consequences of the Stimulus Package

Frank | 12 02 2008

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President Bush’s new stimulus planned, now approved by Congress, will send checks of at least $300 to over 100 million American in an effort to jumpstart the lagging economy. For the plan to work it is necessary that citizens receiving these rebates go out and consume right away. However such a plan is only a minor fix and will end up exacerbating the original problem that caused this recession: debt.

The major event leading to the downward economic spiral we find ourselves in today was the subprime mortgage crisis, which essentially meant that many new lower income bracket homeowners could not pay their mortgages, leading the banks to have to foreclose. Furthermore, Americans, as a whole, owe more money than they are taking in because of widespread ignorance about how to properly use a credit card and budget. Our government is even having major issues with budget management as our outstanding national debt is approximately $9 trillion, with over $2 trillion of that being owed to foreign governments. In fact, we borrowed the $168 billion for this stimulus package from China.

At a time when the American people and government have so much debt to pay off, how does a plan help in which the government has to borrow billions of more dollars, and encourages the people to go further into debt by buying a new television, computer or DVD player? Temporarily there will be a surge in profits and sales, but as soon as monthly payments for product with low down payments and high interest rates are due we will see how the economy does then. My prediction is not too good.