03/09/2009 05:12 am ET Updated Dec 06, 2017

Why the Stimulus is Needed, Part II

I'm going to say this as simply as possible. There is a great deal of confusion out there about the stimulus. Let's clear it up.

The United States Economy is Broken down into four sectors. Personal Consumption Expenditures, Gross Private Investment, Net Exports and Government Spending.


The chart above represents personal consumption expenditures. The orange line shows the year over year change. Notice it has been decreasing since July 2007 and has been posting declines 7 of the last 8 months.


Above is a graph of the percentage change from preceding quarters in personal consumption expenditures. It is inflation adjusted. Notice that for the last two quarters, personal consumption expenditures have decreased.


Above is a chart for the percentage change real in gross private domestic investment from the preceding quarter. This number has been weak for 8 of the last 11 quarters. In other words, investment has been decreasing for some time.

The US is a net importer. That means we don't have any exports.

That leaves government spending to pull us out of the hole. It's that simple.

Given the charts above in personal consumption expenditures and gross private domestic investment, what do you think the chances are of the consumer spending again (in the face of massive losses from the housing and stock market and with the massive increase in lay-offs over the last year) or business investing again? In other words, this isn't that complicated.

Read Part I of "Why the Stimulus Is Needed" here.