Unemployment is a SYMPTOM of the disease of debt load.

Even if the Government plan could restore the job count to its prior peak, the massive service of debt load that bled off consumer spending power will still be present. Added to that will be the new government debt for the stimulus. Until debt is paid off in FULL the monthly payments on most loans continues to drain consumer spending power at the same amount. Taxpayer funded spending, to the degree that it enables some of the current unemployed to spend and service debt, will at best, mitigate the downward spiral, forestall some loan default and then, only till the money runs out.

Any economic activity suffering from insufficient income, absent increased sales or reduced costs of production, must look to reduce the cost of overhead. The two forms of consumer overhead are debt service and taxes. Cutting taxes does stimulate as future after-tax earnings become higher but this will be too little, too late. Spending power evolves SLOWLY from whatever future earnings continue to be generated.

Cutting the costs of debt service generates instant purchasing power and continues for as much as thirty years. Under quantitative analysis it is by far the most powerful re-boot!

See “A Stimulus That Keeps on Stimulating” and other posts for more understanding.

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