Djcnor’s Weblog

Printing Money vs. a Good Safety Net

Posted on: March 27, 2009

I know many Americans are worried right now about the huge amount of money being invested in pulling the US out of the economic slump it’s in. Europe is taking a more leisurely approach to relieving the crisis, and the New York Times had an interesting article today that suggests why they have that luxury.

http://www.nytimes.com/2009/03/27/world/europe/27germany.html?_r=1&emc=eta1

“VIENENBURG, Germany — Last month Frank Koppe gathered together all 50 of his employees at Koppe-Apparatebau for coffee, cake and the kind of bad news that has lately become all too familiar. He told them the small company’s business, designing and manufacturing custom equipment for industrial plants, had been sliced nearly in half.

But rather than resorting to layoffs, Mr. Koppe asked half his employees to come in every other week. The government would make up roughly two-thirds of their lost wages out of a fund filled in good times through payroll deductions and company contributions. ”

It’s the safety net, folks.

A strong safety net prevents extreme hardship among the losers in an economic downturn while keeping a certain amount of money in even the most lean pockets, money guaranteed to be spent locally to support the most necessary businesses in the communities and providing an amount of stimulus in proportion to the amount of people losing their jobs.

Programs such as the one described above maintain the skills of the workforce. Workers affected by the downturn don’t fall behind and have none of the kinds of resume/CV gaps that make finding new jobs harder. No one loses access to the level of healthcare coverage they had before. What’s more is it costs considerably less than the American version of stimulus.

According to the story, when Obama goes to the G20 meeting, he plans to press the Europeans to take more actions parallel to those the US is taking, but maybe it would be a better idea to listen and learn from EU methods.

Read the article and tell me what you think.

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2 Responses to "Printing Money vs. a Good Safety Net"

I liked this post. I agree with the European’s perspective to hold back on spending. It’s kind of funny that Europe want’s the U.S. to be careful with our spending.

I wonder if Obama will listen or not myself.

Arranging the system to automatically provide stimulus in proportion to the need for it and relieve much of the suffering caused by the downturn at the same time makes sense to me, too. In my opinion, stimulus always works better when the money is put in the hands of those at the bottom rungs of the ladder. Why? Because it is likely to go through more pairs of local hands (each pair multiplying the effect of the original stimulus) and through the right pairs of hands, the ones that provide basic needs and thus should be preserved for the good of the nation. I looked over Obama’s stimulus plans and was very impressed because so many of the programs did just that, using the money to pay workers who would then spend their pay locally, and at the same time getting much needed work done, work that brings up to first world standards US systems that have fallen far behind in past decades.

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