The Job Creating Machine

"The macroeconomic impacts of any economic stimulus program are very uncertain." So begins a recent Congressional Budget Office report on the economic impact of the nearly $800 billion stimulus package soon to become law. The report's noncommittal opener isn't exactly a ringing endorsement, but the CBO goes on to suggest that the stimulus will do much to moderate what would otherwise be a severe and prolonged recession. But how, exactly, will the stimulus package create the jobs needed to thin the growing ranks of the unemployed? Actually, not all economists think it will. Still, to understand the criticisms of the stimulus, it helps to know how it's intended to work in the first place. The recession has two main culprits: the derailed financial sector and weak spending. The financial crisis is the monkey wrench in the gears of the nation's assembly line, limiting the economy's productive capacity. The subsequent belt-tightening by households and businesses indicates a collective unease ... (link)