Examining the Effects of Economic Stimulus

By Jonathan Higuera
February 26, 2008 03:08 PM

The media attention on whether the economic stimulus plan will work in a meaningful way has overshadowed another line of questioning: where is the money coming from to cover the costs of the $170 billion plan?

It’s no secret.

Bonds will be issued by our government and the biggest buyers of those bonds will be foreign governments such as China and Middle Eastern, oil producing nations. The country’s deficit and total debt will continue to mount.

“The issue isn’t $170 billion in one fiscal year,” says Gus Faucher, a macro economist with Moody’s Economy.com. “The issue is over the long haul we’ve got a mismatch between taxes and spending.”

Gerald Swanson, an economist at the University of Arizona and author of “America the Broke,” which chronicles the country’s debtor status, says he’s more concerned about the $400 billion in interest that U.S. taxpayers have to foot to service the national debt. That, he says, amounts to an enormous transfer of wealth and is already impacting our quality of life.

“In reality, we’d take $400 billion in tax money that could have been used to build infrastructure or whatever and send it abroad,” he says.

The foreign ownership of our debt also concerns Swanson. “If people lost confidence in the stability of the dollar and they own our government bonds, we could have total chaos in terms of our ability to refinance our total debt.”

If these sound like interesting topics for presidential candidates to discuss, too bad.

It’s not something the media is focusing on right now. They are more interested in following the debate over whether the stimulus plan will actually have an impact on the economy.

In 1992, media scrutiny of the nation’s budget deficits and total debt became a hot issue in the presidential race, perhaps egged on by independent candidate Ross Perot, whose hand drawn budget charts caught the public’s attention and drove home his points. During former President Clinton’s tenure in the 1990s, reducing the deficit was a clear policy goal and he worked with Congress to achieve it.

This cycle, federal deficits and debt doesn’t seem to be much on the national media’s radar. Maybe it’s because the candidates themselves are not talking about it much. Who can blame them? Can you seriously talk about financing universal health care in the same breath as our $9.2 trillion national debt?

But still, Faucher says the media should be asking the question. Do today’s presidential candidates think balancing the budget is important? What are their plans?

I certainly want to know. I want to know where they stand on balancing the budget. I want to know if any are of the mindset that running up the federal debt is not a problem.

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Copyright © 2008 Donald W. Reynolds National Center for Business Journalism