What's Your Priority? A Jobs Package or Deficit Reduction?
March 10, 2010
| MoneyRates.com Senior Financial Analyst, CFA
The Senate recently passed a job-creation package which is expected to add $130 billion to the federal budget deficit over the next year and a half. There was a time, of course, when $130 billion would have been considered a pretty sizable deficit all on its own....
The Senate's action highlighted the somewhat mixed populist message being generated these days -- create jobs and reduce the deficit. Naturally, the two are somewhat contradictory, at least in the short term, so it comes down to a choice of doing one or the other.
MoneyRates.com is interested in comments from readers as to what they'd prefer to see done. First though, a bit of analysis:
For the MoneyRates.com audience of bank depositors, the choice between a jobs creation bill and deficit reduction is not clear cut. Even assuming you don't stand to benefit directly from a job creation bill, employment growth is a key piece in making the economic recovery sustainable. Since the deep recession caused the record low bank rates of the past year or so, stimulating a stronger recovery may seem like the best road to higher bank rates.
On the other hand, failure to get the deficit under control could ultimately erode confidence in the US dollar and thus lead to inflation. Higher savings account rates, money market rates, or CD rates would be meaningless if they were outstripped by even higher inflation rates. So, easy as it is to favor job creation intuitively, in the context of high deficits the costs could be considerable.
So what do you think -- is job creation the right way to go, or do you think the emphasis should be on deficit reduction? We are interested in your comments.
Richard Barrington
15 March 2010 at 5:54 am
Good point, NV -- it doesn't have to be a zero sum game if you add more productive use of funds by the government to the economic model. I'm just not sure I have that much faith....
NV
12 March 2010 at 12:47 pm
"Both" isn't altogether of the question. Deficit reduction doesn't have to come purely out of the bucket of money for jobs creation. I'm in favor of cutting big chunks of federal spending that are misdirected now--for example, defense spending on fancier and fancier planes that benefit military contractors but not the military.
There's no reason why cutting the deficit has to come at the expense of non-defense discretionary spending only, as the president has proposed. We could reorient our economy (and the federal government can greatly influence this) from manufacturing $2 billion F-22 fighter jets that add minimal value to forward-looking industries (alternative energy development comes to mind) while coupling transitional jobs training alongside that.
Mike
10 March 2010 at 2:31 pm
I don't see the banks and wall street giving up all they have going for them . Idon't see savings rates rising far in the near future .
We the American people are Powerless . We the American People have no Government officials that will stand up to the Ruling Class that controls our banks the federal reserve and Wall street . No public officials will demand the average American citizens rights.
The Average American citizen is nothing more then a Cash crop left out to fend against the elements on our own. If we become success and bear fruit it will just be stolen by the ruling class. If we fall by the way side we are just left to die.
Mike
10 March 2010 at 2:17 pm
Give me inflation. What ever we are having now with high Fuel tax ,High property tax , income tax and high food prices and low savings rates sure seems like inflation to me.
I think I would be doing much better with high interest rates for savings with Home prices rising.
Wall street and the banks are probably owned by who ever is pulling Bend Bernake strings . I don't see Wall street and the Banks allowing Bank savings rates to rise. The banks are making a killing using hard earned money saved from the average citizen practically free. Wall street will sucker people into a new trap with low bank savings rates. I don't see the controlers a