My liberal political inclination is to agree with Krugman that the original stimulus wasn't big enough, and we need another one.
My store based experience tells me something different.
I don't know how many parallels one can draw between a small Mom and Pop and the national economy. Maybe it's just not comparable.
But the principle seems the same to me, just much bigger in size.
So what happens when I have a downturn in the store?
Well, I could borrow money and spend it on inventory and infrastructure. There isn't much doubt that would spark higher sales -- maybe even to the point that I might increase employees hours, etc.
But, more often, the correct thing to do is to take my lumps, work my way through the problem, CUT spending and wait for a turn around.
By all accounts, such a response is largely responsible for Great Depressions, and may result in a continuation of the Great Recession.
Still --- Like I said, as a small business owner I'm leery of trying to spend my way out of trouble.
I will say this, though. IF I were to decide to got that route, to try to stimulate business -- I would go BIG. I wouldn't just double the size of my store, I'd quadruple it. I think I'd be much more likely to get the response I need from that, than from smaller, incremental increases. Even doubling in size probably wouldn't achieve the results I need.
So, while getting way BIGGER, and spending considerably more money to get there, would be a huge risk, it might very well work.
Whereas, I think increasing spending tentatively would just be a waste.
4 days ago