No Soup for You!
Tuesday, February 3rd, 2009Over 70% of U.S. businesses have announced freezes on hiring and/or pay increases. My employer is included in this figure, which is frequently hailed as one of the most recession-resistant companies in the world.
And it looks like the freezes will be around for a while. In the words of ADP’s CEO, this will “likely continue [...] into 2010.” Why do businesses in the United States expect this economic crisis to last so long? Isn’t the government about to pass out an $800 billion stimulus package?
Well, the Congressional Budget Office says only 25% of the money will go out this year. Most of it won’t be spent until 2011 or 2012. How is this supposed to help the economy?
It won’t. An analysis by the Wall Street Journal indicates that only 12% of the stimulus package legislation could plausibly be considered an economic stimulus. No wonder CEO’s have said they won’t be hiring for awhile.
It sure is convenient for the politicians though, as their porkbarrel money will be spent right before elections. And if you still think your government cares about you, think about what will happen to the economy when we print $800 billion dollars and just put it into circulation as if it were mana from heaven. Over the next four years, we’ll see inflation skyrocket while we are stuck with stagnant wages. But we’ll save the economics lecture for another post.
As a side note, the stimulus package could fund all of the soup kitchens in America for about 15 years if we eliminated the wasteful spending. And considering the direction that our government is taking us, this would probably be a good investment.
