President Obama may have experienced his Walter Cronkite moment over the economy.
Responding to Cronkite’s reporting from Vietnam four decades ago that the only way to end the war was by negotiating with the North Vietnamese, President Lyndon Johnson was reported (though never confirmed) to have said, “If I’ve lost Cronkite, I’ve lost Middle America.”
Now President Obama appears to have “lost” New York Times liberal economic columnist Paul Krugman. Krugman, who enthusiastically supported the president’s redistributionist and stimulus plans, has bowed to the reality that they are not working. In a recent column titled “This is Not a Recovery,” Krugman took issue with the president and Vice President Joe Biden that we have experienced a summer of economic recovery. “Unfortunately, that’s not true,” he wrote. “This isn’t a recovery, in any sense that matters. And policymakers should be doing everything they can to change that fact.”
Krugman asked an essential question: “Why are people who know better sugarcoating economic reality? The answer, I’m sorry to say, is that it’s all about evading responsibility.”
It is that, and more. The administration is so locked into its left-wing, “tax, borrow and spend” ideology that it has become like someone trapped in a cult: unable to escape and endlessly repeating the same mantra.
In a speech last week to central bankers and economists in Jackson Hole, Wyo., Federal Reserve Chairman Ben Bernanke acknowledged the economy is fragile, especially in light of the government’s latest report, which showed the weakest quarterly growth in a year. He added that high unemployment poses a serious threat. Still, Bernanke tried to sound optimistic by forecasting some pickup in growth in 2011 and beyond.
Optimism not based on reality is false hope based on wishful thinking. One might as well ask a high-performance engine to run at peak level after several of its cylinders have been disabled. It is impossible, no matter how shiny the paint job.
An economy burdened with debt because of too much government spending, a health care law that will add new and unknown burdens, expiring tax cuts that will take more money from the private sector for government to waste and abuse, and a stock market unsure and thus unable to fuel the economic engine to propel us out of this recession, is not a “summer of recovery,” but a winter of discontent.
The solution is not a “Star Trek” approach in which we must go where no one has gone before. We know what works and what must be done. Social Security and Medicare must be reformed; government programs that have failed, or are obsolete, should be scrapped; military spending designed to enhance re-election prospects for some members of Congress, while doing nothing to improve the military, must be ended, and people should be asked to return to the attitude of previous generations that all of us, including government, must live within our means.
Writing in U.S. News & World Report, publisher Mort Zuckerman takes the Krugman view a step further by calling the administration he once supported “The Most Fiscally Irresponsible Government in U.S. History.”
Zuckerman writes: “People see the stimulus, fashioned and passed by Congress in such a hurry, as a metaphor for wasted money. They are highly critical about the lack of discipline among our political leaders. The question that naturally arises is how to forestall a long-term economic decline.”
The answer is for the Republicans, so eager and so likely to regain power in the House and possibly the Senate in the coming election, to expose the administration’s sugarcoating of reality and get out the bad-tasting medicine. The good news is that by swallowing fiscal responsibility, we will all be better off in the end. But can Republicans withstand and prevail over the Democratic demagoguery that will predictably be heaped on them? They’d better, or they don’t deserve to lead.
As Walter Cronkite used to say, “That’s the way it is.”
— Cal Thomas is a columnist for Tribune Media Services. tmseditors@tribune.com
Comments
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Moderateguy (anonymous) says…
"I believe that sometimes you gotta wreck the truck to get the insurance money to make the truck payment." - Larry the Cable Guy.
Apparently it's the main economic theory of those in Washington as well.
jonas_opines (anonymous) says…
I wonder, given that an economy is just a pattern mirage of people making individual decisions based on their personal information, to what extent the economy's trends are influenced by the saturation of media messages about the state of the economy.
jaywalker (anonymous) replies…
Quite so, I believe. And we have the "Gulf oil disaster" as a blueprint. The media goes ape, posits doom and gloom for all coastal areas around the Gulf, and tourist business goes in the toilet. The 24 hr news cycle machine can be downright destructive.
scott3460 (anonymous) replies…
But it's a "liberal" media, so why would they do that?
Or is there perhaps something to those of us who recognize a "corporate" bias in today's mainstream media?
jaywalker (anonymous) replies…
First of all, whether the media is liberal or conservative has no part in this discussion. The subject is simply the influence media can play in things like economic trends.
Second, while you're busy patting yourself on the back for being one of the "enlightened ones" that supposedly recognizes something that doesn't exist, ask yourself what sense it would make for corporate interests to ruin their own business around the Gulf. I mean, seriously? You wanna prove evidence of corporate bias in media by claiming they willingly shot themselves in the foot? Yeah, not so much.
scott3460 (anonymous) replies…
Sorry to see the attitude, jay, you are usually more reasonable.
Business interests, who increasingly consolidate control the nation's media in to fewer and fewer hands, have quite a large motivation in the doom and gloom they are helping to create. If they are able to elect right wing majorities to the Congress they stand to enjoy more business friendly government. The short term pain may be seen as worth the investment in order to gain the larger prize. So, yes, whether right wing forces have compromised a free and independent press and are using their tools to issue right wing propaganda has a pretty big part in the discussion.
jaywalker (anonymous) replies…
More reasonable? You want me to acknowledge a massive "right wing conspiracy" that is distributing propoganda and misinformation in order to cost the public, the government, but primarily themselves billions of dollars, keep the country in a state of fear and anxiety, and the world economy in a state of flux............just to win some seats back???????????????????????
Um, yeah, that sounds 'reasonable', allrightythen.
thuja (anonymous) replies…
I wonder, given that a thread is just a pattern mirage of people making individual comments based on their personal reactions, to what extent the thread's trends are influenced by the saturation of repeated mantras about the state of Tom.
thuja (anonymous) replies…
It could be possible to know more about everything by not reading anything.
avoice (anonymous) replies…
This is a vast oversimplification. In relatively good but tight economic times, this theory may play out. In the current situation, a large number of people have no control over their means of financial support. Many have no job. Many have part-time jobs. Many who have fulltime jobs have not received a pay increase in 3 years, and some of those people have been forced to take pay decreases in order to keep their jobs. So no matter what the media say, good or bad, people are currently dealing with their individual situations, and a very large number find that no matter how interested in spending money or contributing to the tax base they may be, their limited incomes provide no possibility of making ends meet.
jafs (anonymous) replies…
I think people also respond to emotion, and the fear that things won't get better makes people save more and spend less.
Or vice-versa.
jonas_opines (anonymous) replies…
Something of an oversimplification, but in all times it's perfectly fair to suggest that the actions and decisions of those individuals higher in the power hierarchy will always have an effect on the lower. Vice versa too, but maybe not to the same extent.
In defense of my previous simplification, it's rather tedious to craft an economic treatise from an iPhone.
just_another_bozo_on_this_bus (anonymous) says…
Funny how Cal spends so much time quoting Krugman without saying what Krugman thinks the solution is-- and it's not the "solution" Cal would like.
Liberty_One (anonymous) replies…
Yup. Krugman thinks the stimulus should have been bigger and that the Fed shouldn't worry about silly things like inflation.
Orwell (anonymous) replies…
Exactly. Old Cal's brain cranks this out: "I say Obama's bad because he did too much to stave off a second Great Depression. And I know I'm right because even Paul Krugman criticizes Obama – for not doing enough."
Logic fail.
merrill (anonymous) says…
Best to go read the article rather than assume Cal Thomas was correct in his assumption or interpretation.
Second Stimulus
Op-Ed Contributor
Why We Need a Second Stimulus
By laura tyson
Published: August 28, 2010
OUR national debate about fiscal policy has become skewed, with far too much focus on the deficit and far too little on unemployment. There is too much worry about the size of government, and too little appreciation for how stimulus spending has helped stabilize the economy and how more of the right kind of government spending could boost job creation and economic growth. By focusing on the wrong things, we are in serious danger of failing to do the right things to help the economy recover from its worst labor market crisis since the Great Depression.
The primary cause of the labor market crisis is a collapse in private demand — the same problem that bedeviled the economy in the 1930s. In the wake of the financial shocks at the end of 2008, spending by American households and businesses plummeted, and companies responded by curbing production and shedding workers. By late 2009, in response to unprecedented fiscal and monetary stimulus, household and business spending began to recover. But by the second quarter of this year, economic growth had slowed to 1.6 percent, according to a government estimate issued Friday. Clearly, the pace of recovery is far slower than what is needed to restore the millions of jobs that have been lost.
This gap is starkly reflected by the 23 million Americans who are looking for full-time jobs and the millions more who have left the labor force because they could not find one.
The situation would be even worse without the $787 billion fiscal stimulus package passed in 2009. The conventional wisdom about the stimulus package is wrong: it has not failed. It is working as intended.
Its spending increases and tax cuts have boosted demand and added about three million more jobs than the economy otherwise would have. Without it, the unemployment rate would be about 11.5 percent. Because about 36 percent of the money remains to be spent, more jobs will be created — about 500,000 by the end of the year.
Two forms of spending with the biggest and quickest bang for the buck are unemployment benefits and aid to state governments. The federal government should pledge generous financing increases for both programs through 2011.
dinoman (anonymous) says…
to whome it may concern... im 37 work one job at 12 plus an hour i work at least 20 hours extra each week at 12 dollars an hour.. i am single i pay one of the highest tax rates period .. i am paying into a system that i believe won't be here when im 65 yet i have no .. absolutly no recorse but to pay to the system that i have no faith in... if i dont pay i go to jail ... i ask you when does democracy end and comunissm begin.. my vote doesnt matter... i dont have money so nobody listens.. twenty years ago i stood up in highschool and said that the gulf war was my generations vietmam i was laughed out of class.. now where are we.... again i pay and pay and yet nothing gets done power goes on and off .... i pay three times as much in gas as in 1990 but we still pay clothing and food are going through the roof but we still pay... medical bills are all but unatainable except by the rich... where are we left... we the common people are left footing the bill ... and time marches on the government still gets paid insurance rife with blatent steeling goes on oil companys dump millions of barrells of oil in the gulf and we still pay .... the machine doesnt know how to fix itself... the machine needs replaced.... all broken machines are replaced.. this one is no different.. in a company if it dosnt make money it gets thrown out not proped up to cost another trillion dollars.... how can a 37 year old farm boy see this and all the high paid high faluting idiots in washington not see this .......... simple............MONEY....
This comment was removed by the site staff for violation of the usage agreement.
Liberty275 (anonymous) replies…
Granted it was rambling, but not incoherent.
He works 60 hours a week for $12 an hour and that puts him in a high tax bracket. That's horrendous. He should barely pay anything at that level of income.
He doesn't trust that SS/Medicare will exist when he is old enough to qualify, but he still pays for it because tax evasion is illegal. That's a legit concern.
He contended that the gulf war was another Vietnam and got laughed at.
He say's there has been lots of inflation and prices are too high.
He's a middle-aged farm boy that wants to replace the political machine of America.
He's basically screwed like the rest of us and decided to vent without proper capitalization or punctuation.
dinoman (anonymous) replies…
ye my spelling isnt right and my punctation isnt also but so are alot of usa citizens... that dosn't mean i dont have legit concerns or a life worth of experiences listen to the common man they work for you.... lincoln was a farm boy also he became a lawyer and pres... its the idea that counts...
JJE007 (anonymous) replies…
That's a rather cruel response to a seemingly heartfelt philippic.
vertigo (Jesse Crittenden) replies…
Apparently no one has seen the movie Happy Gilmore.
Don't get your panties in a bunch, Nancy.
Iwetmypants (anonymous) replies…
Dino, your argument is well stated and in my opinion right on point. If you don't know by now you will be decended upon by idiots. The liberal crazies that troll LJW are mostly drunks and bugger eaters who live in there Moms basement. These people will never argue reason or stay on topic they will mention you spelling. They will call you stupid. They simply refuse to think or apply logic.
I am in agreement, this country is owned by the people with big money. Money is power in America.. Working folks like you and me are dying out and have lost our voice. I encourage to continue the fight, what else is there to do?
merrill (anonymous) says…
Second Stimulus
Con't
Op-Ed Contributor
Why We Need a Second Stimulus
By laura tyson
Published: August 28, 2010
By next year, the stimulus will end, and the flip from fiscal support to fiscal contraction could shave one to two percentage points off the growth rate at a time when the unemployment rate is still well above 9 percent. Under these circumstances, the economic case for additional government spending and tax relief is compelling. Sadly, polls indicate that the political case is not.
Two forms of spending with the biggest and quickest bang for the buck are unemployment benefits and aid to state governments. The federal government should pledge generous financing increases for both programs through 2011.
Federal aid to the states is especially important because they finance education. Although the jobs crisis is primarily a crisis of demand, it also reflects a mismatch between the education of the work force and the education required for jobs in today’s economy. Consider how the unemployment rate varies by education level: it’s more than 14 percent for those without a high school degree, under 10 percent for those with one, only about 5 percent for those with a college degree and even lower for those with advanced degrees. The supply of college graduates is not keeping pace with demand. Therefore, more investment in education could reduce both the cyclical unemployment rate, as more Americans stay in school, and the structural unemployment rate, as they graduate into the job market.
An increase in government investment in roads, airports and other kinds of public infrastructure would be cost-effective, too, as measured by the number of jobs created per dollar of spending. And it would help reduce the road congestion, airport delays and freight bottlenecks that reduce productivity and make the United States a less attractive place to do business. The American Society of Engineers has identified more than $2.2 trillion in public infrastructure needs nationwide, and a 2008 study by the Congressional Budget Office found that, on strict cost-benefit grounds, it would make sense to increase annual spending on transportation projects alone by 74 percent.
Over the next five years, the federal government should work with state and local governments and the private sector to finance $1 trillion worth of additional investment in infrastructure. It should extend the Build America Bonds stimulus program, which in the past year has helped states finance $120 billion in infrastructure improvement.
More on this story
http://www.nytimes.com/2010/08/29/opi...
matchbox81 (anonymous) says…
What Cal doesn't point out, is that Krugman's frustration with the Obama administration has to do with the government not doing enough stimulous spending, and being cowed by the Republicans into thinking that deficit reduction is more important than priming the economy. Roughly, the amount of stimulous should be the difference between what the econony is actually producing, and what the economy is capable of producing, based on the number of workers and the usual unemployment rate. Republican's (and some swing-state Democrats) balked at this figure, and the eventual stimulous was much lower than needed. As a result, our economy is still anemic.
Liberty_One (anonymous) replies…
"stimulous was much lower than needed. As a result, our economy is still anemic."
If the largest stimulus spending bill in the history of mankind wasn't enough, maybe it's a bad plan?
jafs (anonymous) replies…
Or maybe it was too small.
Either conclusion is possible.
Liberty_One (anonymous) replies…
"Or maybe it was too small. Either conclusion is possible."
Yup, the largest stimulus bill in the history of mankind might have been too small. Are you insane?
"Or targeted incorrectly."
Nope. Either the theory is right or wrong, and according to the theory it doesn't matter how it's spent. According to Keynes it's the aggregate that matters, not any particular sector. Paying people to dig holes and fill them back in is supposed to work as well.
jafs (anonymous) replies…
Do you think Paul Krugman is insane?
Liberty_One (anonymous) replies…
Yes, Krugman is a nut. He advocated FOR creating a housing bubble back in 2002:
"Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble."
http://www.nytimes.com/2002/08/02/opi...
Do you really think we should follow this guy's advice?
jafs (anonymous) replies…
The context of that quote in that story makes it clear that he is not advocating that at all.
He is, in fact, criticizing what he sees as over-optimism about something like a new housing bubble preventing more of a recession.
And, he's a Nobel Prize winning economist - seems like he might know some useful things to me.
Liberty_One (anonymous) replies…
"To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble."
The context makes it pretty clear that is what is advocating.
"he's a Nobel Prize winning economist"
And Obama won a Nobel Prize for being president for a couple weeks.
Krugman is invested in Keynesianism. There's no way he can admit he's wrong, so what does he have to do? Claim it wasn't enough. And again, if the biggest stimulus bill in the history of mankind wasn't enough to help AT ALL, then more isn't the cure.
jafs (anonymous) replies…
I read the whole article.
And I understood the tone of his comments.
You're misrepresenting him, because you disagree with his general approach.
I have no dog in the fight - I'm not a strongly ideological economist of any sort.
But I think you're wrong about the targeting being irrelevant. For example if we give big banks money based on the assumption that they will increase their lending, and thus circulate money into the economy (as we did), if they don't do so, the money doesn't circulate.
If we gave money instead to people who used it to buy things they needed, then the money would in fact circulate. Given my understanding that circulation is the idea behind stimulus spending, the second scenario will work better and make more sense than the first.
One reason I would like to have seen some serious requirements attached to any bailout money given to large banks, insurance companies, etc.
Liberty_One (anonymous) replies…
As far as Krugman, it's not outside his ideological beliefs. He advocates for more stimulus and more action from the fed constantly. Regardless, stimulus money was spent in many ways, shoring up states with shortfalls, tax breaks, public works etc. The TARP bailout went to the banks, but I don't think the a lot of the stimulus money did.
The problem is with this whole idea that stimulus spending causes money to "circulate." It ignores the fact that the money has to come from somewhere, and that the negative consequences from that action are at the very least offsetting of any positives. For example:
"If we gave money instead to people who used it to buy things they needed, then the money would in fact circulate"
But what happens to the people "we" took the money from?
jafs (anonymous) replies…
It depends on who they are, and what they were doing (or not doing) with the money, and what consequences come from the change.
Folks who are making millions or billions/yr probably won't be hurt in any significant way if they pay a little more in taxes.
I'm not sure how you can claim that negative consequences are at least offsetting of positive ones without more detailed analysis.
And, money always comes from somewhere else - the private sector is no different in that regard - if someone spends something on one item, they can't spend it on another.
Liberty_One (anonymous) replies…
"Folks who are making millions or billions/yr probably won't be hurt in any significant way if they pay a little more in taxes."
Well, it's not about whether they individually will be hurt or not, but whether the economy as a whole will be. Here's the problem with your statement, you assume that if we raise taxes on the rich they'll grumble about it and then begrudgingly pay the taxes and move on with their lives. This ignores the consequences on human behavior. Wealthy people work for their income too, and if taxes go up, what's the point of working so much? Their labor becomes less valuable to them than leisure time, so they work less. These are the most productive people. Highly skilled doctors making $400,000 a year have no incentive to work longer hours if the extra pay is being severely reduced because of taxation. If you are a businessman, why spend money to expand your business and hire more staff if the potential gains are going to be severely reduced by your tax burden, yet your potential losses are still 100% gone. If you make a dollar, you only get to keep fifty cents, but if you lose a dollar, you lose the whole dollar. Why take risks? Why work extra? Why try to earn more if the reward is substantially less? These policies have unintended consequences that are negative.
So not only do we have the negative consequences of that money being taken from some people, but those people end up working less and being less productive; yet another negative consequence.
Another negative consequence is that the government spending is a misallocation of that money. Had it stayed in the private sector it would have gone towards the most profitable use in investment or the most desirable goods or services in consumption. The government spends money on bridges to no where and schools that don't have enough teachers to fill them. Look at a map of southern Illinois, which is as unpopulated as western Kansas, and ask yourself if they really need all those highways or is that just a result of Illinois having a lot of votes in Congress? Spending money on things we don't need makes us poorer, not wealthier.
"I'm not sure how you can claim that negative consequences are at least offsetting of positive ones without more detailed analysis."
It's at least as offsetting because it's dollar for dollar. One dollar spent by the government means a dollar taken from somewhere else. The government cannot spend the money more efficiently than the market so it is at least as negative as it could be positive. Central planning does not work because the government has no method of calculation. A private entrepreneur predicts his costs and revenues, and then asks if the project will be profitable or not. The government cannot calculate this because profit and loss never come into the equation.
jafs (anonymous) replies…
Some wealthy people work hard for their money, others don't.
CEO's making several million/year aren't going to do less because of slightly higher taxes, in my opinion. An interesting article I read a little while ago concluded that CEO's who try to do more actually wind up hurting their companies - so the better ones do less.
They may, in fact, try to evade those taxes instead.
Also, you claim "severly reduced" income - I mentioned "slightly higher" taxes.
I agree that the government could and should spend money more wisely.
The government, and others, do calculate how money spent circulates, and give multiplier figures, don't they? I think food stamps have the highest one.
And, again, the private sector is the same - at any given moment, a dollar spent here is not spent there.
Liberty_One (anonymous) replies…
"And, again, the private sector is the same - at any given moment, a dollar spent here is not spent there."
I don't understand your point. My point is that money government spends doesn't magically come out of no where--it comes from somewhere and there are negative consequences that offset any positive consequences. Of course if you buy a garden hose from Wal-Mart that's money that Target doesn't get. That's the opportunity cost. My point is that talking about government stimulus stimulating the economy has to be tempered by pointing out the opportunity cost. There's no free lunch and there's negative consequences that have to be accounted for. What is your point?
"The government, and others, do calculate how money spent circulates, and give multiplier figures, don't they?"
Sure, but if they don't explain how much it will cost the economy to take that money from wherever they get it, they are only telling half the story.
"Also, you claim "severly reduced" income - I mentioned "slightly higher" taxes."
I was talking about income taxes in general. 40%, 45%, 50% or however much is a huge chunk of your income. In the past the highest rates have been as high as 90%. Imagine how much that would hurt the economy.
"Some wealthy people work hard for their money, others don't."
Purely subjective and irrelevant. How hard one works doesn't matter, it's how productive one is.
"CEO's....."
Really? Most executive managers are highly skilled and experienced. They are paid for the knowledge and skill in predicting the market and organizing a business. Regardless, if you think CEOs of gigantic corporations are representative of the wealthy in the US you are mistaken. Most millionaires own and run their own business. In addition, most highly paid workers are people like doctors, attorneys, engineers, pilots etc. In fact, the average surgeon makes more money than the average CEO.
Thus you didn't address my point at all and instead brought out the stereotypical whipping boy of the CEO who gets paid with $20 million in stock options. Why should the business owner risk money on expanding his business when if he wins he only keeps fifty cents on the dollar, but if he loses he loses 100%? Why should a surgeon work more hours instead of playing golf when he only gets to keep half that extra money?
Can you see how income taxation in general is a huge drag on our economy, and raising it will only make it worse?
jafs (anonymous) replies…
My point about the private sector is that you seem to think private sector spending is great without any negative consequences, but that public spending is terrible, with them.
The money always comes from somewhere, and is not used for purposes other than the ones it's used for, regardless of whether it is in the private or public sector. So if someone buys a fancy luxury car for $300,000, that's $300,000 that's not being used to start or expand a business, etc. in exactly the same way that government spending works.
Clinton only raised the marginal tax rate, and it wasn't that high. So nobody's talking about taxing people 50% of their total income.
You mean those skilled and productive auto company CEO's, or the ones at the banks, or insurance companies, or investment bankers??
I don't believe that you're correct about surgeons vs. CEO's - any source for that claim? Average CEO salaries in large companies run about $7million/year.
Why should anyone go into business at all if they're taxed at all? They do, don't they? And, I question the assumption that people work only for the compensation - many people work for other reasons as well. And, if the surgeon doesn't want to work more, then there will be room in the field for another one as well - maybe it would be better, in fact, to have two surgeons who work a moderate amount (overwork and stress may cause doctors to be less careful).
I don't agree with your premise - I think that at some point, outrageously high taxation may in fact act as you suggest. But I'm not suggesting anything that drastic.
Liberty_One (anonymous) replies…
"My point about the private sector is that you seem to think private sector spending is great without any negative consequences, but that public spending is terrible, with them.'
Like I said above, Wal-Mart's gain is Target's loss. I've never said that private spending was somehow a net positive. Consumption is NOT the way to increase our wealth, neither public NOR private spending will increase prosperity.
"So if someone buys a fancy luxury car for $300,000, that's $300,000 that's not being used to start or expand a business, etc. in exactly the same way that government spending works."
Exactly my point. Spending does not increase overall wealth or create any multiplier effects, neither public nor private spending. Production and increases in supply increase our wealth. If we make more goods and services then we are wealthier.
So again, private spending is neutral--it does not increase wealth. My other point was that government spending is worse than neutral because we buy things that are not needed like bridges to no where and thus this is like throwing money down a well. In addition higher levels of taxation discourage people from working to earn more since the reward is less than it otherwise would be.
"any source for that claim? "
From the U.S. Department of Labor website:
Surgeon: $219,770
http://www.bls.gov/oes/current/oes291...
Chief Executive Officer: $167,280
http://www.bls.gov/oes/current/oes111...
I was surprised to see this one on the list:
Astronomer: $96,780
"So nobody's talking about taxing people 50% of their total income."
For someone in the top Fed tax bracket: Federal Income tax (39.6% if Bush tax cuts expire) + State income tax (Kansas = 6.45% (New Jersey = 10.75% for highest bracket)) + Social Security tax (6.2% on first $106,800, 12.4% for self-employed) + Medicare tax (1.45%, 2.9% for self-employed) = Max tax rate of 48.95% + 12.4% on the first $106,800 for the self-employed (Min tax rate of 47.5% + 6.2% on the first $106,800 on everyone else). People are *already* getting taxed on half their income, and that's not counting sales taxes, property taxes, estate taxes (coming back next year) and all the other taxes we pay. You might be talking about a 5% increase or so, but that would put people in the position where for every extra dollar they earn they keep less than half right from the get-go.
"Why should anyone go into business at all if they're taxed at all?"
They go to make money, but after they start hitting the top tax brackets, what's the motivation to try and make more? Why not play golf or coach little league instead of working on expanding operations or buying another business when you only get to keep half if you win, and you lose 100% if you lose?
jafs (anonymous) replies…
So the $300,000 would be better spent on investing in a business, even if the government spent it that way, in your view?
That's my point, that it's more important how the money is spent than which sector is spending it.
I believe the 39.6 is only the marginal rate, and doesn't apply to all of one's income. And, we're certainly not paying 1/2 of our income now in taxes.
We're paying about 1/4, it seems to me, and would only pay about $100/month more if the breaks expired on everyone, which would only bring it up to a little more than 1/4.
And, we usually get a small refund on our federal return each year.
Adding in sales and property tax brings it up, of course. And I completely agree that the government should be much more careful about spending our money - I'm sure there are many stupid and wasteful things they spend it on - and I've advocated for reducing/eliminating them - for example, the CBO says we're losing over $100 billion/yr to fraud and wasteful spending.
You know, my wife and I went to Canada some years back, and it was very interesting - people seemed much less stressed out, and the average person seemed to be doing ok - there were more middle-level cars - fewer high or low level ones. When we asked someone what percentage of their income was paid in taxes, they didn't even know - it didn't seem to be an issue.
A couple, both of whom were doctors, and had practiced in both countries, summed up the difference with "If you have a lot of money, you can do better in America. But if not, you can do better here."
Liberty_One (anonymous) replies…
"That's my point, that it's more important how the money is spent than which sector is spending it."
Well that's actually my point. The government cannot calculate how to spend the money. When a private business looks to spend money, how do they decide whether to build another store, invest in a money market account, spend it on advertising etc.? They predict costs and revenues and see which choice would be most profitable. The best entrepreneurs are the ones that can predict the more accurately. How does the government decide to spend money? By which state's senators need to be bought off to get their vote? By giving union-based industries extra work? The government doesn't calculate on profit and loss to see which project is the most needed. It spends based on political needs, as in the need to buy votes. Even if the government wasn't corrupt, how can they calculate whether to build another school or bridge, hire more teachers, or build a sports stadium? Every time the government miscalculates that's like throwing money down a hole. When a private entrepreneur miscalculates, he eventually runs out of money. The government just takes more. There's no correcting mechanism for bad decisions. And what's worse is that the mistakes aren't noticed because the government never runs out of other people's money.
If you think it's important how money is spent then the government should be the last place we should look for direction.
jafs (anonymous) replies…
That's interesting.
I think you idealize the private sector a bit - there's plenty of stupidity, greed, and corruption there as well.
And, it's true the government may not use a simple analysis of the market the way a private entrepreneur would, but they can make different kinds of analyses.
In fact, removed from the need to make a profit, they could make better decisions which benefit a wider group of people.
For example, they could use our $300,000 to make low or no-interest loans to start up small businesses. Those businesses would then have smaller repayments, and thus might be more likely to succeed.
And, as long as they pay the money back, we don't lose any money.
Also, the corrective mechanism is our voting system - when people feel the government is making bad decisions, they vote for different candidates.
And, of course, when these massive banks, etc. made poor decisions, they simply went to the government for help - they didn't accept the consequences of their stupidity and greed.
Liberty_One (anonymous) replies…
"I think you idealize the private sector a bit - there's plenty of stupidity, greed, and corruption there as well."
Absolutely there's plenty, but if I make a stupid decision, like starting a cupcake store in Lawrence, eventually I run out of money. Someone else buys the assets and takes over the lease and turns it into something more profitable. The government just keeps funding things with other people's money.
"In fact, removed from the need to make a profit, they could make better decisions which benefit a wider group of people."
Well, the problem with that is I don't see any objective way to make those decisions. Profit and loss is completely objective. I may think my cupcake store is a great idea, but if it's not profitable, then objectively it isn't. Remember, profit indicates that people demand the product or service being offered. We live in a free society, so if you don't offer something that people are willing to pay for, you won't make any profit.
"Also, the corrective mechanism is our voting system"
That's an awful blunt mechanism. If the government is subsidizing agriculture too much, how would the public know? All they would know is that food is cheap and that other things are more expensive. Plus we vote for the candidate and not the single issue--Brownback, for example, is against the health care bill but in favor of farm subsidies. Whereas the market "decides" each issue individually, when we vote we have to decide on the general position of the candidate.
"For example, they could use our $300,000 to make low or no-interest loans to start up small businesses. Those businesses would then have smaller repayments, and thus might be more likely to succeed."
But those were businesses that couldn't get funding on the free market or their profits weren't high enough to cover regular interest rates. This is the cupcake store in Lawrence, which will eventually go out of business and lay off its workers. All we'd be doing is sowing the seeds of the next unemployment crisis. My cupcake store is taking up capital assets and commercial real estate that could have been used by a more profitable business which doesn't need government help, and thus won't have to lay of a bunch off employees eventually.
jafs (anonymous) replies…
You have some good points.
The last one, though, I think is not quite correct:
Let's say we want to start a small business - we figure we can cover our expenses, and pay ourselves and any employees a reasonable wage, and pay back the no-interest loan. Then we'll be fine - the business will succeed, be able to provide our goods/services at a reasonable cost, and pay off the loan. Sounds like a win-win situation to me.
But if we had to pay off a 5% interest loan, we wouldn't make enough without gouging our customers or paying employees poorly.
You know, when the Oread Inn was proposed, the neighborhood and the city wanted it to be a bit smaller - I believe 1 floor less. But the developers said they wouldn't be able to make enough profit that way for their investors - it would have been profitable, but not enough - 5% instead of 8%, or something like that. So the city caved, and let them build a taller building.
If the government invests, it doesn't need to make that extra 3% profit, so everyone would have been happier.
Liberty_One (anonymous) replies…
Well, that's a tough one to answer and a complete answer would take a long time. In short, prices convey information. For example, rising oil consumption combined with decreasing supply result in rising prices. Rising prices tell us information. We do we do then? We buy fuel-efficient cars, or move closer to work etc. Now let's say the government decided to artificially lower the price of oil by buying up a whole lot and then selling it for half-price. That new price would not accurately convey the information on what really is going on. People would buy gas-guzzling cars and move to the suburbs because the price is telling them that's a good idea. So people would base their actions on a price that's telling them false information. We would be consuming way too much and the supply would suddenly run extremely short, and then we'd have a disaster since we're so invested already.
Interest rates are prices too--the price of borrowing money. This is where it gets too complicated to explain briefly, so you'll have to take my word that interest rates are prices that convey information just like the prices of other things.
So, if we push interest rates artificially low, then that will send false information to the market. You say our business can't be successful at regular rates, but if we could get a low interest loan it could be. That's certainly possible. But think about this--that's also true for every other proposed business at the margin. You'd have a lot of people opening up businesses that otherwise couldn't have. Sounds great right? Lots of new businesses, unemployment goes down and the economy grows. The boom is on.
But here's where we go wrong--the market rate of interest was conveying information. Specifically the future amount of spending. If the interest rate was high, that means low increases in future spending. Low interest rates mean future spending will increase a lot. Thus because interest rates have been artificially lowered, everybody built new businesses on the hopes that there would be enough customers to support them, but there's not enough spending to support them all. Thus when reality sets in, all these businesses fail at the same time and lay off all their employees.
So these low-interest loans only create a boom-bust cycle. Yes, they would appear to help in the short term, but they are financing businesses that are doomed to fail when reality catches up. We would only be sowing the seeds for the next recession. Unfortunately this is exactly what the government is doing right now--artificially lowering interest rates to try and re-inflate the boom.
jafs (anonymous) replies…
But wouldn't a solution be for people to simply be more realistic in their projections?
Then we wouldn't have too many businesses.
I mean, lots of people understand that there aren't unlimited customers in the market.
In fact, it could and should be part of the approval of such loans - that the businesses don't have unrealistic expectations.
jafs (anonymous) replies…
And, the analogy with oil would be better if the government bought it and sold it for the same price, not half price.
Then it wouldn't have such drastic consequences.
jafs (anonymous) replies…
For example, just to make the math easy, let's assume that a business getting a commercial loan has to charge twice as much for their products.
That would mean that the market could support one of those or two of the government funded businesses.
Assuming that the first business would succeed, of course.
So we'd have twice as many people employed, and two business owners, etc.
Sounds twice as good.
Liberty_One (anonymous) replies…
"And, the analogy with oil would be better if the government bought it and sold it for the same price, not half price. Then it wouldn't have such drastic consequences."
But you're wanting to offer low interest loans. If the market rate is 6% and your loan is 3% then that's half price. And the consequences are very drastic.
"But wouldn't a solution be for people to simply be more realistic in their projections?"
The problem isn't unrealistic projections, it's bad information. The low interest rates are conveying false information about the supply of loanable funds. When we see one bank fail, it was likely because it was run poorly. When we see the entire banking industry fail simultaneously, all making the same mistakes, is it because they were all run poorly the exact same way or because they all had bad information that lead them all to the same incorrect decisions?
"That would mean that the market could support one of those or two of the government funded businesses."
That's the thing, the rate of interest indicates what the market can support. It is the price of borrowing money which is based on the supply and demand of loanable funds. If the market can only support one, then it can only support one. Giving low interest loans only means we can *fund* two stores but that is conveying false information. The future customers won't be spending enough to support two. If the market can only support one, then it can only support one.
Prices mean something--they convey information. Artificially changing prices does not change the reality of the information they would have conveyed. The point of the oil example was that even though the price would appear to have gone down, the reality of diminishing supply did not change. You can lower interest rates, but the reality about the information that caused those interest rates to be where they were does not change. Just like there wasn't an abundance of oil that was keeping prices low, there is not an abundance of future customers that will support these businesses.
jafs (anonymous) replies…
But that analysis leaves out the fact that the businesses with lower repayments on their loans can charge less for their products.
Let's say the government offers no-interest loans, and businesses which get those loans can charge 1/2 as much for their products as those which get commercial loans.
Then the same amount of consumer dollars can be spent at 2 businesses instead of 1.
So, instead of buying an ice-cream cone - I can buy an ice-cream cone at one store and something else at another store, for the same amount of money.
Then, 2 businesses can flourish, with all of the benefits that accrue, and consumers can get more goods for the same amount spent, which benefits them as well.
The only losers in the equation are the commercial lending banks - but if the businesses wouldn't be able to pay those loans back, they wouldn't have gotten them in the first place.
Sounds good to me all around.
Now, you'd have to have some way of making sure that you aren't using the government loans for businesses that would be able to get the private ones, of course. That would mess things up.
Liberty_One (anonymous) replies…
"Let's say the government offers no-interest loans, and businesses which get those loans can charge 1/2 as much for their products as those which get commercial loans."
If that were the case then both businesses would fail. If interest is such a large part of costs that you'd have to double your price to make a profit, how could you possibly compete with existing businesses that are far less leveraged?
Regardless, this isn't even a possibility. Other than banking, no industry has costs so low that interest makes up such a large part of the price. A gas station buys gas for $2.45 and sells it for $2.50. You can't fund two gas stations and expect them to charge half the price just because their loan payments are a little less. Bakery, hotel, auto repair garage are all going to have fixed and variable costs that aren't going to change because their loan payments are a little less.
In addition, if you fund more businesses, they are going to buy more capital goods, and as demand increases so will the price. So they are even more likely to fail because their predictions for costs were based on false information--the factors of production were bid up. Now the freezer for your ice cream parlor cost you more than you anticipated and you have to charge more.
Since the prices of the capital goods went up, what's going to happen? Next year they're going to make more, of course, because they believe, falsely, that the rising price indicates sustainable rising demand. But what happens when my cupcake store and your ice cream parlor goes out of business? Your freezer and my oven get sold to the highest bidder. But remember the freezer manufacturer and the oven manufacturer thought the increasing price meant more demand, so they made more this year? Well now much cheaper, slightly used ones are available, and they're left with a large warehouse full of unsold stuff. So we laid off our staff, and now the manufacturers have to lay off some of their staff too because they're cutting back on production.
By giving out these low or no-interest loans you've distorted the market down an unsustainable path. It sets off a chain of mistakes that all catch up to us simultaneously. This mistakes ripple through the economy and thus while the economy is correcting the structure of production people are getting laid off, businesses are closing or reducing production and we go into a recession.
Your idea actually is exactly what the government did after the 2001 recession. Interest rates were lowered to practically zero and what I'm describing is exactly what happened. Ron Paul even predicted this in 2002--that we were creating a housing bubble which was a distortion of the economy. The securities are just the means by which the asset bubble was spread. Someone was going to be left holding the bag on those low-interest loans that should have never been.
jafs (anonymous) replies…
Well, we'd have to do the math.
But I know for a fact that even a 5% interest rate on a mortgage means you're paying back about twice the cost of the loan over 30 years.
So I don't think it would be just a little bit less.
The other factors about demand and cost seem valid, but again you assume these businesses will fail, which doesn't seem proven to me.
And everybody in the chain could be more intelligent - for example, businesses could estimate costs with fudge factors built in, manufacturers could not jump to the conclusion that demand was going to continue to go up, etc.
And, again, the housing loan problem was directly related to the fraudulent ratings of the securities - without that factor, this never would have happened. And, of course, the loans that shouldn't have been made wouldn't have been, if everyone didn't think they could just sell them to someone else.
So the idea of no/low-interest rate loans for sound buyers is still a good idea - if that's all that had been done, we wouldn't have had the massive foreclosures we have had.
Liberty_One (anonymous) replies…
"Well, we'd have to do the math.
But I know for a fact that even a 5% interest rate on a mortgage means you're paying back about twice the cost of the loan over 30 years."
I'll give you an example. I worked in a gas station for several years, it was eventually sold, but here's some examples of rounded numbers. Buy a gas station for $4 million with $400K down and $3.6 million loan @ 5% interest = maximum of $180k interest per year. A gas station can easily make $3-4 million per year in total revenues. Gasoline usually is only a few cents of profit, the convenience store items cost about 66% of their price, and things like coffee and fountain soda cost less. Then there's labor, electricity, maintenance, theft, etc. When it comes to the price of a gallon of gas or a snickers bar, the interest is only a small %. There's no way you could cut prices in half just by losing the interest. However, in business profit margins are razor thin--only 2% for gas stations. So if your yearly revenues are $3 million, that's only $60k profit, but at a $400k investment that's a good return of 15% on your money. However, as you can see an increase of only 2% interest would completely wipe out your earnings. Decreasing interest to zero would not allow you to charge half price though--not even close.
You also said the manufacturers could run their businesses better to avoid production mistakes. But it's not that simple. They don't know they are making a mistake at the time. Prices are information, and they are getting bad information. But there's no way for them to tell that their particular product is overpriced or underpriced because of government intervention somewhere else in the production chain. For example, the cupcake stores and ice cream stores were driving up the price of commercial kitchen machines. That in turn drove up the price of the steel that went in those machines. Steel is a fungible good--the price goes up whether it's being used in cars, bedsprings or commercial-grade ovens. So how does the steel manufacturer who sells steel to make engine blocks able to know that the price increase that's going on the market is due to market forces or government intervention?
You don't believe me that these businesses will fail. Using the example from above, I'll explain why in the next post.
jafs (anonymous) replies…
I see your point about the pricing - one could lower prices a bit, though, and still make enough profit, no? Using your example, that would be $15,000/month that you would save, and thus pass on to the consumer.
Also, in the residential market, prices don't fluctuate that much for stoves, refrigerators, etc. Unless the commercial market is significantly different, it wouldn't respond that quickly to a slight increase in demand.
And, there is the opposite problem as well - right now, lower consumer demand, reluctance on the banks' part to lend, and businesses not wanting to take a chance means that the commercial kitchen guys aren't selling anything much - hard to stay in business that way.
I was imagining a scenario in which one could borrow the total start-up costs plus a little bit to cover overhead for a bit, and a grace period before the loan started to get paid back.
Liberty_One (anonymous) replies…
Now those businesses that got the loans could not have got them on the free market because they were not profitable enough to pay them back. Prices are information, and the higher interest rate indicates that there would not be enough future spending to support these businesses.
All businesses need some amount of capital goods like machines and buildings to operate their business (if they didn't need these they wouldn't need the loan in the first place) as well as various raw materials, labor and other inputs. Since there are more businesses than would otherwise exist, demand for these inputs increases and thus so do the prices of these inputs. Other businesses that also buy these inputs now have to pay higher prices. In the above example it was steel for engine blocks. So now cars cost more money to produce and their price will have to go up higher than it otherwise would have been. So while maybe my cupcake store and your ice cream parlor can offer reduced prices, people have to pay more money for their cars now. So the problem is that the car manufacturer had a product that people were already willing to pay enough for that it didn't need a government no-interest loan to operate. That means people wanted the cars. Our businesses couldn't get off the ground without the no-interest loan, meaning people were not willing to pay a price high enough to make either business profitable. That means people wanted the cupcakes and ice cream less than they wanted the cars. So this situation can only last so long. We, as a society, are producing more of things people don't really want, and less of the things they do really want.
The entire production chain has become skewed from where it would have been. The only cure is massive layoffs, business closings and liquidation so that capital goods, resources and labor can be shifted towards more profitable uses. Prices convey important information. Changing the price doesn't change the reality behind that information.
jafs (anonymous) replies…
There would not be enough spending to support the businesses if they have to pay prevailing interest rates, but very well may be if they don't have to pay those. People who can afford to pay outright for businesses open them without having to charge more - why doesn't this have the same effect?
And, businesses don't have to raise prices if their costs go up - they could also change their executive compensation, or lower their profit margin, etc.
Oil companies are/have been making record profits - to the tune of $35 billion/year. If their costs go up a little, they can easily keep prices constant and simply make a little less profit.
By the way, the oil example is interesting, given that OPEC controls the supply in order to keep prices where they want them - hardly a good situation.
Given the current mess, it seems that you're suggesting we simply accept it and do nothing - I fail to see how that will improve anything. Businesses are not going to start hiring people for no reason - banks are not going to start lending money for no reason, etc.
Finally, the "free market" approach you favor is, at the heart of it, brutal, and includes the failure of many businesses, which means many people have to suffer quite a bit. Also, when businesses fail and go bankrupt, their suppliers and creditors suffer as well.
It's hardly a panacea.
jafs (anonymous) replies…
But that analysis leaves out the fact that the businesses with lower repayments on their loans can charge less for their products.
Let's say the government offers no-interest loans, and businesses which get those loans can charge 1/2 as much for their products as those which get commercial loans.
Then the same amount of consumer dollars can be spent at 2 businesses instead of 1.
So, instead of buying an ice-cream cone - I can buy an ice-cream cone at one store and something else at another store, for the same amount of money.
Then, 2 businesses can flourish, with all of the benefits that accrue, and consumers can get more goods for the same amount spent, which benefits them as well.
The only losers in the equation are the commercial lending banks - but if the businesses wouldn't be able to pay those loans back, they wouldn't have gotten them in the first place.
Sounds good to me all around.
Now, you'd have to have some way of making sure that you aren't using the government loans for businesses that would be able to get the private ones, of course. That would mess things up.
jafs (anonymous) replies…
But that analysis leaves out the fact that the businesses with lower repayments on their loans can charge less for their products.
Let's say the government offers no-interest loans, and businesses which get those loans can charge 1/2 as much for their products as those which get commercial loans.
Then the same amount of consumer dollars can be spent at 2 businesses instead of 1.
So, instead of buying an ice-cream cone - I can buy an ice-cream cone at one store and something else at another store, for the same amount of money.
Then, 2 businesses can flourish, with all of the benefits that accrue, and consumers can get more goods for the same amount spent, which benefits them as well.
The only losers in the equation are the commercial lending banks - but if the businesses wouldn't be able to pay those loans back, they wouldn't have gotten them in the first place.
Sounds good to me all around.
Now, you'd have to have some way of making sure that you aren't using the government loans for businesses that would be able to get the private ones, of course. That would mess things up.
Liberty_One (anonymous) replies…
"And, the analogy with oil would be better if the government bought it and sold it for the same price, not half price. Then it wouldn't have such drastic consequences."
But you're wanting to offer low interest loans. If the market rate is 6% and your loan is 3% then that's half price. And the consequences are very drastic.
"But wouldn't a solution be for people to simply be more realistic in their projections?"
The problem isn't unrealistic projections, it's bad information. The low interest rates are conveying false information about the supply of loanable funds. When we see one bank fail, it was likely because it was run poorly. When we see the entire banking industry fail simultaneously, all making the same mistakes, is it because they were all run poorly the exact same way or because they all had bad information that lead them all to the same incorrect decisions?
"That would mean that the market could support one of those or two of the government funded businesses."
That's the thing, the rate of interest indicates what the market can support. It is the price of borrowing money which is based on the supply and demand of loanable funds. If the market can only support one, then it can only support one. Giving low interest loans only means we can *fund* two stores but that is conveying false information. The future customers won't be spending enough to support two. If the market can only support one, then it can only support one.
Prices mean something--they convey information. Artificially changing prices does not change the reality of the information they would have conveyed. The point of the oil example was that even though the price would appear to have gone down, the reality of diminishing supply did not change. You can lower interest rates, but the reality about the information that caused those interest rates to be where they were does not change. Just like there wasn't an abundance of oil that was keeping prices low, there is not an abundance of future customers that will support these businesses.
jafs (anonymous) replies…
Sorry about the triple post - something's screwy with the JW.
The banking problem, as we've talked about, seems to me was related to the ability of banks/mortgage companies to bundle and securitize the loans, and the credit rating agencies (paid by the issuers, which is an obvious conflict of interest) rating them highly even though they were risky investments.
As long as you can sell your loans, and transfer the risk somewhere else, you don't care about the soundness of them.
Home loans are the same way - let's say we have a number of people who can't afford a regular bank loan at 5% interest, but could afford a no-interest loan.
Why shouldn't the government make no-interest loans available to those people? We'd have more homeowners, which brings a variety of benefits to individuals, working people, and neighborhoods, and we'd get our money back.
In fact, that's my proposal - the government should have a revolving loan system of no-interest loans for small businesses and homeowners.
There should, of course, be guidelines, and the business plans should be sound, and the prospective homeowners with decent credit and able to pay back the loans.
jafs (anonymous) replies…
Or targeted incorrectly.
Or without enough requirements and oversight of how the money is spent, especially by large banks.
notajayhawk (anonymous) says…
So, let's see, merrill - the article says the problem is the lack of private sector jobs, and the solution is more government jobs and public works project.
Mmmmm, ok.
scott3460 (anonymous) replies…
If the private sector cannot or will not spend to produce jobs, why shouldn't we elect to do so through our representative government? There are millions of unemployed people who want to work and there is much work to be done here in our country. Why not put them to work. Here's an idea, invest in a group to investigate and prosecute employers of illegal immigrants. Here's another, hire crews to clean rivers and sites of private industry pollution. A creative mind could come up with a lot of beneficial tasks we could accomplish. Unfortunately most politicians in DC are captured by monied right wing interests and this will not happen. But public spending when the private sector fails is not that outrageous an idea.
Liberty_One (anonymous) replies…
There's no such thing as a free lunch. For every job created by government that's a job lost in the productive sector. Deregulate the economy and return to sound money if you want to create jobs.
salad (anonymous) replies…
Yeah......jobs in CHINA.
You're precious industrialist class, crowing for "tax relief", doesn't care about creating American jobs. They just want all the money and all the protections that come with being American citizens.....as long as they don't have to pay their share.....and poor kids can do all the fightin'.
Liberty_One (anonymous) replies…
They'd love to create jobs in America but the government won't let them. Deregulate the economy, return to sound money and bust the union racket and you'll see jobs come back. The only reason they go to China is because their economy is becoming freer than ours!
just_another_bozo_on_this_bus (anonymous) replies…
So, just because a job is done by government, it's automatically nonproductive?
Liberty_One (anonymous) replies…
By definition it is nonproductive because if it was considered valuable by the populace then it would be profitable enough for someone in the productive sector to do it.
I know, you think that the government is wonderful and should be responsible for at least 1/3 the economy. Of course you don't realize that means it has to feed like a vampire on the other 2/3 of the productive economy, which we are seeing is leading us to disaster.
just_another_bozo_on_this_bus (anonymous) replies…
"By definition it is nonproductive"
By your definition, that is.
Liberty_One (anonymous) replies…
"By your definition, that is."
No, by the definition:
pro·duc·tive
adj.
4. Economics Of or involved in the creation of goods and services to produce wealth or value.
If the goods and services aren't being produced on the free market because no one is willing to pay for what it would cost, then the value is zero, and is by definition unproductive.
matchbox81 (anonymous) replies…
No, government jobs are productive where the government is addressing a free market failure. The benefits of an interconnected highway system, or a national defense, beneft all, but don't benefit one private sector enough to have them pay the full cost for it. That's why highways are federally funded, and why freight railroads aren't (well, I'm sure that there's some subsidies). Therefore, having the federal government hire a private contractor to design and build a new overpass or interchange would be productive from both a national perspective, and the perspective of the employees, suppliers, and subcontractors of the original private sub contractor.The idea is that the multiplyer effect from the initial government spending would jump-start the economy, so that the factories that sell to the private contractor hire more employees; the new employees buy products and services, and in-turn result in other business hiring more employees.
This seems like a much better way to jumpstart the economy than to dole out tax breaks to high earners that won't go out and spend the money, but rather let it sit in a bank account.
Liberty_One (anonymous) replies…
Actually you're wrong. Private highways were built long before the government got involved. Some of the first major highways were built by oil companies. They would put one of their gas stations on either end.
"The idea is that the multiplyer effect from the initial government spending would jump-start the economy, so that the factories that sell to the private contractor hire more employees; the new employees buy products and services, and in-turn result in other business hiring more employees. "
There is no such thing as a multiplyer effect. This is because you are only looking at one side of the coin. There is an equal and offsetting negative effect that occurs because that money is being taken out of the economy somewhere else. All that is happening is money is being taken out of the right pocket and put in the left. There is no multiplyer effect.
"that won't go out and spend the money, but rather let it sit in a bank account. "
Savings don't sit in a bank account, they become loanable funds that are used by entrepreneurs to start/expand businesses. REAL businesses that create long-term job growth.
matchbox81 (anonymous) replies…
Your view is of mercatilism, where there's only a set amount of gold in the world, and the only way a person gets gold is by taking it away from someone else. Move into the modern economics, and you'll discover that there are multiplying effects. By your thinking of "money put into one part of the economy has to be taken out of another part" would mean that growth of private businesses would be taking money away from other private businesses.
"Savings don't sit in a bank account, they become loanable funds that are used by entrepreneurs to start/expand businesses." Except in this case, where banks are skittish about loaning out money because the economy is so bad, and the banks aren't sure if they business they loan money to will survive. Corporations have lots of money in their bank accounts now too, but instead of spending it by hiring more people, they're conserving the money in case there's another economic downtown. Again, instead of the money giving the wealthy tax breaks, it makes more sense for the government to do more projects, and pay workers that will go out and buy laundry detergent that night.
Liberty_One (anonymous) replies…
Mercantilism? You are too funny! If you think my view is mercantilist then you haven't a clue about what your saying.
"By your thinking of "money put into one part of the economy has to be taken out of another part" would mean that growth of private businesses would be taking money away from other private businesses."
It's called opportunity cost. If you buy a garden hose from Wal-Mart that means you didn't buy a garden hose from Target. Understand? So how does the economy grow then? By increasing productivity--making more stuff. Money is just a unit of exchange; it isn't real wealth.
"Except in this case, where banks are skittish about loaning out money because the economy is so bad, and the banks aren't sure if they business they loan money to will survive. "
That's a good thing. Don't you know what got us into this mess? It was banks being too loose with their lending policies.
"it makes more sense for the government to do more projects, and pay workers that will go out and buy laundry detergent that night."
No, that's as good as throwing the money away. Buying more stuff does nothing to increase our production capacity or create real wealth. Read up on Says law and don't say any more goofy stuff about mercantilism until you know what you're talking about.
notajayhawk (anonymous) replies…
If it was a productive job, Herr Klowne, it would have been done without the stimulus.
notajayhawk (anonymous) replies…
"If the private sector cannot or will not spend to produce jobs, why shouldn't we elect to do so through our representative government?"
Well, let's see:
1) Because one addresses the problem, the other doesn't.
2) Because if these government jobs were necessary, they'd already be there and filled. Creating a make-work position just to put money in your pocket is no different than welfare. And it puts money in your pocket by taking it out of my pocket. (Not that you'd have any objection to the latter, of course.)
3) Because it's not a sustainable system. When everyone's working for the government, scottie, who pays their salaries? Oh, I know, they pay taxes, too. So it becomes like the old joke about the Chinese laundries all washing each others shirts. It produces nothing.
Other than that, scottie, no particular reason.
just_another_bozo_on_this_bus (anonymous) replies…
You certainly have the circular logic thing down pat.
notajayhawk (anonymous) replies…
Did you have anything intelligent to say today, boohoohoozo? Not that I expect you to, but hey, the law of averages are on your side that something intelligent might slip out by accident.
You want circular logic, klownie? Relying on government jobs to keep people working is the epitome of circular logic. We'll pay Peter from the taxes we collect from Paul, and pay Paul from the taxes we collect from Peter. But hey, to an avowed Marxist who doesn't have the intelligence to recognize that communism has failed, it's understandable you'd see that as a step in the right direction, Herr Klowne.
scott3460 (anonymous) replies…
OK, in my example I proposed hiring people to focus on illegal employers of immigrants. Please explain how that job is being done so well currently by either the private sector, or the government which has been starved of resources by tax cutting. This would not be unproductive effort, in my opinion.
Liberty_One (anonymous) replies…
This would be extremely unproductive. Immigrants are highly productive for their wage levels--that's a huge boost to our economy. If we got rid of the immigrants that would only worsen our already reeling economy.
scott3460 (anonymous) replies…
Slaves would be even more productive, but, like employing illegal immigrants, slavery is currently outlawed. Enforcing the nation's prohibition on the hiring of illegal immigrants in a more strenuous manner would decrease the current rate of unemployment among our citizens and reduce expenditures for unemployment and public assistance benefits. That, it seems to me, would be a net improvement in our nation's productivity.
jafs (anonymous) replies…
Well, it's hard to predict exactly what would happen if we got rid of the low wage-earning illegal immigrants.
Businesses might choose to employ Americans and pay them more - they might not. Or they might employ Americans and then raise prices. They might simply demand that fewer employees do more work.
The main problem with all of the "Do this, and that will follow in the economy" is that businesses are not required to respond in any particular way.
I agree, though, that enforcing the prohibition on hiring illegal immigrants is a worthwhile thing to do, and hiring people to do that would provide them with a job, and they would spend that money, circulating it into local economies.
scott3460 (anonymous) replies…
Yeah, I see the point, thank you.
jafs (anonymous) replies…
Sure :-)
Liberty_One (anonymous) replies…
"Slaves would be even more productive,"
I don't follow. Why would slaves be more productive? If anything they would be less productive since without the labor being priced it is likely to be misallocated. Anything that's "free" is going to be overused and misallocated. A simple example is that if your statement were true, the South would have been economically stronger than the North. But this was not the case.
notajayhawk (anonymous) replies…
Neither of your ideas would be productive. Neither actually produces anything, but I will grant that they're worthwhile ideas.
matchbox81 (anonymous) says…
Federal government gives money to state and local governments to do projects. The local government hired private contractors to do the work, those private contractors start buying supplies and eating at diners again. Yes, in this instance, more government spending equals more private jobs.
notajayhawk (anonymous) replies…
And when the government font dries up?
Oh, wait, that's already happening.
"in this instance, more government spending equals more private jobs"
In this instance, more government spending equals more *temprary* private jobs. There, fixed that for you.
matchbox81 (anonymous) replies…
The entire world seems to think that Uncle Sam is still good for his word - people have more faith in it than in the euro. Regardless, temporary jobs funded by the government would still cause a multiplying effect on other businesses. Those temp workers buy more products, which causes businesses to hire more, which results in the new employees spending money, which results in the original "temporary" government workers being offered a job at another business 6 months down the line.
In these situations, the job of the federal government is to spend enough money to jumpstart the economy.
Liberty_One (anonymous) replies…
"The entire world seems to think that Uncle Sam is still good for his word - people have more faith in it than in the euro. "
Incorrect. Iran has stopped accepting dollars. India is buying gold and moving away from dollars. China and Russia have both come out saying that they want a different reserve currency than the dollar. Saying it's better than the euro isn't saying much.
notajayhawk (anonymous) replies…
"Those temp workers buy more products, which causes businesses to hire more, which results in the new employees spending money, which results in the original "temporary" government workers being offered a job at another business 6 months down the line. "
Not quite. Somebody has to pay those government workers. That means more taxes on the rest of us, which leads to less disposable income and less spending. At best it would be a wash.
jafs (anonymous) replies…
Doesn't it sort of depend on where the money is now, and how it's being used (or not used)?
Agnostick (anonymous) says…
Corrected title: "The U.S. Ecomomy Isn't Recovering As Fast As We Would Like"
Liberty_One (anonymous) replies…
Corrected post: "The U.S. Economy Is Actually Getting Worse."
jayhawklawrence (anonymous) says…
I am just glad that we are not living in our cars and standing in line for cold soup and stale bread.
The Great Depression II did not happen. It could have.
It has been a tough recession, but most of my customers made it through and are now busy again with work. There is a lot of optimism about the future.
Disappointments? The Republicans effectively dulled the recovery with their rhetoric. Legislation to help businesses and in particular manufacturers has been blocked in the Senate by the Republicans. Democrats lacked the backbone to get as much done as they could have but it just goes to show that most of them are typical politicians looking out for themselves instead of the country.
There were mistakes with the TORP bailout and the Stimulous funding. Neither political party is responsible enough when it comes to handling money. The only real conservatives right now appear to the Tea Party Candidates.
The Republicans would have done much of the same thing with TORP and with the stimulous. It is a joke to listen to their BS.
Cal is an idiot.
Liberty_One (anonymous) replies…
"The Great Depression II did not happen. It could have."
Just wait, Obama is FDR to Bush's Hoover. Only worse. We haven't arrived to the bottom of this recession. It will get much worse before it gets better.
dinoman (anonymous) replies…
if you want a history lesson from a farm boy there was a small recesson in the early 1900 we were brought out by ww1 and the industrial revolution is spawned the depresson of the 30's was only ended by ww ii and its industrial revolution... history repeats itself... we again are in a small recession and we thought we cought it in time but i dont see any great advancess in our economy... whats up....
yourworstnightmare (anonymous) says…
It is impossible to say what would have happened to the economy without the stimulus and bailout measures taken by Bush and then Obama. Just as it is impossible to say what would have happened in Iraq had Bush not decided to start a war of choice there.
Eight years of borrow-and-spend economics under Bush, combined with regulatory irresponsibility, combined with the notion that everyone should be homeowners despite being unable to afford it, resulted in our crippled economy.
Certainly the economy is not recovering at a rate that is satisfactory. It needs to get better, and this is Obama's responsibility, fair or not.
The nattering nabobs of negativity about the economy, Thomas and present company included, certainly are not helping things, as economics does include a dash of perception and attitude on the part of the participants.
Just ask George W. Bush.
Liberty_One (anonymous) replies…
"economics does include a dash of perception and attitude on the part of the participants."
No, it doesn't. Being positive won't do anything to improve the economy. The problem is our production structure has been skewed by the false signals sent by government intervention. Artificially low interest rates falsely indicate that future consumption will increase, thus creating malinvestment which now needs to be liquidated, but due to more government intervention, this is not happening. The economy won't be fixed until we liquidate unproductive investments, and delaying that in the hope that staying positive will somehow make them productive again only makes it worse.
just_another_bozo_on_this_bus (anonymous) replies…
"The economy won't be fixed until we liquidate unproductive investments,"
Can you identify these?
just_another_bozo_on_this_bus (anonymous) replies…
And if they are unproductive, why would anyone want to buy them?
(unless you really mean liquefy, as in sticking them into a blender at high speed.)
Liberty_One (anonymous) replies…
"Can you identify these?"
Failing businesses.
"And if they are unproductive, why would anyone want to buy them?"
Why can't you answer this yourself? It's simple common sense.
1. They buy them at a discount
2. They put the assets of the liquidated business to more productive uses
just_another_bozo_on_this_bus (anonymous) replies…
Which businesses? GM? I believe the plan is most definitely for the government to divest in that ASAP (although how that is defined is open to debate.)
And what do you think would be more productive use for GM?
Liberty_One (anonymous) replies…
"And what do you think would be more productive use for GM?"
Irrelevant question. What I personally think they should be used for doesn't matter because I'm not an entrepreneur so how could I possibly know? Professionals with experience and knowledge of the market and the uses for the assets involved would make that decision. I'm only talking about the economics.
The factories, machines, raw materials etc. would by bought at discounted prices by entrepreneurs with capital to spare. They would then turn those assets around to other uses. Maybe Toyota would buy them and make cars, maybe they could only be sold for scrap. Either way, successful enterprises are going to purchase the assets at their market value and use them for other purposes than their current, unproductive use.
notajayhawk (anonymous) says…
"It is impossible to say what would have happened to the economy without the stimulus and bailout measures taken by Bush and then Obama."
Then why does the story merrill was nice enough to cut-and-paste up above say this:
>>> "The situation would be even worse without the $787 billion fiscal stimulus package passed in 2009. The conventional wisdom about the stimulus package is wrong: it has not failed. It is working as intended."
>>> "Without it, the unemployment rate would be about 11.5 percent."
Why is Obama claiming he saved the car companies? Why are all the administration hacks echoing the above sentiment, that it all would have been worse without the stimulus?
If you're going to spend a trillion dollars or so of taxpayer money, nightmare, don't you think there should be some evidence of, or at least some way of knowing, "what would have happened to the economy without the stimulus"?
jafs (anonymous) replies…
From what I've heard and read, non-partisan economists generally think that we would have had a depression without the governmental steps that were taken.
It's a hard sell - things could be worse - especially when they're not getting better quickly enough.
And, I'm not saying that I agree with all of the ways in which the government has acted.
snap_pop_no_crackle (anonymous) says…
Hasn't the current regime saved or created 6 billion jobs? Hasn't Joe "where's the Xanax?" Biden been creating a huge carbon footprint wandering the country and proclaiming that this is the Recovery Summer?
Has it all been a bunch of hooey?
yourworstnightmare (anonymous) says…
Well, I guess the proof is in the pudding, then, isn't it?
The economy has not collapsed, unemployment is only 10%, as opposed to 20 or 30%, and the stock market has made a bit of a recovery. Job creation is lagging as it always does in recession recoveries, but there are signs that companies are becoming more active with their cash reserves. The economy has not collapsed, 90% of us have jobs, and investment portfolios are making money again. This is reality.
I personally think that things could have been much worse without the actions of Bush and Obama.
snap_pop_no_crackle (anonymous) replies…
Actual unemployment is much higher than 10%. A quick interwebs search will tell you that.
Liberty_One (anonymous) replies…
"The economy has not collapsed, unemployment is only 10%, as opposed to 20 or 30%,"
Real unemployment is actually 22%.
"90% of us have jobs"
Incorrect. Only 58% of men 20 and older have jobs. Compare this with 85% in the 1950s. The way the government counts unemployment is meant to make the economy look better than it actually is.
yourworstnightmare (anonymous) replies…
By whatever measure, unemployment is maybe 5% higher than it was 10 years ago, by whatever scale you use. It could have been a lot worse.
Investment accounts are making money again, the economy has not collapsed, and companies are starting to spend again.
It could have been a lot worse.
I also notice that all of you seem to be doing well; you seem to have plenty of money for internet accounts and computers are retired comfortably or have jobs that allow you to post to this site as often as you please.
I am in the same situation. It could have been a lot worse without the Bush/Obama economic surge.
Liberty_One (anonymous) replies…
"It could have been a lot worse without the Bush/Obama economic surge."
Wrong, it could have been a lot better without the wasteful misallocation of our nation's wealth. These spending bills are like throwing our wealth down a huge money sinkhole. Not only are they not helping, but the next recession is going to be even worse, and it's coming sooner rather than later. This time we might have inflation to deal with along with a shrinking economy and even higher unemployment.
yourworstnightmare (anonymous) replies…
I think you are misguided here. Time will tell.
Let's speak again about this in one year, Liberty_One. Deal?
Liberty_One (anonymous) replies…
"Let's speak again about this in one year"
That's what everyone was saying last year when I said this wasn't going to work. "Just give it some time!" they all said. "He's only been in office a few months, he's not a miracle worker!" they all said. It's the same excuses.
No, you are saying that Right Now it's better than it would have been, that it could have been a lot worse. I don't see how it could be much worse. Unemployment is high, inflation is looming, our debt is about to crush us, this country is falling apart and if we don't change course soon it will be too late! I want to get back on the right track now before the economy is so ruined that the government starts defaulting on its checks.
If the disaster that this stimulus bill has been so far hasn't convinced you that it was a bad idea, do you really think anything could change your mind in one year?
yourworstnightmare (anonymous) replies…
Quit dodging, Liberty_one. It is unbecoming.
Let's revisit this in a year. Using your outline above, if the following things happen, then I will be convinced that the Bush/Obama surge did not work:
1) Unemployment significantly higher than now, say 100% higher than it is now.
2) Inflation is significantly higher than now (100% higher).
3) Our debt has crushed us (not sure how to quantitate this, but maybe we should use government default on checks as a measure).
If these things happen in a year, I will be convinced that the Bush/Obama surge did not work.
What will convince you in one year that it has worked?
Liberty_One (anonymous) replies…
Quit dodging? Are you serious? It's you folk who refuse to acknowledge the complete and utter failure of this stimulus snake oil we were sold that are dodging. It's so funny that you say I'm dodging but are telling me to wait a year before we can discuss the success or failure of this policy!
Why can't you discuss it now? Next year all you're going to do is tell me to wait another year.
"If these things happen in a year, I will be convinced that the Bush/Obama surge did not work."
So in other words, if things stay just as bad as they are now, or even get a little worse, you still won't be convinced that it didn't work. Only if the economy literally dies will you finally admit that it didn't work, huh? Heads you win, tails I lose.
"What will convince you in one year that it has worked?'
Enough economic growth to pay for the stimulus spending at our current Tax to GDP ratio over the next few years--about 7% growth. And at least a 25% drop in U-3 unemployment.
yourworstnightmare (anonymous) replies…
I thought we had been discussing the economy now. While weak, there are signs that the economy is improving (stocks rising, companies spending money, no economic collapse). You disagree. So let's see where we are in a year.
I do not know why you are so defensive about this.
Liberty_one, it is you who are predicting the utter failure of the economy because of the stimulus. You used these terms, not me. I am simply holding you to your own predictions. I think they are wrong. Let's see in a year.
Liberty_One (anonymous) replies…
"I am simply holding you to your own predictions."
No, you are making up predictions for me. I never said anything about 100% increase in unemployment or that the government will default on checks by next year. I do predict that things will get continually worse though. We will see rising unemployment, rising inflation and a rising deficit. How much exactly, I don't know.
"you who are predicting the utter failure of the economy because of the stimulus"
The stimulus has already failed. If you'd take off the rose-colored glasses you would see that. You think that "there are signs that the economy is improving," what signs? Unemployment hasn't gone down, wealth creation has not increased, production capacity has not increased. The minimal GDP growth is overshadowed by the decline in GPP. Government spending cannot continue to grow while the private economy shrinks since the government leaches off the private economy like a vampire.
And the economy won't fail because of the stimulus by itself. It's only one nail of many in our collective coffin. There's still time to get back on track though.
"I do not know why you are so defensive about this."
Well you tell me I'm dodging the issue and you want to wait a year to see if the stimulus worked or not. You make up outlandish predictions and ascribe them to me. I can't imagine why that would make anyone defensive.
yourworstnightmare (anonymous) replies…
Quotes from Liberty_one:
"but the next recession is going to be even worse, and it's coming sooner rather than later. This time we might have inflation to deal with along with a shrinking economy and even higher unemployment. "
"inflation is looming, our debt is about to crush us, this country is falling apart and if we don't change course soon it will be too late! "
You are delusional if you think I am making up your dire predictions.
Let's see in a year.
Liberty_One (anonymous) replies…
"You are delusional if you think I am making up your dire predictions."
"1) Unemployment significantly higher than now, say 100% higher than it is now.
2) Inflation is significantly higher than now (100% higher).
3) Our debt has crushed us (not sure how to quantitate this, but maybe we should use government default on checks as a measure)."
There it is in black and white. You made these things up, I never said anything about unemployment or inflation being 100% higher or that the government would go bankrupt in one year. And quantify is the word you were looking for.
"Let's see in a year."
That's what I was saying last year. Was I right or wrong?
yourworstnightmare (anonymous) replies…
Wrong. The economy has not collapsed. It has stabilized and is even growing a little.
By 100% I mean doubled (10% to 20%).
You said that inflation will rise, unempyent will go up, and our debt will crush us.
If you disagree with mine, you give me some solid numbers that we can use as a judge of a worsening economy and a failure of the Bush/Obama economic surge in one year.
No more dodging, Liberty_one. You made predictions. Let's see how they stand up.
Liberty_One (anonymous) replies…
"The economy has not collapsed."
I've said multiple times that it's not too late--yet--to get this country turned around. The stimulus is only one part of the problem. SS and Medicare will run out of money someday--not tomorrow, not next year, but before I'll be old enough to collect. This was reported in the LJW recently. What happens then? India, China and other countries are moving away from the dollar as a reserve currency. What happens then? What happens when China and Japan stop buying our debt because they have lost faith in our ability to repay them? This stimulus has not improved any of these situations but has actually made things worse.
"It has stabilized and is even growing a little."
All of the growth has been in the public sector. Since the public sector is funded by the private sector, this growth is unsustainable. If the public sector feeds off the private sector like a vampire, what happens when it runs out of blood?
Again, I cannot believe you say that I'M dodging when you keep asking for a another year to see if the stimulus is working or not.
The stimulus is a failure if the economy doesn't get better. If unemployment is still high, it is a failure. If growth is still next to nothing, it is a failure. If we cannot pay off the debt it's created, it is a failure.
"If you disagree with mine, you give me some solid numbers that we can use as a judge of a worsening economy and a failure of the Bush/Obama economic surge in one year."
It's already a failure by Obama's own economic team's projections:
http://michaelscomments.files.wordpre...
So it's pretty simple. Unless U-3 unemployment gets below 7.5%, which is where Obama's team said we would be without the stimulus by Q3 of 2011, then it's a complete and utter failure.
Jimo (anonymous) says…
Start with half a stimulus, set that against an equal-sized anti-stimulus and sit around and wonder where the fireworks show is. But for Cal and his buddies, we'd be sitting pretty by now.
Let's all hope that GOP obstruction won't require a repeat of the massive stimulus ending the depression -- a/k/a, World War II. Personally, I hate the idea of $100 trillion in borrowed money, centralized control of the economy, and millions of casualties.
Liberty_One (anonymous) replies…
"won't require a repeat of the massive stimulus ending the depression -- a/k/a, World War II"
The depression didn't end until after WW2. The private sector continued to shrink all through the war and shortages were becoming more common. It wasn't until after the war when the budget was cut by 2/3 that the economy recovered. The year after the budget was cut the economy had the single greatest year of economic growth in US history.
Jimo (anonymous) replies…
Because economic stimulus ceases the minute you cut the budget. (Everyone knows that.) Because, literally, restructuring every industry in America, doesn't lead to positive consequences over time. Because moving millions of people out of the farms, backwoods, and small town America, providing them skills and training, opening their minds by exposing them to new people and places, introducing all those fancy elitist management techniques, is all reversed by pulling the plug on the venture (and cutting spending by 2/3rds!!!!). ROFL
Perhaps you are unaware that the mass of the stimulus (spending) didn't arrive until 1943-45? And that it was only this extraordinary expenditure that allowed this massive budget cut 1947-48? Or that the "year after" 1948 wasn't 1951 (THE greatest year of economic growth of the Keysian era - not "in US history" - although not much bigger than 1973, 1978 or 1979).
Libs Law (formerly known as Herbert Hoover's Prognostication): cutting the budget by 2/3rds will cause the greatest economic growth in US history.
What happens if we cut the budget by 3/4ths? By 99/100ths? By how much was the budget cut before 1973 or 1978?
Pray tell? How much did the Chinese cut their budget? How about the Germans? Uhh....they didn't but rather put in place massive stimulus programs (and fell back on other macroeconomic structures): voila, those are the growing economies! Of course, the Irish took your advice (GDP down 7% and still falling). So did the Portuguese (in a deathspiral). And of course the Greeks! Lib's Law has everyone in Greece sitting on golden commodes in just one more year thanks to their massive budget cuts!!! I'm holding my breath!
Liberty_One (anonymous) replies…
Full of lies as usual.
Jimo (anonymous) replies…
ROFL
Lacking in any substantive reply - as usual. Sorry to embarrass you, Champ. Leave the propaganda at the door. Live. Learn. Know.
Liberty_One (anonymous) replies…
It's not worth it to make a substantive reply to a troll.
yourworstnightmare (anonymous) says…
Think of the bailouts and stimulus as an economic "surge", just like the surge that we all agree was successful in Iraq.
jayhawklawrence (anonymous) says…
"I personally think that things could have been much worse without the actions of Bush and Obama."
I think it is true that every President tries to do their best for all Americans and they are never the bad guys they are made out to be.
It is sad to think that we may never see a President who is beloved by most Americans in the political system we have today. We send a guy to Washington these days to get his head cut off and his family dishonored.
toe (anonymous) says…
Kansas seems to be doing very well. Revenues were up for the State which I did not expect.
Made_in_China (Paul R. Getto) says…
"wounded_soldier (anonymous) replies… What we need to do is get rid of the special interest groups. If we did that, the people whould (sic) rule again, not special interests. That means getting rid of lobbyists and PAC's." === WS: Arguably, there are three constitutionally protected jobs (1st Amendment): journalist, preacher and lobbyist. We are all represented by one lobbyist or another, whether we know it or not. Yes, the big money gets the biggest bang for their buck, and this is a matter of concern. What most people mean when they complain about advocates for one cause or another, "My cause is not winning or getting the attention it deserves."
dinoman (anonymous) says…
hey by the way if our economy is so great why are schools closing and the state department not able to hire enough employes to get all their jobs done in a timely manner... i mean even the courts have gone to four days instead of five tags and titles take months not to mention state tax returns... whats up
yourworstnightmare (anonymous) replies…
Tax cuts combined with a weak economy. Welcome to the ownership society.
yourworstnightmare (anonymous) says…
Admit it. Just like the surge in Iraq, the Bush/Obama economic surge has worked and prevented a depression.
Liberty_One (anonymous) replies…
No, it's causing a depression. The economy is getting worse and real unemployment is soaring. Only 58% of men 20 and older have a job (compare to 85% average during the 1950s) and only 62% of women 20 and older. Growth has been almost nothing and at the same time we are mounting up massive debt which it is now grown so large it will be impossible to not default on. We spent a ton of money and got nothing in return. Well, nothing would actually be better than what we are getting since we spent money we didn't have, so now we have a huge bill to pay off with growth that never happened.
The next recession will be coming even sooner and will be much worse thanks to Bush/Obama administration's reckless spending (read: vote buying) schemes.
yourworstnightmare (anonymous) replies…
I think you are misguided here. Time will tell.
Let's speak again about this in one year, Liberty_One. Deal?
Liberty_One (anonymous) replies…
I doubt anything that could happen in the next year would change your mind if you still think this was a good idea now.
yourworstnightmare (anonymous) replies…
But Liberty_One, you said: "The next recession will be coming even sooner and will be much worse thanks to Bush/Obama administration's reckless spending (read: vote buying) schemes."
Coming sooner than I think? How soon? When would be a good time to check back and compare notes on the economy, time enough for the devastating Bush/Obama stimulus to "sooner than anyone thinks" wreak havoc on the economy?
Or will we even have computers anymore by then?
Let's check back in one year and see how things are.
Liberty_One (anonymous) replies…
Ohh? And what do you think will happen by next year? Sunshine and lollipops?
yourworstnightmare (anonymous) replies…
I was just using your own dire predictions, Liberty_One. If the economy has grown slightly and we have not slipped back into recession, I think it will be a sign that the Bush/Obama economic surge worked.
Quit dodging, Liberty_one. It is unbecoming.
Let's revisit this in a year. Using your outline above, if the following things happen, then I will be convinced that the Bush/Obama surge did not work:
1) Unemployment significantly higher than now, say 100% higher than it is now.
2) Inflation is significantly higher than now (100% higher).
3) Our debt has crushed us (not sure how to quantitate this, but maybe we should use government default on checks as a measure).
If these things happen in a year, I will be convinced that the Bush/Obama surge did not work.
What will convince you in one year that it has worked?
yourworstnightmare (anonymous) says…
Hope_and_Change snarled thusly: "There are too many slackers that need the fruits of others labor."
Oh, you mean all of the troops and military personnel who are fighting two wars paid for not by American tax dollars but by borrowing and debt?
Are those the slackers to whom you are referring?
notajayhawk (anonymous) replies…
The difference between the ones Hope_and_Change was referring to and our servicemen and women being that the latter actually earn and deserve the money we give them (and much, much more).
yourworstnightmare (anonymous) says…
On average, every man, woman, and child in America has borrowed ~$3000 to fight the wars in Iraq and Afghanistan.
cait48 (anonymous) says…
There are a number of things I don't understand and I wish someone would explain them to me.
Stimulus spending and corporate welfare was a *Republican* plan to begin with and to be honest the fact that Obama went along with it and gave in to the right disappointed me greatly. Now that it's apparent that it's not working, the castigation of Obama for it is coming from those very people whose idea it was in the first place.
Please explain that to me.
Secondly I really want to know from these armchair pundits of BOTH sides just exactly what would THEY do, given the circumstances. And please don't say "cut taxes" because that's not feasible either. The national debt has grown so great due to two unnecessary wars and the tax base of this country has already shrunk from unemployment to the point where the very infrastructure of this nation is at grave risk. We're out of money. Flat broke. Period.
So what do we do without frankly risking the lives of Americans?
Please tell me, all politics aside, how do we fix this mess?
Liberty_One (anonymous) replies…
"how do we fix this mess?"
Cut spending by 2/3
Cut taxes by 1/2
Eliminate all federal departments except treasury, state, justice and defense
Get rid of the central bank
Retire our standing army
Deregulate the economy
Return to the gold standard
I guarantee it'll work in two years or your money back.
cait48 (anonymous) replies…
The big problem is that if it doesn't you have just murdered millions of Americans for no reason. I'm not sure that I want to back the chance of sending this country back into the Stone Age against a 5% chance it might work.
Liberty_One (anonymous) replies…
Really? This is the plan used by the US to handle almost every recession prior to 1929. How many times did millions of people die and the country sent back into the Stone Age?
cait48 (anonymous) replies…
Prior to 1929??? Obviously it didn't work for Hoover.
It didn't get sent back to the Stone Age because in many ways it still hadn't come out. Financial methods and practices were still in the "Daddy Warbucks" era.
You think the Great Depression didn't kill people? Wow....there's some folks up in the nursing home you need to talk to.
Liberty_One (anonymous) replies…
"Obviously it didn't work for Hoover. "
What are you talking about? Hoover's New Deal wasn't anything like my proposal.
whynaut (anonymous) replies…
To start, pick the money up off the floor. Fix the tax cuts. Come up with an equation that's not too complicated, but sophisticated enough to ensure those who need help, get it, and those who don't pay their taxes in full. Get rid of rules that rely solely on employee numbers or net profits, and instead create a sliding scale that takes both of these factors into account, in addition to cost of living in the place of employment. The idea would be to create a rule that gives companies tax breaks in proportion to how far they are from having the means to provide all their employees with a reasonable wage for where they live. Companies already profitable would naturally slide off the scale and have to pay taxes in full.
yankeevet (anonymous) says…
Just bought a loaf of bread; and one head of lettuce;.......cost $5.14...this is just crazy.....the cost of living; food; fuel; clothes; ..........so expensive; no wonder houses are getting forclosed on.
cait48 (anonymous) replies…
Wow! Where do you shop? I can get lettuce for under three bucks and bread for a 1.25. Although it may be sales tax that's adding so much. I recently bought 20.00 and change worth of stuff and paid over 4.00 in taxes on it bringing the total bill to over 25 dollars.
jafs (anonymous) replies…
How are you paying 20% in sales taxes??
Even here, sales taxes are only about 9% now, as far as I know.
cait48 (anonymous) replies…
I dunno. Still looking for the bill.
yankeevet (anonymous) replies…
Target.....grocery
madameX (anonymous) replies…
Try Checkers. Seriously, their prices are awesome.
yankeevet (anonymous) says…
and the lettuce; was rotton inside...................
Agnostick (anonymous) replies…
Lettuce prey...
jafs (anonymous) says…
My ideas:
1. Eliminate fraud and waste in government programs - the CBO estimates we're losing over $100 billion/yr to them - things like 4 year olds getting a homebuyer tax credit.
2. Legalize all drugs, regulate and tax them. This would provide a new revenue stream, and lower our law enforcement expenses.
3. Stop putting non-violent criminals in jail - frees up space and resources for the violent ones.
4. Create strong incentives for businesses to create jobs here, and not outsource them - either simply require it, or structure some tax incentives.
5. Scale back our armed forces to a national defense size.
6. Consider stopping all aid to other countries until we get back on our feet financially.
7. The 8 years of Clinton's administration produced consistently shrinking deficits in the first 4 years, and consistently increasing surpluses in the last 4 - whatever they did worked. Let's do it again.
8. Consider re-structuring SS and Medicare programs to function as insurance programs - ie. only those who need them receive the benefits. And stop collecting separately for them - simply collect tax revenue and use it.
9. Impose certain conditions on banks, insurance companies, etc. that have received bailout money that don't allow them to just sit on the money. For example, we could require banks to lend a certain percentage of their assets (to safe and sound customer loans, of course).
geekyhost (anonymous) replies…
Really? Can you provide me with some reputable links to this CBO estimate about 4yr olds and home buyer credits?
PS - social security is solvent until 2037, and it could be solvent for longer if we'd stop capping payments at $100k. No need for a means test.
Moderate (George Lippencott) replies…
Not true. We have to pay off the trust fund bonds with real money that will come feom you and I
Moderate (George Lippencott) replies…
JAFS
Are you asking me?? I was only addressing the SS solvency issue
jafs (anonymous) replies…
Nope. I was responding to geekyhost.
geekyhost (anonymous) replies…
Dur. That's the point. We pay in. It pays us back. The trust fund bonds represent money people have already paid to the system and is invested in T-bills instead of sitting in a pile of minted but unused cash. So are you suggesting we are insolvent on our own T-bills? That would mean banks and private retirement accounts would be equally insolvent and we all might as well start digging bunkers now, because the entire global economy will collapse if that's the case.
jafs (anonymous) replies…
Well, one problem is that they don't actually keep the funds in the trust fund, and invested the way they're supposed to.
They "borrow" it instead for other uses, so they don't have to raise taxes.
The system would be somewhat better off if they hadn't been doing that for years - the way it works now, it's basically a Ponzi scheme.
jafs (anonymous) replies…
Just google it and you'll find some articles - the 4 year old one may be a little exaggerated, but the point is correct.
Before the government required any paperwork verifying home purchases, many people got the tax credits without buying any houses.
And there are many other examples of people who don't really deserve or qualify for various programs getting money.
It's the CBO's own estimate of over $100 billion/yr - argue with them if you don't think they're right.
It still makes more sense to me to have Social security and Medicare work as insurance programs, used only when needed, even if you're right. Why should people who don't need them get them?
jafs (anonymous) replies…
What do you think of all of my other ideas?
And, do you have any of your own? I was responding to cait above, who asked what people thought we could do to improve the economy.
Liberty_One (anonymous) replies…
"7. The 8 years of Clinton's administration produced consistently shrinking deficits in the first 4 years, and consistently increasing surpluses in the last 4 - whatever they did worked. Let's do it again."
It worked because they did so little. The republicans came in in '94 and we had a semi-gridlock for six years. A few things were done, but especially when the witch-hunt for Clinton started up very little was done to interfere in the economy at all.
jafs (anonymous) replies…
Ok.
So let's restore tax rates to what they were then, at least.
Also, I'm not sure that's true - I think that Clinton and the Republicans compromised and worked together more than the parties are doing right now.
For example, I think the Republicans let him raise marginal tax rates, in exchange for a lowering of the capital gains rate.
Liberty_One (anonymous) replies…
"So let's restore tax rates to what they were then, at least."
As long as we cut spending levels to what they were then, which would mean about a 50% cut, no problem.
cait48 (anonymous) replies…
That can be accomplished by bringing back every troop member from Iraq and Afghanistan and discharging them.
Liberty_One (anonymous) replies…
Sounds good to me. Central banks and standing armies are dangers to liberty.
vertigo (Jesse Crittenden) replies…
Yes, let's discharge 160K+ troops (and thus breaking their contract - hope you don't mind paying for that settlement!) into this economy with our unemployment rate.
If you want to cut military spending troop levels isn't the way to go. Cut civilian contractors working for the DOD? Sure. A lot of the civilians I've worked with in the military do only what is in their job description. If their job description is a forklift driver and you ask them to help you do something besides drive that forklift the answer is usually "No". Nevermind that they aren't doing anything at all at the moment.
You also need to fix the budgeting systems for individual units/bases/wings/divisions/etc...
what I mean by that is come every year in September (end of FY) these organizations rush to spend whatever is left in their accounts so they insure they don't get their budgets cut for the next year. It's a "use it or lose it" attitude. So at the end of every FY you end up with new office furniture thats not needed, new flat screen TVs to add to the collection in the store room where the previous years TVs (still unopened in their boxes) sit, etc.
Units should be able to not be forced to empty their account to insure they get the funding they need for next year. It encourages wasteful spending- and that's precisly what happens.
I think cutting our nuclear stockpile is going to help (Maintenance costs are outrageous) but we can cut even more to reduce that expense.
Look at renegotiating travel contracts. I recently went TDY (temporary duty) to Guam. If I was allowed to purchase my own ticket via expedia or some other website it would've cost me roughly $2500 less than what the government paid for my airfare. And let's not get into what they paid me in per diem since I was lodged off base.
There's so many examples of wasteful spending in the military that I've seen in the last 17 years it's sickening.
Paying the troops isn't one of them.
notajayhawk (anonymous) replies…
1) That works out to a little over $300 per person. A worthwhile goal, but in reality it would cost more to collect than you'd bring in.
The IRS's Law Enforcement Manual spells out very specific tolerances on a line-by-line basis on what can be changed on a tax return, i.e. the amount of a 'mistake' a tax filer can make without taking any action at all. That's because it costs more to make the change than amounts under that threshold would bring in. Some people are very aware of these tolerances - I once had a return cross my desk on which every line on the return was within $5 of the threshold. This is also why people generally don't get audited usually until 3 years or so after the 'incorrect' return is filed. Audits are very expensive (I seem to recall it was over $15K back then), and until the interest and penalties accrue it simply isn't worth it.
Also, a lot of it would be noncollectable. I could show you a simple little trick where a person with absolutely no income can get back thousands in EIC (I've seen it done). I can't publish it here, of course. But if you catch the guy, how do you get your money back? He has no income, probably doesn't own anything worth anything, and if you put him in prison, *THAT* costs a fortune *AND* you still don't get the money back.
If it was 10 individuals or corporations each cheating to the tune of $10 billion, it's worth pursuing. If it's 100,000,000 filers each skimming a grand, it would cost more to collect, especially when there's no way you'd get all of it back.
2) Alcohol is legal. And taxed. And still a major cost to our society.
3) What about financial criminals (e.g. the aforementioned tax cheats)? If they go unpunished, what's to dissuade them from doing it again, and again, and again - what does *THAT* cost us in the long run?
4) What kind of incentives? They'd have to be pretty hefty to make up the difference between salaries here and salaries in Bangladesh. And those tax incentives reduce federal revenues. If you require it, you start runaway inflation by forcing companies to pay higher labor costs for virtually everything we buy.
5) Given the choice, if we're going to fight a war, I'd rather it was on the other side of an ocean than on the shores of North Carolina.
6) That's a good one. But why not do it permanently?
7) Got another dot-com boom lying around anywhere?
8) It already is considered tax revenue, the people that pay in have no ownership rights to what they've paid. However, if you start only giving it back to just some of the people who paid in, it's nothing more than a thinly veiled welfare program.
9) The problem is the banks already want to lend to safe-and-sound customers. That is how banks make money. If you force them to lend more, it will go to those who are not-so-safe-and-sound.
jafs (anonymous) replies…
Well, I got one note of agreement :-)
I'm not suggesting we audit everybody - simple preventive measures would probably be a lot more cost-effective, like requiring proof that you've bought a house to get the home-buyer tax credit. And there are other types of waste as well.
Alcohol sales also provide quite a bit of revenue, don't they? I know that many abuse alcohol and we have assorted problems from that as well. But making drugs illegal doesn't prevent people from using or abusing them and creates a whole host of associated problems (Prohibition didn't work with alcohol - why do people think it will work with drugs?)
I didn't say we shouldn't provide any consequences for non-violent criminals - I just think we shouldn't put them in jail. Why not simply require them to pay back what they've stolen? If I were robbed, that's what I'd want - putting someone in jail doesn't give me back my tv.
Well, tax incentives would reduce some tax revenues, but the jobs created would add some as well. The question of what happens if companies have higher costs is a complex one - part of it depends on how big they are, and their corporate culture, and part depends on whether we structure any sort of regulations. I know you're generally opposed to such regulations, but I think they'd be quite good. Lowering the ratio between CEO/average salaries, for one.
SS collection is collected separately, and benefits are structured relative to your contribution. I think of it as an "insurance" program (according to my father-in-law, that's what it is) - in insurance programs we all pay into them and receive benefits as needed. I don't collect money back from health insurance based on some percentage of my premiums - I get it back in the form of needed benefits. Some will pay in more than they receive, and others less. The idea is to provide a safety net, if things go wrong - millionaires with plenty of assets and retirement income don't really need Social Security, do they?
If the point of giving billions to banks was to stimulate the economy, based on the idea that the money would circulate to individuals and businesses, and the banks don't lend it, it doesn't work as planned.
notajayhawk (anonymous) replies…
"like requiring proof that you've bought a house to get the home-buyer tax credit"
Most tax returns are filed electronically, and virtually all of them are processed electronically. Requiring documentation for various credits that aren't already verifiable by the computers would require a lot of staff and really bog down the system.
"Alcohol sales also provide quite a bit of revenue, don't they?"
The costs associated with alcohol abuse are in the hundreds of billions in this country alone. I don't think we get our money back.
"Why not simply require them to pay back what they've stolen?"
While the Bernie Madoff's may have some assets that can be recovered, most people that do things like embezzling do it because they don't have any money. Restitution is already a requirement for most financial crimes, but the victims rarely get their money back. In any event that's hardly a punishment or disincentive - it wasn't their money anyway!
"tax incentives would reduce some tax revenues, but the jobs created would add some as well"
Not unless we start collecting a whole lot more from individual taxpayers, half of whom pay no income tax.
"I think of it as an "insurance" program (according to my father-in-law, that's what it is) - in insurance programs we all pay into them and receive benefits as needed."
Medicare already works that way. Social Security is really more of a retirement fund, and just like any other pension, you get back more if you pay in more. But the Supreme Court ruled long ago that it's just a tax, they don't have to give you *ANY* of it back. It would be problematic, at best, to say THIS person gets back enough to live on even though he's paid hardly anything in, and THAT person, who's paid in a lot more, gets nothing. I'm sure it's legal and doable. What I said was that just turns it into another welfare program.
"If the point of giving billions to banks was to stimulate the economy ... and the banks don't lend it, it doesn't work as planned"
And again, anything you do to force them to lend more runs the risk of lowering the standards for qualifying borrowers. That's how we got into this mess.
"Stop companies from "off-shoring" their profits - we're losing about $60 billion/year in tax revenue from that practice alone."
No particular problem with that, but again, 1) I doubt you'd collect anywhere near that much, and 2) there would be problems with increased prices from legitimate foreign companies being taxed both here and at home. Any additional taxes collected are eventually going to come out of the pocket of the consumer anyway.
jafs (anonymous) replies…
Well, they recently did start requiring such documentation - I don't have any information about the details of how that's affected things.
Are we spending hundreds of billions of taxpayer dollars on alcohol related problems? If not, it's not an apples to apples comparison.
The figures of $60 billion/yr come from a government office - I forget which one.
But, overall, you don't like my ideas - that's your prerogative. Do you have any of your own? Cait asked what we all thought might help.
notajayhawk (anonymous) replies…
"Well, they recently did start requiring such documentation"
I wouldn't be surprised on the homebuyer credit, it's not so prevalent that checking it would be a huge deal, but I don't think we're talking about a huge amount of money there. Can you imagine if they required documentation for something like the EIC or child tax credit? Yes, you have to have social security numbers - you don't have to have any proof they lived with you (e.g. a divorce decree), unless you end up getting audited.
Wanna' here another funny story about the IRS? I had a return once where the man had attached a letter (completely ignored, as all non-official attachments are, during the input process) saying his wife had left him, she was out of the state and he didn't know where she was. Someone in the department had requested the form saying he had the right to claim the kids as a deduction, can't remember the number. Within a week the form came back, signed by her - with identical handwriting to his. Nobody pursued it.
"Are we spending hundreds of billions of taxpayer dollars on alcohol related problems? If not, it's not an apples to apples comparison."
I believe the last figures I saw were that about $150B or so was in treatment costs. The bulk of that is funded by taxpayers. And the other costs, e.g. the costs to business, also result in a secondary hit on tax revenues.
"The figures of $60 billion/yr come from a government office - I forget which one."
I'm not doubting it. I'm sure we lose at least that much. It's a different matter altogether as to whether that money could actually be collected.
I didn't say I didn't like your ideas. I said most of them wouldn't bring in as much as you hope. I didn't even say they weren't worth pursuing, most of them are worthwhile. I don't think it would be enough to come near solving our problems.
jafs (anonymous) replies…
Uggh - I hate stories like that. If we could improve the functioning of our government, it would be a good thing.
Thanks - it seemed that you didn't like most of them at all.
jafs (anonymous) replies…
One more.
Stop companies from "off-shoring" their profits - we're losing about $60 billion/year in tax revenue from that practice alone.
geekyhost (anonymous) says…
Actually, Cal, Krugman said it wasn't working because Obama only passed a watered down stimulus and jobs bill and hasn't spent enough money, not because the government is saddled in debt, of which Social Security is NOT a contributor. You'd know that if you were actually reading and not cherry picking statements to try to argue for a point that Krugman finds even more fiscally irresponsible than a lukewarm recovery.
geekyhost (anonymous) replies…
And here's a dose of Krugman to illustrate:
"The way the right wants to tell the story — and, I’m afraid, the way it will play in November — is that the Obama team went all out for Keynesian policies, and they failed. So back to supply-side economics!
The point, of course, is that that is not at all what happened. A straight Keynesian analysis implied the need for a much bigger program, more oriented toward spending, than the administration proposed. And people like me said that at the time — we’re not talking about hindsight."
Practicality (anonymous) says…
Richest lawmakers grew wealthier as economy faltered.
The rest of the country is still struggling with high unemployment amid a sluggish-at-best economic recovery -- but the wealthiest members of Congress are in high cotton. Indeed, the top 50 wealthiest lawmakers saw their combined net worths increase last year, according to the Hill's annual analysis of financial disclosure documents.
Combined, the 50 lawmakers were worth $1.4 billion in 2009 -- an $85.1 million increase over their 2008 total -- the Hill reports. The members' total combined assets depreciated by nearly $36 million last year -- but Congress' well-to-do set also reduced their debts by a combined $120 million.
The list of 50 lawmakers spans both parties (27 Democrats and 23 Republicans) and both chambers of Congress (30 House members, 20 senators), the Hill reports.
Here are profiles for the 10 most flush Hill power-and-money brokers:
1. Sen. John Kerry (D-Mass.): $188.6 million.
2. Rep. Darrell Issa (R-Calif.): $160.1 million.
3. Rep. Jane Harman (D-Calif.): $152.3 million.
4. Sen. Jay Rockefeller (D-WVa.): $83.7 million.
5. Rep. Michael McCaul (R-Texas): $73.8 million.
6. Sen. Mark Warner (D-Va.): $70.2 million.
7. Rep. Jared Polis (D-Colo.): $56.5 million.
8. Rep. Vern Buchanan (R-Fla.): $53.5 million.
9. Sen. Frank Lautenberg (D-N.J.): $49.7 million.
10. Sen. Dianne Feinstein (D-Calif.): $46.1 million.
Practicality (anonymous) says…
The reason I posted the above is for this reason:
If the top 50 wealthiest lawmakers are still profiting during the current economy, then the economy isn't faltering for them. It might be exactly how they want it to be.
madameX (anonymous) says…
So I've heard it said in passing in a few news reports lately that investment firms are currently sitting on billions in capital and that is a huge contributing factor to why the economy is not recovering. We can debate all day long until we are blue in the face about what effect the stimulus did or didn't have, or whether it was a good idea, or tax level, or spending or whatever, but I suspect to some extent all of that is beside the point. IMO, the reality is that there's not much the government can do to actually pull us out of a recession. Maybe it can make the situation a little better for a little while (see: stimulus) but it doesn't have the kind of capital and power necessary to actually fix the problem, especially when investors are sitting on their hands refusing to invest.
Most of the rancor that is being heaped on the Obama Administration (and to some extent the Bush Adminstration) ought to be directed at Wall Street. They're the ones who actually have the means to help the economy and they're the one who don't seem to be doing much about it. For the most part they're even the ones who screwed it up. Why are we even debating about what the government should or should be doing to fix a problem it's not in a position to really fix that should't be its responsibility? The market wrecked the economy, it should be the market's responsibility to fix it. I don't know how to make that happen, but I feel like it needed to be said.
Liberty_One (anonymous) replies…
I agree with your conclusion, but not quite on the reasoning. Spending won't do anything. If you go out and spend all your money, you aren't any wealthier. The way you increase wealth is to earn more, and for the economy that means increasing production, not consumption. We need to make more things, export manufactured goods again and stop being a consumption-driven society. This is the real reason why the government cannot fix the problem by spending money.
BornAgainAmerican (anonymous) replies…
Exactly!
camper (anonymous) replies…
"We need to make more things, export manufactured goods again and stop being a consumption-driven society"
Precisely
camper (anonymous) says…
Economic stimulus has not really created long-term jobs. However, it has
prevented our economy from hitting rock bottom and is providing a basic safety net for our economy and many state budgets.
I agree with Madame, but I also feel that the biggest obstacle to our recovery is the the lack of a solid manufacturing base which has been shrinking for the past few decades. I really think it is time to analyze our trade policies. NAFTA has been in place long enough for us to decide its success. In my mind, it has not created new jobs for American Workers (quite the opposite) and it certainly has not seemed to help the plight of the average Mexican worker.
In addition to shipping manufacturing jobs overseas, we are also outsourcing white collar jobs as well. This includes IT professionals who often train their foreign replacements to engineers in China who are working for high tech US Multi-National corporations. All of this is putting downward pressure on US wages because there is no way the US worker can compete with this. This cycle of outsourcing jobs will continue to repeat itself if nothing is done, and the labor market will become a worldwide pool.
We desperately need our leaders to restore the playing field for American workers. Once this is done, the economy will gradually improve. But until then, I promote stimulus. But if we do stimulus, let's atleast do something that will benefit future generations (since we will be handing them the bill). Things like mass transit and renewable energy infrastructure.
BornAgainAmerican (anonymous) replies…
I was with ya' camper until the part about stimulus...it simply doesn't work.
camper (anonymous) replies…
That's ok BornAgainAmerican.
Moderate (George Lippencott) replies…
Good reasoning. If we are to pump prime perhaps we could better direct the resources to obtain long-term relief by retraining those to whom we provide money. People in the reduced circumstances of unemployment even with aid do not buy beyond necessities.
Investments in renewable energy will not help the unemployed in the short haul - it is money to the better off (thinkers and investors) - yes, a bit trickles down to construction workers - probably not to line production workers.
Whether we like it or not domestic consumption drove our economy and the lack of it is driving our problems. Changing the model might take a long time. Perhaps we should just try to restart the engine before we replace it with something untried.
In our economic system business (down the street) makes investments in jobs. Investment usually comes from the market. In our society, that investment is driven by a search for reward (lender and borrower). One really good way to limit investment in new jobs is to introduce uncertainty (labor cost uncertainty, regulatory uncertainty, tax uncertainty and so on). There should probably be a rule that whatever big initiatives a new administration is going to undertake are done in the first two years and then we have a moratorium to allow the market to adjust and rebound. Alternatively, we could nationalize everything and cut the “market” out of the equation?
merrill (anonymous) says…
With 23 million looking for full time employment, bouncing back from the Bush/Cheney fraud on the financial system and the tax payers will take a lot more time as predicted.
Until the greater majority demand new industry with OUR tax dollars to provide new jobs FOR the jobless who want to support the USA economy the economic outlook will remain bleak.
How about some socialism for small business,the self employed and the unemployed to get the economy "smokin" again.Lawrence has plenty of older existing infrastructure going to hell due to mismanagement of local tax dollars. The USA has tons of infrastructure that needs attention which could employ tons of people for the next 3 years easily.
New "Clean Energy" projects could do the same. Other jobs in OUR local communities will be the end result!
Ending the multi trillion war completely will be a huge step and fewer soldiers will come home in boxes.
Republicans have no intention of working with Pres. Obama. Not from day one.
notajayhawk (anonymous) replies…
And he's done what to work with them, mertle? What happened to including the Republican proposals in the final health care bill, like he said he would do? That an example of bipartisanship to you?
Clowns like you, mertle, really almost make me wish the Democrats would stay in power for a while. I'm just curious as to how far down the tubes the country can go, and for how long, before you come up with one thing besides "Bush's fault!" "Bush's fault!" Bush's fault!".
Guardian (anonymous) says…
I admit Bush was not a fiscal conservative, but where Bush's economic policies were a fender bender, Obama's are a train wreck.
vertigo (Jesse Crittenden) says…
We often hear the argument that only 50% of the nation pays taxes. But what we don't hear complaints about are how companies use transfer pricing to cut their taxes owed- and it costs us $60 Billion in tax revenues a year.
Take Forest Labratories, Inc for example. They are the U.S. drug manufacturer who produces Lexapro. It's made in the U.S., by a company in the U.S. and is only for sale in the U.S.; yet through transfer pricing they shift those profits to an offshore subsidiary (sometimes nothing more than an unmanned office) thus bypassing any U.S. taxes.
Read more: http://www.bloomberg.com/news/2010-05...
merrill (anonymous) says…
Restore America's Values = Keep the republican party crooks out of power which has been a real problem for the past 30 years. Each repub admin beginning with Reagan/Bush has had questionable war motives,taking financial institutions down and other criminal activity.
Let's put america back to work!
With 23 million looking for full time employment bouncing back from the Bush/Cheney fraud on the financial system and the tax payers will take a lot more time as predicted.
Until the greater majority demand new industry with OUR tax dollars to provide new jobs FOR the jobless who want to support the USA economy the economic outlook will remain bleak.
How about some socialism for small business,the self employed and the unemployed to get the economy "smokin" again.Lawrence has plenty of older existing infrastructure going to hell due to mismanagement of local tax dollars. The USA has tons of infrastructure that needs attention
which could employ tons of people for the next 3 years easily.
New "Clean Energy" projects could do the same. Other jobs in OUR local communities will be the end result!
Ending the multi trillion war completely will be a huge step and fewer soldiers will come home in boxes.
merrill (anonymous) says…
Obama would not need to be creating jobs if Reagan/Bush and Bush/Cheney had not cost the country 23 million jobs and tons of retirement money. With support from Brownback,Tihart and Moran.
Their New World Order global economy plan has promoted communist China by way of millions upon millions upon millions of USA white collar and blue collar jobs = lost industry = lost USA wealth in partnership with corporate america.
The Reagan/Bush savings and loan heist was considered the largest theft in history at the time. George Herbert Walker Bush then took $1.4 trillion of taxpayers money to cover the theft.
This Savings and Loan theft ripped off tons of retirement programs tied to the savings and loan institutions in which retirees never got one penny back. A large number of these retirees were forced back into the job market to supplement their Social Security. Yes these folks would have been completely devastated if THEIR Social Security and medicare had not been there. White collar criminals are a huge threat to the USA economy.
Bush/Cheney admin basically did a repeat performance of what Reagan and Daddy Bush pulled off.
If you study the facts you likely would not vote republican for several decades.
The Global Economy, New CHINA World Order and Reagnomics are absolute failures for the USA!!!
camper (anonymous) says…
Economic stimulus is not designed to create long-term jobs. Its purpose is to act as an economic safety net until the private sector economy rebounds.
Right now there are some long term issues that need to be addressed such as job outsourcing, trade imbalances, and manufacturing declines. And these will take a decade or more to fix. President Obama addressed some of these issues in the campaign debates, but so far I have not seen a bill proposed to remedy any of this (ie something like repealing NAFTA). It is sad, that anything the President will propose these next two years, even if it was a100% guarantee to support new jobs, it is going to be opposed by the other party. And all this will do is waste more time and/or force us to keep using stimulus as an artificial adrenaline to keep the economy from free-fall.
overplayedhistory (anonymous) says…
Redistribution Is a word that has to be carefully defined.
When banks wager our deposits and everyone except them looses I call that redistribution too.
jafs (anonymous) replies…
Amen!
notajayhawk (anonymous) replies…
It is a form of redistribution, but not in the sense you think. The redistribution isn't from the banks customers to the bank.
The bank in a way redistributes money from the depositors to the borrowers, in the same way a blackjack dealer or bookie redistributes money from the losers to the winners, or an insurance company redistributes money from people that don't submit claims to people that do. But the casino or bookie, the insurance company, and yes, the bank, always makes money because they're not so much a party to the transaction as a facilitator of it, and they get fees for providing that service.
jafs (anonymous) replies…
Normally, perhaps.
But in the recent meltdown, the banks were speculating with our money, lost and then were bailed out by the government.
They got billions in money to help them out, while the average guy with a 401K plan saw their retirement savings drop dramatically.
In the old-fashioned "It's a Wonderful Life" banking system, your description is accurate. And, it's a better system, to my mind, in many ways.
notajayhawk (anonymous) replies…
Then maybe they shouldn't have been bailed out. Except the people whose money they lost were just as responsible as the banks and other financial institutions were.
Especially as it's a voluntary redistribution. It's not the casino's fault player B takes all of player A's money. And the people that had those investments, without a care in the world except seeing whether those quarterly statements were showing their little nest egg building, nobody stole their money, they gambled with it - and lost.
jafs (anonymous) replies…
I questioned the bailout when they were first proposed - I never understood exactly how everything was going to come tumbling down if we let some businesses fail. But then the folks working at the banks who had no responsibility for the bad investments get hurt as well.
I'm not sure the analogy is completely correct - many of the securities were rated highly, so that investors thought they were safer than they were - most pension plans (or people saving for retirement) wouldn't choose to invest in highly risky speculative investments.
In fact, that's the lynchpin of the whole mess, that credit rating agencies were paid by issuers of securities - that's like letting home sellers pay for the appraisals.
Of course, you have to wonder - either the banks didn't know the securities were backed by sub-prime mortgages, in which case they didn't do their "due diligence", or they thought they deserved an "AAA" rating, which means they were stupid.
Moderate (George Lippencott) replies…
JAFS Perhaps I do not understand our system.. I though the banks (Fanny and Freedy) packaged those rotton assets in portfoilios and sold them to all of us. The banks profited form the sale but fanny and freedy are federally driven assets - who was rsponsible for dur deligence?. Perhaps the blame lies beyond your general statement of the bankers and in part with the politicians who drove very risky loans through the mortage market by regulation!!
jafs (anonymous) replies…
It's complicated.
Fannie and Freddie are both mortgage lenders, and businesses that buy bundled and securitized loans.
There were also many other banks and mortgage companies that made bad loans, bundled and sold them.
I'm pretty sure that the most egregious abuse was from private mortgage lenders, who made loans without any documentation, etc.
And, the credit rating agencies are definitely very at fault - without their collusion, the securities issuers wouldn't have been able to sell the risky investments as good ones.
People who cite the Community Reinvestment Act as the problem don't even read the Act - it states that the loans are to be "safe and sound" - so that wouldn't have created a whole mess of bad loans (unless of course the criteria are ignored).
madameX (anonymous) replies…
Also, as I understand it, the majority of the loans that later went bad were originated by lenders who aren't regulated by the CRA. The CRA basically says that if you take in deposits from a certain customer base the you have to make a certain percentage of the your loans to that same customer base. Or maybe it's geographical area, I'm not sure, but the point is that many, many, many of the toxic loans were originated by brokerage houses and such that got their money straight from investment banks and as lending entities that did not get thier capital from customer deposits were outside the authority of the CRA. Also, I suspect that banks that take deposits from customers nationwide (US Bank, I think Wachovia, etc.) are outside the regualtion of the CRA becuase the "community" from which the get their capital is the whole country.
Also, it was Bill Clinton who changed the rules so that adjustable rate mortgages acquired by Fannie and Freddie would count towards their quotas affordable loans, and he's already come out and said what a bad thing to do that turned out to be.
So in my non-expert opinion it was a little from column A and a little from column B, but I don't think the fallout would have been nearly as severe if the problems had been limited to Fannie and Freddie.
MyName (anonymous) says…
So what, Cal is an Economist now? Dunce of all trades, master of none, I guess. At least he's got some relatively harmless ideas he's parroting in this week's talking points regurgitation. Too bad he's not specific about what he'd actually like to see cut in order to balance the budget (besides "waste").
snap_pop_no_crackle (anonymous) replies…
Don't be so coy. Tell us what you really think.
Moderate (George Lippencott) says…
Camper,
Yes, but at the end of the day the unemployed are still unemployed and their reduced circumstances did little to restart the economy. Perhaps if after six months of unemployment we had required them to participate in a retraining program they might at the end of the day be employable.
We frequently accuse our generals of fighting the last war. Truth in that paid in blood. It seems to me our economic policy makers are fighting the last economic war and we are paying for their less than adequate decisions in treasure and human suffering.
By the by, not all the stimulus money went to anything useful in the economy. A measure went to establish programs long sought by the Democrats that did little to improve the economy and have now created a massive annual deficit (twice annual income). That in itself depresses economic growth.
jafs (anonymous) replies…
Yes, and I was disappointed in the Democrats for that.
I thought they should have focused on only those things likely to have positive short-term effects, and waited until the economy improved for the other projects.
Liberty_One (anonymous) replies…
"And, the analogy with oil would be better if the government bought it and sold it for the same price, not half price. Then it wouldn't have such drastic consequences."
But you're wanting to offer low interest loans. If the market rate is 6% and your loan is 3% then that's half price. And the consequences are very drastic.
"But wouldn't a solution be for people to simply be more realistic in their projections?"
The problem isn't unrealistic projections, it's bad information. The low interest rates are conveying false information about the supply of loanable funds. When we see one bank fail, it was likely because it was run poorly. When we see the entire banking industry fail simultaneously, all making the same mistakes, is it because they were all run poorly the exact same way or because they all had bad information that lead them all to the same incorrect decisions?
"That would mean that the market could support one of those or two of the government funded businesses."
That's the thing, the rate of interest indicates what the market can support. It is the price of borrowing money which is based on the supply and demand of loanable funds. If the market can only support one, then it can only support one. Giving low interest loans only means we can *fund* two stores but that is conveying false information. The future customers won't be spending enough to support two. If the market can only support one, then it can only support one.
Prices mean something--they convey information. Artificially changing prices does not change the reality of the information they would have conveyed. The point of the oil example was that even though the price would appear to have gone down, the reality of diminishing supply did not change. You can lower interest rates, but the reality about the information that caused those interest rates to be where they were does not change. Just like there wasn't an abundance of oil that was keeping prices low, there is not an abundance of future customers that will support these businesses.
jafs (anonymous) replies…
Sorry about the triple post - something's screwy with the JW.
The banking problem, as we've talked about, seems to me was related to the ability of banks/mortgage companies to bundle and securitize the loans, and the credit rating agencies (paid by the issuers, which is an obvious conflict of interest) rating them highly even though they were risky investments.
As long as you can sell your loans, and transfer the risk somewhere else, you don't care about the soundness of them.
Home loans are the same way - let's say we have a number of people who can't afford a regular bank loan at 5% interest, but could afford a no-interest loan.
Why shouldn't the government make no-interest loans available to those people? We'd have more homeowners, which brings a variety of benefits to individuals, working people, and neighborhoods, and we'd get our money back.
In fact, that's my proposal - the government should have a revolving loan system of no-interest loans for small businesses and homeowners.
There should, of course, be guidelines, and the business plans should be sound, and the prospective homeowners with decent credit and able to pay back the loans.
Liberty_One (anonymous) replies…
"And, the analogy with oil would be better if the government bought it and sold it for the same price, not half price. Then it wouldn't have such drastic consequences."
But you're wanting to offer low interest loans. If the market rate is 6% and your loan is 3% then that's half price. And the consequences are very drastic.
"But wouldn't a solution be for people to simply be more realistic in their projections?"
The problem isn't unrealistic projections, it's bad information. The low interest rates are conveying false information about the supply of loanable funds. When we see one bank fail, it was likely because it was run poorly. When we see the entire banking industry fail simultaneously, all making the same mistakes, is it because they were all run poorly the exact same way or because they all had bad information that lead them all to the same incorrect decisions?
"That would mean that the market could support one of those or two of the government funded businesses."
That's the thing, the rate of interest indicates what the market can support. It is the price of borrowing money which is based on the supply and demand of loanable funds. If the market can only support one, then it can only support one. Giving low interest loans only means we can *fund* two stores but that is conveying false information. The future customers won't be spending enough to support two. If the market can only support one, then it can only support one.
Prices mean something--they convey information. Artificially changing prices does not change the reality of the information they would have conveyed. The point of the oil example was that even though the price would appear to have gone down, the reality of diminishing supply did not change. You can lower interest rates, but the reality about the information that caused those interest rates to be where they were does not change. Just like there wasn't an abundance of oil that was keeping prices low, there is not an abundance of future customers that will support these businesses.
jafs (anonymous) replies…
But that analysis leaves out the fact that the businesses with lower repayments on their loans can charge less for their products.
Let's say the government offers no-interest loans, and businesses which get those loans can charge 1/2 as much for their products as those which get commercial loans.
Then the same amount of consumer dollars can be spent at 2 businesses instead of 1.
So, instead of buying an ice-cream cone - I can buy an ice-cream cone at one store and something else at another store, for the same amount of money.
Then, 2 businesses can flourish, with all of the benefits that accrue, and consumers can get more goods for the same amount spent, which benefits them as well.
The only losers in the equation are the commercial lending banks - but if the businesses wouldn't be able to pay those loans back, they wouldn't have gotten them in the first place.
Sounds good to me all around.
Now, you'd have to have some way of making sure that you aren't using the government loans for businesses that would be able to get the private ones, of course. That would mess things up.
Liberty_One (anonymous) replies…
"Let's say the government offers no-interest loans, and businesses which get those loans can charge 1/2 as much for their products as those which get commercial loans."
If that were the case then both businesses would fail. If interest is such a large part of costs that you'd have to double your price to make a profit, how could you possibly compete with existing businesses that are far less leveraged?
Regardless, this isn't even a possibility. Other than banking, no industry has costs so low that interest makes up such a large part of the price. A gas station buys gas for $2.45 and sells it for $2.50. You can't fund two gas stations and expect them to charge half the price just because their loan payments are a little less. Bakery, hotel, auto repair garage are all going to have fixed and variable costs that aren't going to change because their loan payments are a little less.
In addition, if you fund more businesses, they are going to buy more capital goods, and as demand increases so will the price. So they are even more likely to fail because their predictions for costs were based on false information--the factors of production were bid up. Now the freezer for your ice cream parlor cost you more than you anticipated and you have to charge more.
Since the prices of the capital goods went up, what's going to happen? Next year they're going to make more, of course, because they believe, falsely, that the rising price indicates sustainable rising demand. But what happens when my cupcake store and your ice cream parlor goes out of business? Your freezer and my oven get sold to the highest bidder. But remember the freezer manufacturer and the oven manufacturer thought the increasing price meant more demand, so they made more this year? Well now much cheaper, slightly used ones are available, and they're left with a large warehouse full of unsold stuff. So we laid off our staff, and now the manufacturers have to lay off some of their staff too because they're cutting back on production.
By giving out these low or no-interest loans you've distorted the market down an unsustainable path. It sets off a chain of mistakes that all catch up to us simultaneously. This mistakes ripple through the economy and thus while the economy is correcting the structure of production people are getting laid off, businesses are closing or reducing production and we go into a recession.
Your idea actually is exactly what the government did after the 2001 recession. Interest rates were lowered to practically zero and what I'm describing is exactly what happened. Ron Paul even predicted this in 2002--that we were creating a housing bubble which was a distortion of the economy. The securities are just the means by which the asset bubble was spread. Someone was going to be left holding the bag on those low-interest loans that should have never been.
jafs (anonymous) replies…
Well, we'd have to do the math.
But I know for a fact that even a 5% interest rate on a mortgage means you're paying back about twice the cost of the loan over 30 years.
So I don't think it would be just a little bit less.
The other factors about demand and cost seem valid, but again you assume these businesses will fail, which doesn't seem proven to me.
And everybody in the chain could be more intelligent - for example, businesses could estimate costs with fudge factors built in, manufacturers could not jump to the conclusion that demand was going to continue to go up, etc.
And, again, the housing loan problem was directly related to the fraudulent ratings of the securities - without that factor, this never would have happened. And, of course, the loans that shouldn't have been made wouldn't have been, if everyone didn't think they could just sell them to someone else.
So the idea of no/low-interest rate loans for sound buyers is still a good idea - if that's all that had been done, we wouldn't have had the massive foreclosures we have had.
Liberty_One (anonymous) replies…
"Well, we'd have to do the math.
But I know for a fact that even a 5% interest rate on a mortgage means you're paying back about twice the cost of the loan over 30 years."
I'll give you an example. I worked in a gas station for several years, it was eventually sold, but here's some examples of rounded numbers. Buy a gas station for $4 million with $400K down and $3.6 million loan @ 5% interest = maximum of $180k interest per year. A gas station can easily make $3-4 million per year in total revenues. Gasoline usually is only a few cents of profit, the convenience store items cost about 66% of their price, and things like coffee and fountain soda cost less. Then there's labor, electricity, maintenance, theft, etc. When it comes to the price of a gallon of gas or a snickers bar, the interest is only a small %. There's no way you could cut prices in half just by losing the interest. However, in business profit margins are razor thin--only 2% for gas stations. So if your yearly revenues are $3 million, that's only $60k profit, but at a $400k investment that's a good return of 15% on your money. However, as you can see an increase of only 2% interest would completely wipe out your earnings. Decreasing interest to zero would not allow you to charge half price though--not even close.
You also said the manufacturers could run their businesses better to avoid production mistakes. But it's not that simple. They don't know they are making a mistake at the time. Prices are information, and they are getting bad information. But there's no way for them to tell that their particular product is overpriced or underpriced because of government intervention somewhere else in the production chain. For example, the cupcake stores and ice cream stores were driving up the price of commercial kitchen machines. That in turn drove up the price of the steel that went in those machines. Steel is a fungible good--the price goes up whether it's being used in cars, bedsprings or commercial-grade ovens. So how does the steel manufacturer who sells steel to make engine blocks able to know that the price increase that's going on the market is due to market forces or government intervention?
You don't believe me that these businesses will fail. Using the example from above, I'll explain why in the next post.
jafs (anonymous) replies…
I see your point about the pricing - one could lower prices a bit, though, and still make enough profit, no? Using your example, that would be $15,000/month that you would save, and thus pass on to the consumer.
Also, in the residential market, prices don't fluctuate that much for stoves, refrigerators, etc. Unless the commercial market is significantly different, it wouldn't respond that quickly to a slight increase in demand.
And, there is the opposite problem as well - right now, lower consumer demand, reluctance on the banks' part to lend, and businesses not wanting to take a chance means that the commercial kitchen guys aren't selling anything much - hard to stay in business that way.
I was imagining a scenario in which one could borrow the total start-up costs plus a little bit to cover overhead for a bit, and a grace period before the loan started to get paid back.
Liberty_One (anonymous) replies…
Now those businesses that got the loans could not have got them on the free market because they were not profitable enough to pay them back. Prices are information, and the higher interest rate indicates that there would not be enough future spending to support these businesses.
All businesses need some amount of capital goods like machines and buildings to operate their business (if they didn't need these they wouldn't need the loan in the first place) as well as various raw materials, labor and other inputs. Since there are more businesses than would otherwise exist, demand for these inputs increases and thus so do the prices of these inputs. Other businesses that also buy these inputs now have to pay higher prices. In the above example it was steel for engine blocks. So now cars cost more money to produce and their price will have to go up higher than it otherwise would have been. So while maybe my cupcake store and your ice cream parlor can offer reduced prices, people have to pay more money for their cars now. So the problem is that the car manufacturer had a product that people were already willing to pay enough for that it didn't need a government no-interest loan to operate. That means people wanted the cars. Our businesses couldn't get off the ground without the no-interest loan, meaning people were not willing to pay a price high enough to make either business profitable. That means people wanted the cupcakes and ice cream less than they wanted the cars. So this situation can only last so long. We, as a society, are producing more of things people don't really want, and less of the things they do really want.
The entire production chain has become skewed from where it would have been. The only cure is massive layoffs, business closings and liquidation so that capital goods, resources and labor can be shifted towards more profitable uses. Prices convey important information. Changing the price doesn't change the reality behind that information.
jafs (anonymous) replies…
There would not be enough spending to support the businesses if they have to pay prevailing interest rates, but very well may be if they don't have to pay those. People who can afford to pay outright for businesses open them without having to charge more - why doesn't this have the same effect?
And, businesses don't have to raise prices if their costs go up - they could also change their executive compensation, or lower their profit margin, etc.
Oil companies are/have been making record profits - to the tune of $35 billion/year. If their costs go up a little, they can easily keep prices constant and simply make a little less profit.
By the way, the oil example is interesting, given that OPEC controls the supply in order to keep prices where they want them - hardly a good situation.
Given the current mess, it seems that you're suggesting we simply accept it and do nothing - I fail to see how that will improve anything. Businesses are not going to start hiring people for no reason - banks are not going to start lending money for no reason, etc.
Finally, the "free market" approach you favor is, at the heart of it, brutal, and includes the failure of many businesses, which means many people have to suffer quite a bit. Also, when businesses fail and go bankrupt, their suppliers and creditors suffer as well.
It's hardly a panacea.
jafs (anonymous) replies…
But that analysis leaves out the fact that the businesses with lower repayments on their loans can charge less for their products.
Let's say the government offers no-interest loans, and businesses which get those loans can charge 1/2 as much for their products as those which get commercial loans.
Then the same amount of consumer dollars can be spent at 2 businesses instead of 1.
So, instead of buying an ice-cream cone - I can buy an ice-cream cone at one store and something else at another store, for the same amount of money.
Then, 2 businesses can flourish, with all of the benefits that accrue, and consumers can get more goods for the same amount spent, which benefits them as well.
The only losers in the equation are the commercial lending banks - but if the businesses wouldn't be able to pay those loans back, they wouldn't have gotten them in the first place.
Sounds good to me all around.
Now, you'd have to have some way of making sure that you aren't using the government loans for businesses that would be able to get the private ones, of course. That would mess things up.
jafs (anonymous) replies…
But that analysis leaves out the fact that the businesses with lower repayments on their loans can charge less for their products.
Let's say the government offers no-interest loans, and businesses which get those loans can charge 1/2 as much for their products as those which get commercial loans.
Then the same amount of consumer dollars can be spent at 2 businesses instead of 1.
So, instead of buying an ice-cream cone - I can buy an ice-cream cone at one store and something else at another store, for the same amount of money.
Then, 2 businesses can flourish, with all of the benefits that accrue, and consumers can get more goods for the same amount spent, which benefits them as well.
The only losers in the equation are the commercial lending banks - but if the businesses wouldn't be able to pay those loans back, they wouldn't have gotten them in the first place.
Sounds good to me all around.
Now, you'd have to have some way of making sure that you aren't using the government loans for businesses that would be able to get the private ones, of course. That would mess things up.
Moderate (George Lippencott) says…
see:
http://www2.ljworld.com/weblogs/loyal...
snap_pop_no_crackle (anonymous) says…
Green jobs! Woo Hoo!
"Add Jesse Jackson’s ride to prominent vehicles being stripped in Detroit.
Following the embarrassing news that Mayor Dave Bing’s GMC Yukon was hijacked by criminals this week, Detroit’s Channel 7 reports that the Reverend’s Caddy Escalade SUV was stolen and stripped of its wheels while he was in town last weekend with the UAW’s militant President Bob King leading the “Jobs, Justice, and Peace” march promoting government-funded green jobs.
Read that again: Jackson’s Caddy SUV was stripped while he was in town promoting green jobs.
Add Jesse to the Al Gore-Tom Friedman-Barack Obama School of Environmental Hypocrisy. While preaching to Americans that they need to cram their families into hybrid Priuses to go shopping for compact fluorescent light bulbs to save the planet, they themselves continue to live large..."
http://www.detnews.com/article/201009...
jafs (anonymous) replies…
Yes, because hypocrisy and corruption only exist on the left side of the aisle.
Moderate (George Lippencott) replies…
No JAFS, because they are human nature.
I will remind you that nobody of note on the right is demanding I drive a little car to a local HW store to buuy energy efficient bulbs.
Living large is part of our culture. Demanding that the little people sacrifice is getting a bit old - when it come from the national or local true belivers. My house is too big says the man. Gore has three of them (at least) all much bigger than mine and I at least use mine.
jafs (anonymous) replies…
Of course - that was my point.
No, the right just demands that people work harder for less money and fewer benefits, act sexually in ways that are acceptable to them, hate Muslims, etc.
Nobody's "demanding" anything yet - you are still free to buy large houses, cars, etc.
Personally, if I were king of the world, I would in fact demand that all products were environmentally sound - then everyone could choose without destroying the planet.
Gore is wrong to have mansions he doesn't use - that doesn't make it any better for me to do the same.
The fact that "living large" is part of our culture is a large part of the problem - but I see evidence that that mindset is changing, which I take to be a good thing.