Stimulus plan necessary but not enough, BU professors say

The stimulus package President Barack Obama signed into law last Tuesday may not be large enough to boost the economy, Boston University economics professors said at a panel discussion Thursday.

More than 100 professors and students attended the ‘Making Sense of the Bailout’ discussion at the School of Management Auditorium, where three BU professors covered the consequences of the stimulus.

‘[The stimulus is] too little,’ SMG finance and economics professor Michael Salinger said. ‘It may be a surprise to most people, but the way most economists think about this is straight out of the introductory microeconomics textbook.’

Salinger said although the $787 billion stimulus package is intended for use over two years, it is only large enough to help the economy for one year.

SMG finance and economics professor David Weil said although most economists have argued for more money in the stimulus, Congress must consider whether voters would support the amount.

Successfully passing the bill was a major political accomplishment for Obama, but it was limited by what voters and Congress would allow, Weil said.

‘It represents a huge and necessary infusion of resources into the economy,’ Weil said.

Despite the debate over the stimulus package within Congress, the panelists agreed the stimulus is absolutely necessary.

‘It is not too late,’ College of Arts and Sciences economics professor Simon Gilchrist said. ‘Late is better than never.’

It is difficult to predict how fast the economy will respond to the stimulus plan because the US has never committed to such a large amount in a stimulus package before.

Gilchrist said the US government will finance the stimulus through foreign loans and domestic sources, such as taxes, but it will be in an increasingly better position to pay back the debt it accrues.

‘Ultimately it is the debt of tax payers,’ Gilchrist said.

Panelists said there is additionally likely to be more government regulation, especially on the banking system and financial market.

BU graduate student Bjorn Arnarson, who said he is optimistic about the package, attended the discussion to better understand the stimulus bill.

‘I just wanted to get some academic views on the stimulus plan aside from the media because you only get bits and pieces from the media,’ Arnarson said.

SMG junior Natan Magid said though he agreed with the panelists’ points, he will hold off on judgment of the stimulus until more time passes.

‘I have to wait and see,’ Magid said. ‘I think it’s smaller than it needs to be. I don’t think it’s going to be as expected to help that much.’

SMG Senior Associate Dean Mike Lawson, who moderated the discussion, said he was very pleased with the panel. SMG will hold a follow-up discussion on the economy’s response to the stimulus package in early May, he said.

‘It’s very important for students to hear from real experts about these matters,’ Lawson said. ‘We have an excellent faculty of economics in CAS and SMG.’