The Stimulus Package Unleashed

[Gaspar]

quote:Originally posted by waterboy

I had a 48% increase in operating revenues yesterday. Someone bought me lunch.

It was easy to show great gains under Reagan. Since 1984 represented a pretty piss poor economic time period, we had nowhere to go but up. The joke at the time was, "if you're paying any taxes now, fire your tax accountant". That downward cycle was different in nature than this one and not as severe. Assuming a tax cut will cure this mess is just partisan posturing.

Ah, the simplicity of the republican mind. Just cut taxes, cut the tax rate, etc. Problem is, a tax cut for the lower 3/4 of the population only goes towards basics or reclaiming lost ground. They are debt squeezed, facing rising expenses for  utilities, food, real estate taxes and transportation. Meanwhile, their jobs are shaky, they are having to forego raises & bonuses (excepting the big boys) they face increased pressure and responsibility as management realizes they can now stick it to their employees in the name of "the economy". Exxon posted record earnings this morning. Q4 earnings for Office Depot matched the previous year.  

On the other hand, the banks didn't pump their bailout money into the economy and historically the top tier of taxpayers don't spend their new tax savings. They don't need to. That leaves even less for government to work with to provide services. Or...is that republicans see as a corollary benefit?

This complex problem economy is going to require more than simplistic thinking. Taxes are only a small part of the answer.

I have to agree with that.  It is a small part of the answer.  Consumer confidence has a lot to do with it.  But taxes and regulation are really the only factors that government has control over.  

Let me make it super simple (since that's the way MY mind works)!  

Like a carriage driver, taxes & regulations are the reigns.  Loosen them and the horse is more comfortable and moves at a steady clip.  Tighten them and the horse is less comfortable, and slows to a stop.  

Stimulus in the form of rebates are the whip, they produce a burst of speed but are ultimately short lived, requiring more energy that must be recouped later, and constant whipping causes the horse to become calloused to the stimuli.

You see, the reigns are tightening, and the horse has learned to ignore the whip!  

[cannon_fodder]

This thread is a great microcasm of what's wrong with the 2 party system.  It is binary.  You are either ON or OFF.

Everyone agrees that something should be done.

Most people disagree with the current bill.

But one party has the votes so it will pass.

A multiparty system would require more cooperation instead of "I win" it would have to be "we win."  Party's could live and die.  Minority voices would be heard.  Even some new ideas might come and go.

[cannon_fodder]

A useful comment as always...

Voting is yes or no?  Really.  I had no idea.  Thanks for clarifying that for me.

If you actually think about the statement, I was referring to support for the measure not voting on the meassure.  Most people disagree with the bill as it currently stands but because we have a two party system there is pressure for all Democrats to vote for it - lest they side with the Republicans.  They can not stand up and say "it is a good sentiment, but needs to be changed in XYZ way to be more effective."  You don't cross party lines.

If you throw other parties into the mix that issue fades away.  People could vote on the MERITS of a measure instead of what party is told to support it.  90% of votes of the average member just follow the party whip - they do what they are told by the party.

quote:Timmay saidthe Dems had 11 traitors vote agin the bill and why the Senate will have GOP go-along-types that will support it

And there's my point.  From your perspective a Democrat who doesn't do what he is told by the party is a traitor, a Republican who votes along with the Democrats is a "go-along-type."  Following the marching orders of the 2 party system or be mocked.

I say that I would like to see the system require cooperation and dialogue to get things done, you respond that a vote is "yes or no."  Thanks again for your enlightening comments.  The discussion is certainly better for knowing what buttons are on the senate floor.

Way to encourage dialogue.

[cannon_fodder]

Are you trying to say that you are a fan of the 2 party system?

Actually, are you trying to make a point at all or just trying to be obnoxious?  Your last 3 posts can be summed up as "nah uh." Great discussion.  I'm sorry I attempted to engage you.

[Gaspar]

quote:Originally posted by tim huntzinger

quote:Originally posted by Gaspar

quote:Originally posted by waterboy

I had a 48% increase in operating revenues yesterday. Someone bought me lunch.

It was easy to show great gains under Reagan. Since 1984 represented a pretty piss poor economic time period, we had nowhere to go but up. The joke at the time was, "if you're paying any taxes now, fire your tax accountant". That downward cycle was different in nature than this one and not as severe. Assuming a tax cut will cure this mess is just partisan posturing.

Ah, the simplicity of the republican mind. Just cut taxes, cut the tax rate, etc. Problem is, a tax cut for the lower 3/4 of the population only goes towards basics or reclaiming lost ground. They are debt squeezed, facing rising expenses for  utilities, food, real estate taxes and transportation. Meanwhile, their jobs are shaky, they are having to forego raises & bonuses (excepting the big boys) they face increased pressure and responsibility as management realizes they can now stick it to their employees in the name of "the economy". Exxon posted record earnings this morning. Q4 earnings for Office Depot matched the previous year.  

On the other hand, the banks didn't pump their bailout money into the economy and historically the top tier of taxpayers don't spend their new tax savings. They don't need to. That leaves even less for government to work with to provide services. Or...is that republicans see as a corollary benefit?

This complex problem economy is going to require more than simplistic thinking. Taxes are only a small part of the answer.

I have to agree with that.  It is a small part of the answer.  Consumer confidence has a lot to do with it.  But taxes and regulation are really the only factors that government has control over.  

Let me make it super simple (since that's the way MY mind works)!  

Like a carriage driver, taxes & regulations are the reigns.  Loosen them and the horse is more comfortable and moves at a steady clip.  Tighten them and the horse is less comfortable, and slows to a stop.  

Stimulus in the form of rebates are the whip, they produce a burst of speed but are ultimately short lived, requiring more energy that must be recouped later, and constant whipping causes the horse to become calloused to the stimuli.

You see, the reigns are tightening, and the horse has learned to ignore the whip!  

Help me out I do not remember attempting to manipulate the economy with 'rebates' or whatever until last year.  Given that, how do you know they do not work?

Did local GOP elected officials refuse to cooperate with The List or did they submit a bunch of 'shovel-ready' projects with the other inmates?

You forget the 2001 rebates of $600 to combat a decline after 911.  

I'm sure you also think that 911 was an evil government plot hatched by that evil George Bush.

Anywho... The rebates were ineffective in creating lasting change, so they instituted the evil 2003 "GB tax cuts for the rich" (fancy name for across-the-board tax cuts) and the economy jumped 32%, and 5 Million jobs materialized over the next two years.

Because pro-growth tax cuts are not designed simply to "put money in people's pockets," their proponents do not focus on whether recipients are rich or poor. Tax relief policies should be designed to maximize long-run economic growth, which in turn raises incomes across the board. Thus, raising marginal tax rates on "the wealthy" to finance tax rebates from low-income families may satisfy a redistributive agenda, but it would also reduce economic growth and eventually lower incomes across the board. It is better for everyone to reduce tax rates across the board and encourage all Americans to work, save, and invest. Daniel J. Mitchell, Ph.D.

...but don't let any of this jade your argument.  
Continue.

[cannon_fodder]

Tim,

One simple question, if "rebates" (they were also distributed to people who paid no taxes, how is that a rebate?) are key to economic prosperity, why not just have the government give all citizens $10,000 every year?  Why not $100,000?

At some point that money has to be repaid.  The government will have to take $1200 out of the economy to repay the original $600.  In the long run, it is a net loss.  Hence, they should be used sparingly.

And tax refunds?  If they didn't take excess money the spending would have fed the market earlier.  Tax refunds as economic stimulus is a bit like saying a good ER helps gang violence.

[Gaspar]

Tim,
Rebates work like a whip to the horse, for a very short period of time, after that the economy rebounds.

Don't just site "Dudes" until you actually read their research.  You took a convenient little snippet from a much larger piece of research.

In the NBER formal Report To the President, they state that rebates are ineffective but for a short time.  They even have some wonderful graphs and data.  Thanks for the resource.

An economic stimulus was proposed by the President in January and passed by Congress in February, authorizing about $113 billion in tax  rebate checks to low- and middle-income taxpayers and allowing 50  percent expensing for business equipment investment.  The stimulus likely  boosted GDP growth in the second and third quarters above what it might have been otherwise, but its influence faded by the end of the year. NBER 2009 Report To The President

It's like Afrin.  A couple of sprays clears your sinuses immediately, but you pay for it 12 hours later when you can't breathe at all.

I'm afraid you wont find any statistical evidence to the contrary.  Even if you scour Huffington or Salon.

[nathanm]

quote:Originally posted by Gaspar


Anywho... The rebates were ineffective in creating lasting change, so they instituted the evil 2003 "GB tax cuts for the rich" (fancy name for across-the-board tax cuts) and the economy jumped 32%, and 5 Million jobs materialized over the next two years.

More likely the loosening of the credit markets to the point that anybody who could sign their name could take out tens of thousands in unsecured debt and homeowners HELOCing themselves up to their eyeballs caused the jump in the economy.

Most of the growth was in the service sector.

Reagan's tax cuts were also overshadowed by loosening of monetary policy by the Feds thanks to inflation having been taken out in a significant way by the second year of his term. They probably did do a little good, though, since tax rates were higher at the time.

Now that tax rates are where they are, tax cuts are becoming even less effective as a stimulus measure. (they never were very effective, except when marginal rates were extremely high back in the middle of the century)

They're just like interest rate cuts are right now, pretty much useless since the Fed's target rate is already at or below inflation.

As further evidence, note that early on in the Clinton administration tax rates went up, yet there was still plenty of economic growth.

I love how the Chicago School policies have destroyed economies the world over, yet many still insist that's the ticket to prosperity.

[Wilbur]

We're talking nearly $3000 for every man, woman and child in the United States (nearly $4300 if you throw in the interest the gov't will have to pay on the debt, since we don't have the money).

Now, you tell me.  Would we get a better bang for the buck if you just sent everyone a check ($9000 headed to my household!)?  Or, knowing how well the feds run any type of program, do you feel it will be better to put it into the programs earmarked in the bill?  I know how I would vote.

Those who are in dire need of money will spend the money right away, thus spurring the economy.  Those who don't spend the money right away will put the money into the banks, which boosts them by providing more cash to loan.

Imagine that.  The citizens would actually dictate where the money goes (not the out-of-touch goofballs in DC), depending on how they spend or save the money.

What a concept.

[rwarn17588]

quote:Originally posted by Wilbur



Now, you tell me.  Would we get a better bang for the buck if you just sent everyone a check ($9000 headed to my household!)?  Or, knowing how well the feds run any type of program, do you feel it will be better to put it into the programs earmarked in the bill?  I know how I would vote.

It depends. If it goes toward infrastructure (highways, et al), it has a markedly better effect on the economy than direct payments to taxpayers. Revenue transfers to state governments, increases in food stamps and extension of unemployment benefits also have much better effect on the GDP than a direct rebate to taxpayers. A payroll tax holiday would create a slightly better effect, too.

Tax cuts, by the way, don't have nearly the pronounced good effects as the above.

Source: http://www.house.gov/smbiz/hearings/hearing-07-24-08-stimulus/Zandi.pdf

To me, infrastructure makes a lot of sense. You currently have roads and bridges that are 60 and 70 years old that are still being used. And seeing how commerce flocks around good roads, improved infrastructure has huge economic effects for years and years.

Let's put it this way: the stimulus bill is likely the best of a really bad situation. Can it be improved? Sure. (And I'm sure more stuff is coming down the pike. Republicans are already wanting *more* infrastructure spending.)

But it's better than doing nothing or lollygagging around, hoping things will get better. Herbert Hoover would attest to that.

[we vs us]

quote:Originally posted by Wilbur

We're talking nearly $3000 for every man, woman and child in the United States (nearly $4300 if you throw in the interest the gov't will have to pay on the debt, since we don't have the money).

Now, you tell me.  Would we get a better bang for the buck if you just sent everyone a check ($9000 headed to my household!)?  Or, knowing how well the feds run any type of program, do you feel it will be better to put it into the programs earmarked in the bill?  I know how I would vote.

Those who are in dire need of money will spend the money right away, thus spurring the economy.  Those who don't spend the money right away will put the money into the banks, which boosts them by providing more cash to loan.

Imagine that.  The citizens would actually dictate where the money goes (not the out-of-touch goofballs in DC), depending on how they spend or save the money.

What a concept.

There's still no guarantee that direct stimulus checks would make it into the broader economy.  Some would, obviously, but some might be plowed back into debt (credit card, mortgage or otherwise) which puts the cash right back in the hoarding hands of the credit industry.  Same things with making a savings deposit.  It's not that banks don't have capital to lend, and it's not that they need more capital to lend.  It's that they 1) can't trust the people they'll lend to, and 2) don't know enough about the liabilities on their own books to part with capital.  So they're sitting on all the bailout funds they've already been given.

It's almost as if the financial industry should be firewalled from the stimulus package.  There're enough closed feedback loops within it right now that any money plowed into it would be frozen right along with that first $350 billion from the TARP.  (Or, you know, bonused out to the upper echelon)

This is why actually having government administer the stimulus is a good thing.  The government WILL spend the money, and WILL demand that it gets things in return, like roads and bridges and a new electric grid, etc.  Private financing can't and won't do that right now.

[Gaspar]

quote:Originally posted by tim huntzinger


And there it is, the dudes at the National Bureau of Economic Research felt strongly enough about the 01 rebate that they put this at the top of their web page: "the [tax] rebates did increase consumer spending significantly, helping to end the recession of 2001."

Yes that was from their paper in 2004.  Their 2009 report is out now and that is where they conclude "The stimulus likely boosted GDP growth in the second and third quarters above what it might have been otherwise, but its influence faded by the end of the year."

You may read more at http://www.nber.org/erp/2009_erp.pdf

[Neptune]

I'm wondering how the hell anyone could possibly say anything worked in 2001.  That September kind of jacked it all up.  Was this before September, if so, how could you know the long-term effects?  Was it after September, because by God the economy struggled for quite some time after.  It kind of, sort of, recovered per se.  Several years later, right before it completely imploded.  

I don't see how anyone could say anything worked domestically over the last several years.  Not with a straight face, and with the support of better than low intellect.

[Neptune]

Ah, read it.  They're saying consumer confidence was propped up, kind of a no-brainer.  It makes the statement however, that the recession "ended".  A position that is impossible to support.  It's just as likely that the "Recession" would have continued at the end of tax rebates, had it not been for the US economy losing over a quarter of it's value shortly after September.  In exactly the way the rebates of 2008 temporarily supported the economy, and consumer confidence.

An alternative and perhaps even more likely concept, is that the economy never recovered from design flaws seen in 2001.  The relatively minor recession abruptly ended with the economic catastrophe and paralysis post 911.  And, the economy was "propped up" every year by bigger and bigger tax cuts, while the root-causes of the recession were never addresses.  Leading, naturally, to today.

Only a few months ago, "the economy" was "strong."

[waterboy]

I am disappointed that this bill doesn't focus more on some major component of our infrastructure. Something along the lines of technology, solar, energy grid, self sufficiency, rail, inner city development etc. Its doubtful a rebate by itself will do much, just like only enacting tax cuts will do much. And its highly unlikely that the laundry lists submitted to Congress will be anything but ludicrous. The Senate has a chance to clean it up some, but republicans more or less showed their stripes by locking arms. Unfortunate.

However, time seems to be their motivation instead of focus.