A Friendly Financial Intervention

There are times when excessive government spending can be a drag on the economy, but now is clearly not that time. In case anyone missed it, the private economy has collapsed. It has been shedding jobs at the rate of more than 600,000 a month for the last six months. There are absolutely no signs this decline is about to turn around any time soon.

In this context, President Obama’s recovery package is providing essential support to the economy. Although signed into law only three months ago, it has already provided a boost to the economy by preventing tens of thousands of layoffs by state and local governments. These governments would have been forced to dismiss teachers, firefighters, and other workers due to plunging tax revenue. While many governments are still making cutbacks, the number of jobs lost is much smaller than it would have been without the stimulus.

In the months ahead, millions of jobs will be directly and indirectly created as the stimulus spending starts to percolate through the economy. Workers will be hired to repair roads, retrofit buildings, modernize the electric grid, and perform hundreds of other tasks paid for by the stimulus. These workers will then spend their paychecks on their mortgages, at retail stores, at restaurants, and in other places, generating new demand and creating more jobs.

Would the private sector somehow be creating more jobs if the government was not employing workers rebuilding our infrastructure? Are there factories that would have hired workers but chose not to because the government is repairing the roads? Did restaurants cancel plans for expansions because the government is keeping teachers employed?

That story does not make sense. We need the government to support the economy right now. We would have many fewer jobs without the boost to government spending.

DEAN BAKER is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of Plunder and Blunder: The Rise and Fall of the Bubble Economy.

This story originally appeared in Business Week.

More articles by:

Dean Baker is a macroeconomist and co-director of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University.

March 21, 2018
Paul Street
Time is Running Out: Who Will Protect Our Wrecked Democracy from the American Oligarchy?
Mel Goodman
The Great Myth of the So-Called “Adults in the Room”
Chris Floyd
Stumbling Blocks: Tim Kaine and the Bipartisan Abettors of Atrocity
Eric Draitser
The Political Repression of the Radical Left in Crimea
Patrick Cockburn
Erdogan Threatens Wider War Against the Kurds
John Steppling
It is Us
Thomas Knapp
Death Penalty for Drug Dealers? Be Careful What You Wish for, President Trump
Manuel García, Jr.
Why I Am Leftist (Vietnam War)
Isaac Christiansen
A Left Critique of Russiagate
Howard Gregory
The Unemployment Rate is an Inadequate Reporter of U.S. Economic Health
Ramzy Baroud
Who Wants to Kill Palestinian Prime Minister Rami Hamdallah?
Roy Morrison
Trouble Ahead: The Trump Administration at Home and Abroad
Roger Hayden
Too Many Dead Grizzlies
George Wuerthner
The Lessons of the Battle to Save the Ancient Forests of French Pete
Binoy Kampmark
Fictional Free Trade and Permanent Protectionism: Donald Trump’s Economic Orthodoxy
Rivera Sun
Think Outside the Protest Box
March 20, 2018
Jonathan Cook
US Smooths Israel’s Path to Annexing West Bank
Jeffrey St. Clair
How They Sold the Iraq War
Chris Busby
Cancer, George Monbiot and Nuclear Weapons Test Fallout
Nick Alexandrov
Washington’s Invasion of Iraq at Fifteen
David Mattson
Wyoming Plans to Slaughter Grizzly Bears
Paul Edwards
My Lai and the Bad Apples Scam
Julian Vigo
The Privatization of Water and the Impoverishment of the Global South
Mir Alikhan
Trump and Pompeo on Three Issues: Paris, Iran and North Korea
Seiji Yamada
Preparing For Nuclear War is Useless
Gary Leupp
Brennan, Venality and Turpitude
Martha Rosenberg
Why There’s a Boycott of Ben & Jerry’s on World Water Day, March 22
John Pilger
Skripal Case: a Carefully-Constructed Drama?
March 19, 2018
Henry Heller
The Moment of Trump
John Davis
Pristine Buildings, Tarnished Architect
Uri Avnery
The Fake Enemy
Patrick Cockburn
The Fall of Afrin and the Next Phase of the Syrian War
Nick Pemberton
The Democrats Can’t Save Us
Nomi Prins 
Jared Kushner, RIP: a Political Obituary for the President’s Son-in-Law
Georgina Downs
The Double Standards and Hypocrisy of the UK Government Over the ‘Nerve Agent’ Spy Poisoning
Dean Baker
Trump and the Federal Reserve
Colin Todhunter
The Strategy of Tension Towards Russia and the Push to Nuclear War
Kevin Zeese - Margaret Flowers
US Empire on Decline
Ralph Nader
Ahoy America, Give Trump a Taste of His Own Medicine Starting on Trump Imitation Day
Robert Dodge
Eliminate Nuclear Weapons by Divesting from Them
Laura Finley
Shame on You, Katy Perry
Weekend Edition
March 16, 2018
Friday - Sunday
Michael Uhl
The Tip of the Iceberg: My Lai Fifty Years On
Bruce E. Levine
School Shootings: Who to Listen to Instead of Mainstream Shrinks
Mel Goodman
Caveat Emptor: MSNBC and CNN Use CIA Apologists for False Commentary
Paul Street
The Obama Presidency Gets Some Early High Historiography