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Don’t stop the spending

28 Jun


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In today’s New York Times, Nobel laureate in economics, Paul Krugman warns that stopping spending can lead to a double dip recession, and possibly even a depression. Concerns about the US’s spending has also been brought up Federal Reserve Chairman Ben Bernanke to the Senate Banking Committee.

Krugman is right, but I only think this applies to countries that are still in recovery. For example, Britain has less than 8% unemployment and a positive GDP%, they are back to normal, not in a recovery stage like the US is in with nearly 10% unemployment. Also, compared to Europe’s spending, the US has not even gotten close. Not counting Federal Reserve and Treasury schemes, the US has spent about $1.9 trillion on bailouts and stimulus packages*. The total wealth in the US is around $62.3 trillion. (Based on a Federal Reserve paper that says the wealthiest Americans own 87% of the wealth, which is around $54.2 trillion. If I still have my algebra in me, I did a proportion to figure out total wealth). The spending is negligible when compared to total wealth, and surely is to how much our economy is worth. The spending simply isn’t enough.

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* I am basing this on adding the costs of the following pieces of legislation: Bailouts of Fannie Mae, Freddie Mac, and AIG; Economic Stimulus Bill of 2008; Emergency Economic Stabilization Act of 2008; The American Recovery and Reinvestment Act of 2009. I did not include certain bailouts or omnibus spending bills.