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Nickelless
Administrator
USA
5580 Posts |
 Posted - 01/09/2009 : 07:46:22
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By JUSTIN FOX – Fri Jan 9, 4:30 am ET
How do you stimulate a stumbling economy? For decades, the consensus among economists was that this was a job best left to the Federal Reserve and to such automatic fiscal stabilizers as unemployment insurance. Passing laws in Congress to cut taxes or boost spending to stave off a downturn was seen as pointless at best. Such help would arrive too late or in the wrong place, the thinking went, or would have no impact at all. (See a bailout report card.)
That consensus has unraveled in the face of the current recession, which appears likely to be the worst in the U.S. in three quarters of a century. When President-elect Barack Obama arrived in Washington at the beginning of week and began lobbying for $775 billion in stimulus spending over the next two years, the nation's economists - or at least the ones who are listened to in Washington - expressed near-unanimous support. This support showed no signs of wavering when the Congressional Budget Office projected Wednesday that, even before any new spending, the federal deficit will top $1.2 trillion this year. As Obama summed it up in a speech at George Mason University Thursday, "There is no doubt that the cost of this plan will be considerable. It will certainly add to the budget deficit in the short term. But equally certain are the consequences of doing too little or nothing at all." (Read Obama's full remarks.)
Yet this pro-stimulus consensus - "Élite groupthink," as one of the dissenting minority, libertarian econo-blogger Arnold Kling, puts it - has its limits. Economists have neglected the subject for so long that their theories of how stimulus works are shockingly underdeveloped. Many of the arguments they make for one proposal or another are the product not so much of economics as of common sense, guesswork, and ideology. The motley mix of tax cuts for families and business, aid to states, infrastructure spending, health-care spending and alternative energy investment that constitutes Obama's stimulus plan is partly the product of campaign promises and political compromises. But it's also a good reflection of the current muddled state of economic thinking on stimulus. (See pictures of Barack Obama's family tree.)
The biggest split is over whether stimulus should take the form of tax cuts or government spending. The main argument for spending over taxes is that, at a time when American consumers have turned suddenly frugal, they're more likely to save any extra cash they get than spend it. This may be the right thing for most people to do, but it won't stimulate the economy. Meanwhile, if consumers do spend the money on TVs and cars and such, much of the impact will leak out overseas to pay for imports.
Tax cuts have the advantage, though, that they can be put in place quickly. There's also the more ideological, if still possibly valid, argument that they don't encourage the growth of bureaucracy. And recent empirical research - some of it by Christina Romer, the UC Berkeley economist who will be chairman of Obama's Council of Economic Advisers - indicates that tax cuts have been quite effective as stimulus in the past. All of which helps explain why 40% of the Obama stimulus consists of tax reductions.
Then there's government spending. One argument is that if you're going to stick future generations with added debt, you might as well put the money into something that will leave them better off - infrastructure, alternative energy, etc. But these projects take time to get up and running. If they're rushed, they're likely to be botched. That's where the case comes in for simply backstopping existing spending by state and local governments that would otherwise have to be cut back sharply. The Obama plan includes elements of both.
Is it the right mix? Who knows. But if it's any solace, the intellectual godfather of all economic stimulus plans, economist John Maynard Keynes, didn't think the specific content mattered all that much. It would be better to do something "sensible" with the money, he wrote in the 1930s. But the economy would still be helped if government simply chose to "fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again." So far, bottle-burying isn't an element of the Obama stimulus plan. But just wait till next week.
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Tourney64
1000+ Penny Miser Member
USA
1035 Posts |
Posted - 01/09/2009 : 10:20:11
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Very simple solutions
1. Make the Bush tax cuts permanent, including the capital gains taxes. It will stimulate the market, and it will make new money available for good companies who create jobs. Things started going downhill when the Democratic congress said they would let the tax cuts expire.
2. Bring the crooks to justice in the Fannie Mae, Freddie Mac and others. If you don't have credibility in the financials of a company, then no one will invest.
3. Fix the problems created in the mortgage meltdown, caused by the mandates by congress, and by ACORN lawyers (one of who was Obama) to the banking industry to give loans to those unqualified to have a mortgage.
Let's not try and spend our way out of the recession. We need to reduce government spending. More spending means more governement debt, and lower dollar values. Deficit spending will reduce the value of the dollar, and we will pay more for everything, only it won't be called a tax. |
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goodcents
Penny Hoarding Member
USA
504 Posts |
Posted - 01/09/2009 : 12:03:45
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| Agreed |
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Bluegill
1000+ Penny Miser Member
USA
1964 Posts |
Posted - 01/09/2009 : 13:33:54
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"Is it the right mix? Who knows. But if it's any solace, the intellectual godfather of all economic stimulus plans, economist John Maynard Keynes, didn't think the specific content mattered all that much."
That man and his followers were/are quacks who belonged in an insane asylum. Pure retarded claptrap. Show me one case in history where that nonsense ever worked out in a positive manner. Short or long term...
The short of it. It won't work.
We haven't reached the point of no return, yet. But we are ever so dangerously close.
This is what we need to do;
Whiskey & Gunpowder
January 9, 2009
By Don Stott
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Basic Economics
There are so many complications, economics wise and there shouldn’t be because as Ludwig von Mises once said, defining economics, “People Act.” It’s just that simple! Examples are everywhere. Toyota is closing its plants for 11 days, and how many employees does this affect? Let’s say 2,000, at $200 a day, for 11 days. The loss in payroll to workers is a total of $4,400,000. Toyota will save $4,400,000, and the laid off workers will buy $4,400,000 less food, cars, gasoline, or whatever they won’t buy, because they have fewer dollars to use.
Multiply this by millions of permanent layoffs, bankruptcies, shut downs, going out of businesses, chains closing for good, autos down the tubes, housing starts virtually zero, and sales almost the same, and what do you get? The Toyota effect, multiplied many times over. 2.5 Million jobs were lost in 2008.
You get millions out of a job, millions behind in their mortgage and credit card payments, millions with homes worth less than is owed on them, and the chain reaction follows. The more layoffs there are, the more store closings and bankruptcies there will be, and resultant layoffs and increasing of all of the above. In other words, thanks to the welfare state, which wasn’t in existence in the 1930’s depression, credit cards which weren’t in existence in the 1930’s depression, and un-backed dollars, which were backed in the 1930’s depression, and no money down home purchases and ARM mortgages, which weren’t possible in the 1930’s depression, the conditions currently extant can and probably will make this depression far more severe than the 1930’s depression. The facts say it will be far worse.
Unfortunately, you haven’t seen anything yet.
Carburetors
For over 75 years, cars, trucks, planes, and everything powered with gasoline engines, used carburetors to mix air and gas to feed into the engine’s intake manifold. They worked well, but on occasion, they became ‘flooded,’ and the engine wouldn’t run. (Modern, fuel injected engines can’t be ‘flooded.’) Carburetors had two things on them which caused ‘flooding.’ (1) The accelerator pump, and (2) The choke. On cold mornings, often the choke, which restricts the flow of air, might make the mixture too rich, and cause the ‘flooding,’ or often in hot weather, too much gas pedal pumping would inject too much raw gas into the engine, ‘flooding’ it, and causing it not to run. Both things, which caused the ‘flooding,’ and engines not running, were TOO MUCH GAS.
The solution was to stop the flooding by depressing the accelerator all the way to the floor, and crank the engine till the excess gas was used up, or open the choke and wait for it to evaporate. Gasoline engine technology is not the point here. The point is this: What got us into this economic mess? TOO MUCH MONEY INSERTED INTO AN ECONOMY by the Federal Reserve. Just like the engine being flooded with too much gas, the solution is to cut off the gas.
The Federal Reserve under Alan Greenspan flooded America with easy money, easy mortgages, and easy credit. The result was bad credit, bad mortgages, and everything being over-priced. Pouring more gas into a flooded carburetor, guaranteed the problem would be made much worse. Cutting off the gas would be the solution. Pouring $2 trillion, and god only knows how much more into the economy, is like pouring gas into a flooded carburetor. It will only make matters worse. Obama says he has consulted 20 of America’s best, most respected economists, and they say pour more gas (printing press dollars) into the flooded carburetor (economy), and the engine of America will start. NUTS! I wish Obama had called me.
The same exact thing was tried in the 1930’s, with huge government spending, and it took WW II to get us out of the depression. We’re already in two wars, and I certainly wouldn’t want us in a third one. How about this as a cure for the current depression?
(1) Get us OUT of both wars we’re now in, and bring home all the troops. Let ‘em solve their own problems over there. We’ve got huge ones here, and can no longer concern ourselves with theirs. This will save hundreds of billions a year, if not well over a trillion.
(2) Disband most federal bureaucracies, especially the Federal Reserve, and do it Quickly. The DOT, DOE, HUD — and the list is long — serve no useful purpose. The Department of Education educates no one, the Department of Transportation transports no one, etc. This will save hundreds of billions a year.
(3) Revert to the Constitution, which gives government no authorization to subsidize anything. This will put an end to all federal welfare, and save hundreds of billions a year.
(4) Get out of the UN, NATO, and any and all foreign entanglements, at a savings of more hundreds of billions, and get the UN out of America. Declare unconditional neutrality, and send no money or advice overseas at any time, or for any reason.
(5) Close our borders with Mexico, and see to it that they stay closed 100%. More savings.
(6) As illegals come up for police stops, free medical care, welfare, school enrollment etc., which are in the hundreds of thousands each year, instantly send them home.
(7) Renounce NAFTA, and all laws, which encourage, tax wise, the building of plants offshore, and resulting layoffs here. With the budget balanced, and no more Federal Reserve, recovery would be pretty quick.
Today, every single state is in terrible economic condition because of layoffs, bankruptcies, and low tax collections. They have to balance their budgets. The D.C. Gang doesn’t, and can print and print and print, which they are doing, and will continue to do with nary a smidgen of responsibility. We all pay for their lack of responsibility with every single dollar we own being reduced in purchasing power.
I can go on and on, but the point is this: The ones who harm us the most — other than the Congress who has gotten us into this with a hundred years of bad legislation — are bureaucrats, welfare recipients, and illegals, who would be out of work, and that’s great! Let D.C. turn itself into a ghost town, full of worthless, out of work ex-bureaucrats. Maybe they’d burn the place down and we could start over. Let the illegals go home by themselves, or by force when they are picked up. If states want to subsidize the poor, or illegal, they can, but not the federal government. All of these ideas would actually balance the budget, and make America strong again. None of these ideas have a Chinaman’s chance in hell of coming to pass. Not a single one. Obama will print up another trillion dollars in un-backed scrip, and we’ll have hyper-inflation, except in housing, because that has yet to reach bottom.
To fix a flooded engine, you cut off the gas. To fix an economy flooded with paper money, you cut off the paper money, not print trillions more! The economy is in such a sorry state, flooded with fake money, that the fed interest is close to zero. They’ll pay you NOTHING to store your scrip for you. Wise people have taken their scrip, and turned it into precious metals, which will always have value in any currency, or all by itself. An economy such as ours, which has been flooded with unbacked scrip, and ceased to run, as in a flooded engine, has to get itself out of the mess by ceasing the printing of scrip.
It will be very painful to millions of people who have not been acting wisely, or who have been depending on Uncle Sam for their sustenance. The pain of this depression is unimaginable today. We’re only at the very beginning of it. The only sensible way to get out of it, is to let it run its course, and at rock bottom, the economy will begin to rise like the Phoenix Bird.
If my ideas ever came into being, there would be wholesale riots by those cut off, and many millions would die. Wonderful! We are flooded with not only too much scrip, backed by nothing, but too much human trash, who have been flooded with handouts from the public treasury. Millions actually believe that government owes them a living, which is gross error, and extremely costly. They, like the scrip, are basically worthless, and they must be gotten rid of to make our economy healthy again. How to do it? I give up, or at least won’t write about it.
Regards,
Don Stott
Unfortunately this will never see the light of day. Common sense will never see the light of day...
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Will Obama's Stimulus Package Work?
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