Managing $787 billion worth of tax-payer’s money is never going to be an easy job. But the manner that it has been handled by President Obama and his administration, has to be questioned. The President has basically not done enough spending of his money due to weird budgeting practices on the part of his administration.

The President had $787 billion to spend in 2 years with the economic stimulus package. What President Obama seemed to have done was that he imposed a strict time-table to check on the rate of money spent. To a certain extent, I understand what President Obama and his administration were doing. They did not want the money to be spent instantaneously. So they staggered it.

I assume that they divided the 2 year period for the release of the stimulus money into four ½-year periods. In each of the period an equal amount of money was allocated the stimulus to work. There is roughly $190 billion allocated to each period.

The issue is that about a third of the stimulus package was tax cuts. Unlike spending, tax cuts would have to be instantaneous. You can build a bridge another day, but tax incomes has to be done by tax day. For that reason, about $280 bill worth of tax cuts has to be given out within the first 6 months of the President’s reign. This has to be allocated in the first ½ year period that was allocated this year.

Because of that, out of the $500 billion plus dollars that was set aside for spending in the stimulus package, only $56 billion has been spent out so far. What is worse, is that the majority of the $56 billion were not the infrastructural projects that would really create jobs. In fact, less than a billion of the $90 billion set aside in the bill for infrastructural spending was spent.

Tax cuts do not create jobs. It helps boost confidence of investors. E.g. If I needed to spend a million dollars to get back an after-tax profit of $10 000, there is a high risk. With a tax cut, I could spend that same million and could get back an after tax profit of $15 000; thus increasing my chances of taking risks. With a tax cut too, I would have a larger purchasing power that would increase my capacity to spend.

But it is still spending that create jobs. E.g. spending on a railway track would need workers to build it at first and then they also need workers to operate it in the future. And too little of this means that there are not enough workers being employed which would ultimately lead to a poor economy.

Both tax cuts and spending is needed to prop the economy up. So when the President all but not do spending in the first quarter, the tax cuts have been rendered useless. There is no point that I create a business when nobody can afford to buy my goods because they have no jobs.

What the President should have done was to make tax cuts an exceptional spending. He should have spent about $125 billion every 6 months. Should the President have done that, we could have a very different economic picture than that one we are having right now.

Also, this has also marred the lessons learned for economists in the future. Some liberal economists would claim that they would claim that the tax cuts did not help to stimulate the economy and the conservatives would insist that the stimulus package was terrible.

The saddest thing of all is this, there can be a family in America going hungry because President Obama made a mistake in handling how to spend the stimulus money. I hope that he does not make this mistake again.

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