Tell us your fix. Thanks.
First to clear up Keynesian theory, it says, government must FIRST save money during the prosperous times, and then spend the money in such a way that it puts money back into the economy at a point where it will grow the economy.
You can't spend like a drunken sailor during good times and then borrow money and put it where lobbyist want it to go. Save first - other countries (like China) have sovereign wealth funds where they keep the surplus money. Then spend during recessions.
About using public funds to make the economy grow... infrastructure is not the answer. I am a civil engineer and have worked around infrastructure projects all my life. Everything associated with infrastructure projects require specialized skills. From the engineer who draws the plans to the bulldozer driver who helps build the bridge, or road.
How do you expect some group of unemployed people, like home builders to factory workers to benefit from infrastructure spending? I guess building new schools would help out construction workers. But, in general, you cannot put a glob of stimulus money out into some sector of the economy and hope some "invisible hand" will spread it around like peanut butter.
Of course, a very wealthy and very tired bulldozer operator will give money to his wife, who will then spend money - but that is a very inefficient process.
I was also a small business owner, and here is what makes small businesses grow:
confidence in the future. As an entrepreneur, I can always find new areas of work where my company can expand. For example, my engineering company expanded to start a sister company that writes Environmental Impact Reports. We could use the management skills from the existing company to hire the technical experts to create a new branch company.
But I am not going to do that if I have Obamacare staring me in the face with the prospect that I may have to spend a lot more money on health benefits. When the Federal Debt is sky-high, and no one can agree on a solution, then I get real nervous. Because my company is profitable, and my salary and bonus are good, I figure I am a good candidate for increased taxes.
And it really doesn't help when I talk to my bank loan officer who says, "Word from the top: no more loans to anyone, no matter how good their credit."
Then the government announces it will dump stimulus money into the Small Business Administration, which is an impossible bureaucracy. I doubt the SBA has ever helped any small business grow.
Do you think the economy is going to grow under those circumstances? NO!
You get the picture? Small business must have confidence the government wants to be a true partner in growing business; and thus grow the economy together. Tell me I don't have to pay FICA on new employees for the next 10 years and won't have to pay for government mandated benefits. Or issue some government loan guarantees to banks who loan to business with good credit. (Kind of like the VA housing loan guarantees -they give banks confidence). Then I will feel that now is the time to think about expansion.
If government is going to spend money, it must be for the purpose of helping the economy grow by helping companies grow. In turn, those companies will create real, long lasting jobs across the full spectrum of the economy. All workers will benefit, and profitable companies will pay more taxes to the state, the city, and the school districts. Those local governments can then improve roads, build new schools, and hire janitors and secretaries.
Viola! Recession slowly vanishes and happy days will be here again.
