Economic stimulus plan?

[Jeff Peachman]

I'm just wondering what everyones thoughts are on Obama's proposed economic stimulus plan. (See the latest video address at change.gov)

Now I do know more economics than the average guy (as in I've had 4 econ classes up to the 300 level) but I'm still not 100% sure this is the way to go. I know this is designed to stimulate more jobs, and large public works projects have improved the economy in the past, but is this a good idea when the federal deficit is so large?

[MSimon]

Actually government stimulus programs distort the market and don't create many jobs. They also create market uncertainty. No good for projects that take longer than 6 months. In addition they suck capital out of the private sector. Raising the cost of capital for business.

Here is some food for thought:

http://powerandcontrol.blogspot.com/200 ... ssion.html

How FDR turned a severe recession into a depression:

http://newsroom.ucla.edu/portal/ucla/FD ... elNum=5409

Short version - public works, enhancing union power, and government stimulus packages. Say. That sounds familiar.

[KitemanSA]

I'm just wondering what everyones thoughts are on Obama's proposed economic stimulus plan. (See the latest video address at change.gov)

Think of the "body economic". Ask yourself whether giving an addict another hit is a good idea. However you anwer, well, thats your answer!

[MSimon]

If the body has a deficiency disease then giving them another hit is a good idea.

[Jeff Peachman]

You could argue that world war II was a "public works" project, and the economy took off like crazy due to the war effort

[TallDave]

Jeff,

War is generally only good for the country making the bombs. The places where the bombs fall don't do as well economically. It's usually a net negative overall, because bombs don't provide economic return.

The effectiveness of stimulus depends on whether it tends to circumvent the markets (by gov't spending) or utilize them (via refunds). What's becoming more popular is to use free markets but in a way that redistributes wealth (i.e. tax "refunds" to people that pay no tax).

[Jeff Peachman]

So if the refunds go to the poor, are they more or less likely to put all that money back into the economy?

And I don't see how the proposed spending crowds out the economy if the money is going towards projects like building roads which the government is meant to pay for anyways.

[seedload]

Crazy thought.

How about rather than messing about experimenting with how best to put money back into the economy we try not taking it out of the economy in the first place.

[Aero]

Crazy thought.

How about rather than messing about experimenting with how best to put money back into the economy we try not taking it out of the economy in the first place.

Naw - That's a libertarian idea, never work. When politicians get the power to take our money they will take it, absolutely!

[Roger]

Dont like the source pf the jobs ? I don't see the markets being able to create jobs at this time.


While the markets are shedding jobs, what institution is capable of turning the corner on job losses? Is anyone else besides the government capable of creating jobs right now?

Who/what ever it is better get started job creating... or else the government will have to do it.

I'll come back next month to see if the environment has changed.

[MSimon]

Dont like the source pf the jobs ? I don't see the markets being able to create jobs at this time.

While the markets are shedding jobs, what institution is capable of turning the corner on job losses? Is anyone else besides the government capable of creating jobs right now?

Who/what ever it is better get started job creating... or else the government will have to do it.

I'll come back next month to see if the environment has changed.

Why yes Roger. Government jobs. And we will tax those still working in the private sector to pay for them. Or inflate our way out of the problem. Jimmy Carter II.

See me in 2 years when the cry is stagflation.

Roosevelt tried what you suggest. He turned a severe recession into a Great Depression with his policies. But every one loved him because he DID SOMETHING.

http://newsroom.ucla.edu/portal/ucla/FD ... elNum=5409

Me? I'd cut way back on corporate taxes in order to get business moving again. And cut government spending to avoid crowding the productive sector out of the economy. And I'd also stop the Fed from printing money.

I'd also lower taxes on the rich to attract more of them to this country.

The more of our economy the government controls through regulation, taxation, and nationalization the worse off we will be and the longer the misery will last. I am going to confidently predict a big turn over in Congress in 2010 and a new President in 2012 unless our President makes a pilgrimage to the U. Chicago economics Dept. and asks their advice. And takes it.

Job losses are good for an economy every now and then. It trims the fat and redeploys capital and labor to more productive enterprises.

http://pajamasmedia.com/edgelings/2008/ ... ed-to-die/

[Aero]

Me? I'd cut way back on corporate taxes in order to get business moving again. And cut government spending to avoid crowding the productive sector out of the economy. And I'd also stop the Fed from printing money.

That sure would be a miserable time. Cutting back on taxes can't work unless business is profitable. Now only a few sectors are profitable so there is not much to be gained there. If profits are zero, taxes owed are zero. There is also not so much to be lost by government by cutting taxes - but this situation is pretty bad. The way out is print and spend money and only government can do that. But in order to print money, government needs collateral, tax income. Of course the printed money will equate to inflation as some point down the road as it always does.

The infrastructure that the government jobs will repair and build is not a private sector duty so business cannot do it, but business commerce will benefit from it being done.

[hanelyp]

Taxes can make the difference between a business being profitable or not. Cut taxes and a business on the margin can become profitable. Raise taxes and the same business can be driven under.

[Aero]

Taxes can make the difference between a business being profitable or not. Cut taxes and a business on the margin can become profitable. Raise taxes and the same business can be driven under.

What taxes are you talking about? I assumed you were talking about Income taxes, which are paid on profits. If a business is not making a profit, it is not paying income taxes. If it is making a profit, there is still a percentage of the profit left, after taxes.

Maybe you are talking about the Unemployment tax fund, or the workman's disability compensation medical tax. If a business can't take care of its workers, well, these are not taxes to be cut. The problem is one of competition from states and countries where Unemployment compensation and Workman's disability insurance premium (tax) are not a legally established right of workers. That is justification for a tariff on these low cost products imported from those states and countries, in my opinion, because those taxes are significant and can hurt the business owner's bottom line when he is unable to stay competitive while covering them by raising prices. But to cut the unemployment tax means cutting the laid-off worker's unemployment check, or picking up the difference from the general fund, and cutting the disability insurance premium (tax) means kicking in the difference from the general fund so the doctor will be paid his fee, because someone injured on the job must be given medical care. -And history shows that not all employers will pay for it, except when forced to by law.

My information comes from talking to shop owners with a few to two dozen employees. I would actually appreciate information from someone who knows some details about these various taxes. But please state your credentials, Opinions are like ... well, every body has one.

[Jeff Peachman]

I just don't really like how the Ultra Rich can so easily pay less taxes than the average person (by percentage).

http://www.theconglomerate.org/2008/01/ ... -plan.html

You average person can't make a living off of capital gains, too much of their income is needed for their necessities to make those kind of investments.

I don't understand the argument that changing taxes to help the wealthy helps the economy. My thoughts were always that money needs to circulate through the economy for the economy to be healthy. The wealthy have a huge amount of assets that aren't constantly recirculated, just held on to, whereas the middle class spends a large percentage of its annual income and saves little.

If we help the middle class, won't the middle class have more money to purchase the products our corporations are putting out there?

BTW, I do see MSimons point about government jobs... it doesn't help the deficit much if our taxes are coming from jobs we used tax money to pay for in the first place...

(edited for spelling, grammar)