Stand by for inflation to come roaring back...maybe stagflation, at that.
I think it's always a bad idea for the government to try to counter the business cycle like this...and at the end of the 1970's, so did most economists. Too bad that most of the ones working today aren't old enough to remember the discreditation of neoKeynesian fiscal policy. Those who fail to learn from history will soon be repeating it.
This was not why Republicans in Congress opposed it, but in any case they will still be able to evade blame for it when it comes a cropper. ( Which probably IS why they voted against it. )
__________________
Use the Shift key, people! Keyboard manufacturers everywhere are ineffably saddened when you ignore what they made just for you!
This was not why Republicans in Congress opposed it, but in any case they will still be able to evade blame for it when it comes a cropper. ( Which probably IS why they voted against it. )
You must be joking, Inq. You must know by now that everything that goes wrong with this will be blamed on republicans. After all, the press will tell us that "everything went wrong under George W Bush"
Stand by for inflation to come roaring back...maybe stagflation, at that.
I think it's always a bad idea for the government to try to counter the business cycle like this...and at the end of the 1970's, so did most economists. Too bad that most of the ones working today aren't old enough to remember the discreditation of neoKeynesian fiscal policy. Those who fail to learn from history will soon be repeating it.
This was not why Republicans in Congress opposed it, but in any case they will still be able to evade blame for it when it comes a cropper. ( Which probably IS why they voted against it. )
You keep railing against fiscal policy, but the monetary policy used by Greenspan and now Bernacke has been a complete failure as well. There was plenty of inflation over the past 20 years, but no one noticed because they've been looking in the wrong place. The inflation wasn't in consumer markets, it was in the investor markets.
__________________
- Wisdom is the knowledge of how much you don't know.
I think it's always a bad idea for the government to try to counter the business cycle like this...and at the end of the 1970's, so did most economists. Too bad that most of the ones working today aren't old enough to remember the discreditation of neoKeynesian fiscal policy. Those who fail to learn from history will soon be repeating it.
Hang on, wasn't the massive deficit spending of the 80's 'neoKeynsian'?
Or was it 'small government' that gave us the booms of the 1990s and early '00s?
Although the last wee while has made me wonder what is Japanese for schadenfreude.
$787 billion is a lot less than the $4 trillion debt from the previous administration tax cuts and Iraq war - under 25% - so let's call the numbers as they are.
Nice thing about economic policies, they're all failures
Now, whether Inq is right or wrong, he's certainly proven a Nixon statement wrong. Rep to first person who gets the reference
__________________
"In theory, theory and practice are the same, but in practice, theory and practice are different."
I like the suggestion one media type made: If the state's governor and/or its representatives don't want it/voted against it, then just don't take the money and let time prove who was right.
Personally, I love the suggestion of the high speed rail system between Los Angeles and Las Vegas. I don't live anywhere near either location but it's a good, economical test of whether or not a high speed rail system can be profitable. The land is cheap (in comparison to other locations) and this has been talked about for decades. More, there's a lot of traffic between the two locations and this should get many cars off the road.
I hope it works and that my own state will abandon it's "rails to trails" plans and make those "trails to rails" [They're spending millions converting former railroad tracks into jogging, biking, and walking trails. One location is planned to be 150 miles of asphalt for walking, biking, and skateboarding.]
I suggest putting the trails overhead so traffic is not impacted and the jogging and biking can continue.
I'd love to have public transportation in my area and if it was available, I'd use it.
The fact no Republicans voted for it? (again, good or bad?)
Anything else connected to this you have thoughts on?
Brainstorm!
Assuming arguendo that a stimulus package is the right thing to do, I think that it should have (at least) the following characteristics:
·Be sufficiently large and fast as to make a real difference. Both in real economic terms and psychologically.
Be fundamentally fair. The stimulus should not reward bad people and bad corporations at the expense of those who were trying to do it right. People who assumed unreasonably high risk should feel that pain and not receive help not available to people who didn't assume those high risk levels.
Addresses key issues:
oJob Loss oDebt burden oDeclining value—particularly in houses oHuge trade imbalance with China, India, Middle East
Does not destabilize federal government
I had hoped that Obama's populist tenancies would tend to push him towards a plan that would at least try to achieve these goals, but I don't see that in what I have heard of the plan. (I will admit that I haven't read it either).
I don't think anybody knows if it is "big enough." The size is a shot in the dark which is about all one can do. I don't care if it is too big, if it is fair. My big concern here is that as a projects bill, most on the impact probably won't hit until 2010-2012 when I think it really needs to hit between now and July-August to achieve the goals.
Some of the project-oriented funds are things that everybody will benefit from and thus fair, others are arguably pork. Everything that I have heard as being "bail-out" money flunks the fundamentally fair test.
Some of the money will help with job loss--at least in the longer term, but primarily because it gives money directly to support the job, not because it creates an economic environment where people are gainfully employed.
Recovery, if it can happen at all, will depend on the public being willing and able to spend. Right now, there is a collective understanding that the vast majority of American are too deeply in debt and the way that they, correctly, are addressing that debt is by cutting back on their spending. However, cutting spending reduces jobs which creates a feedback loop to make it even more imperative that we address debt. Providing money to prop up the banking industry doesn't address debt--it transfers the bad loan to someone else. Much of the impact of both the Bush and Obama plans simply lets foreign investors recoup some of their losses.
As a "Let's spend a bunch of money that we couldn't under Bush" bill, it is probably exactly what the Democrats wanted. As a stimulus package, I see almost nothing in it that will help.
Compare what they came up with to the simpliest stimulus package that they could have done: $2,500 cash distribution to every American--the same amount of money.
--The money could hit the street between now and August using the same distribution that was used last year.
--It would be about as fair as possible: those who are in way too deep will still go under, but the average American could pay off about 1/2 of their outstanding unsecured debt which would make their overall debt load more managable and increase the likelihood that the banks would get their money. It is even "progressive" in that it helps the poor proportionally more than the rich. Those who have been very conservative in their debt over the years get a bonus.
--It addresses debt. It helps with job loss. The inflationary effect of throwing that much money into the system will help support housing prices. While we might see some benefit in foreign trade because inflation will impact currency exchange rates, there is more needed here.
--The impact on national debt is a wash. Both the Obama plan and a straight distribution are trading on the already strained federal finances.
__________________ --Be merciful to those who doubt. Jude 22.
There have been several suggestions here that pumping so much money into the economy will have inflationary results, but there is just one problem with that idea. The amount of money in this stimulus package is a drop in the bucket compared to the amount of money that has disappeared from the economy both in equity and available credit.
Let's be realistic, this package is less about stimulus and more about mitigating damages. We need to get plenty of money to the states, who are dealing with massive revenue shortfalls, to keep them from having massive layoffs. And we need to extend unemployment benefits to keep people afloat as well; that means less defaults and foreclosures (not that unemployment benefits are worth much).
This is a unique recession in that usually real estate values don't decline much, and property taxes are the foundation of most states revenue base, but now we have a decline in sales taxes, incomes taxes, AND property taxes.... the states are in big trouble.
__________________
- Wisdom is the knowledge of how much you don't know.
In times of recession or economic uncertainty, people tend to save money given in the form of a tax break, or use it to pay off debt. This does not help the economy.
"The American democracy will exist until the Congress realizes it can buy the People with the People's money."
-Alexis de Toqueville
There have been several suggestions here that pumping so much money into the economy will have inflationary results, but there is just one problem with that idea. The amount of money in this stimulus package is a drop in the bucket compared to the amount of money that has disappeared from the economy both in equity and available credit.
I will agree that we are currently in a deflationary mode for the reasons you note. The challenge will be to hit the right number. If the economy is actually stimulated, that is a lot of cash to sop up. If it isn't, there will be extreme pressure to do something more about it.
Quote:
Originally Posted by Hauptman
Let's be realistic, this package is less about stimulus and more about mitigating damages. We need to get plenty of money to the states, who are dealing with massive revenue shortfalls, to keep them from having massive layoffs. And we need to extend unemployment benefits to keep people afloat as well; that means less defaults and foreclosures (not that unemployment benefits are worth much).
This is a unique recession in that usually real estate values don't decline much, and property taxes are the foundation of most states revenue base, but now we have a decline in sales taxes, incomes taxes, AND property taxes.... the states are in big trouble.
So this whole exercise is not about fixing the broken pipe, just providing a lot of mops?
__________________ --Be merciful to those who doubt. Jude 22.
Assuming arguendo that a stimulus package is the right thing to do, I think that it should have (at least) the following characteristics:
·Be sufficiently large and fast as to make a real difference. Both in real economic terms and psychologically.
Be fundamentally fair. The stimulus should not reward bad people and bad corporations at the expense of those who were trying to do it right. People who assumed unreasonably high risk should feel that pain and not receive help not available to people who didn't assume those high risk levels.
Addresses key issues:
oJob Loss oDebt burden oDeclining value—particularly in houses oHuge trade imbalance with China, India, Middle East
Does not destabilize federal government
All fine and dandy, but the problem is that the goals are mutually impossible, or at least difficult to reconcile.
The time premium makes it quite difficult to weed out unexpected and unwanted consequences of any particular subpolicy. Also, congressmen who have the guts can hold out in order to extract more pork for their home district. That presents the administration with a dilemma: be principled and delay the whole thing dangerously long, or give in and see other congressmen start clamoring for pork to them?
Quote:
Originally Posted by dcmdale
I don't think anybody knows if it is "big enough." The size is a shot in the dark which is about all one can do. I don't care if it is too big, if it is fair. My big concern here is that as a projects bill, most on the impact probably won't hit until 2010-2012 when I think it really needs to hit between now and July-August to achieve the goals.
Some of the project-oriented funds are things that everybody will benefit from and thus fair, others are arguably pork. Everything that I have heard as being "bail-out" money flunks the fundamentally fair test.
Size: if no one knows for sure what is just right, why not quickly slap out a good-sized lump of money in the system, and hope for the best? If it is too little, rinse&repeat. If too much, increase base interest rates.
Pork: You tell the Detriot population and politicians that, and tell me afterwards how well that went over! I fully expect that the administration will have to grease the system with a significant amount of pork, and that is the way it is.
Quote:
Originally Posted by dcmdale
Compare what they came up with to the simpliest stimulus package that they could have done: $2,500 cash distribution to every American--the same amount of money.
--The money could hit the street between now and August using the same distribution that was used last year.
--It would be about as fair as possible: those who are in way too deep will still go under, but the average American could pay off about 1/2 of their outstanding unsecured debt which would make their overall debt load more managable and increase the likelihood that the banks would get their money. It is even "progressive" in that it helps the poor proportionally more than the rich. Those who have been very conservative in their debt over the years get a bonus.
--It addresses debt. It helps with job loss. The inflationary effect of throwing that much money into the system will help support housing prices. While we might see some benefit in foreign trade because inflation will impact currency exchange rates, there is more needed here.
--The impact on national debt is a wash. Both the Obama plan and a straight distribution are trading on the already strained federal finances.
Big problem with the 2500 bucks/person plan: No congressman can go home and tell his constituency that he wangled something special for them!
If americans getting be made politically palatable to the voters.
Have a nice time!
Peter Gustafsson
Yay! One year closer to my death! I have my 43rd birthday today.
In times of recession or economic uncertainty, people tend to save money given in the form of a tax break, or use it to pay off debt. This does not help the economy.
Actually, it does--particularly with respect to paying off debt--but it is muted in terms of initial impact. If you take a family of four and give them $10K that they apply to a credit card charging 32% interest, it is true that the economy will not get the full $10K immediate bump, but they are likely to see a sustained $3K+/year bump to reflect what they are not paying to the bank.
__________________ --Be merciful to those who doubt. Jude 22.
)
I have my 43rd birthday today.
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