…by the self-proclaimed party of the working people:
The two to three trillion dollars in spending last year and this? It’s a huge grab at the wealth of working people. It has to be paid for, and there are only two ways to do it since government can’t actually create wealth. They have to raise taxes, which steals wealth from working people, or they have to print money, which steals wealth from working people.
No matter how it’s done, the so called stimulus package is the hugest money grab and wealth redistribution since the formation of the Soviet Socialist Union.
And yes, they know exactly what they are doing. It’s all about gaining, and maintaining and reinforcing, political power. We shall see if the Republic survives.
Social Security was bigger. Pay as you go is real convenient for the politicians spending more than 50 years of Social Security surplus.
A little exercise I’ve been enjoying: divide 800 Billion by the number of households in the U.S., total, under $100 annual income, under $75K annual income, etc.
I could do with a tax-free check of a few grand, and pumping all that money back into people’s pockets would do wonders for the economy.
Don’t expect Congress to acknowledge that though.
I’d like to believe that the Republicans know it, but they had eight years of control of both Congress and the White House, and yet they accomplished bupkis in terms of tax simplification and reduction, so probably not.
There are about 110 million households in the U.S. So $800B is about $7,000 per household.
Cutting a lot of checks has an appealing simplicity, but runs the risk of having many or most of those checks being saved or used to pay down debt. The challenge of a stimulus program is to spend money in a way that will see it circulate through the economy multiple times, and ideally purchase things (roads, trains, education, health care) of lasting value.
And of course a stimulus program created by a representative democracy, as opposed to a wise and all-powerful economist-king, is going to reflect the particular interests and constituencies of those representatives. That’s true no matter which party is in charge.
It’s a minor thing, but I’m always annoyed when people make the claim that Government cannot create wealth. That simply isn’t true. Government can (and often does) provide value-creating services that cannot be as efficiently provided by the private sector. By this I mean Courts, police and military (including specialized courts and lawmakers such as the SEC). Also a government role in common carrier infrastructure makes some sense.
There’s a reason virtually every culture in world history provided for national defense through governance: defense is an economic good and governance is the most efficient provider.
Now I certainly agree that the vast majority of this surplus (perhaps even 100%) will be money well stolen and wasted; but that doesn’t make it true that government cannot create wealth.
Defense doesn’t create wealth per se — it, well, defends it.
The republic won’t survive; there are too many unbridgeable gaps between various groups’ concept of what it should be. Also, power continues to be concentrated in the centre.
Rome was a republic to start with, too; look what happened to them. Maybe it won’t be all bad, however; a competently governed empire is a heck of a lot better than an incompetently (and wastefully) governed democracy. At least in my opinion.
Humans can become used to almost anything. Spending other peoples money (without consent) is theft, pure and simple.
The problem is that those making the laws seldom apply those laws to themselves. Politicians not paying taxes is just one example.
Thievery will do nothing to stimulate the economy. Just the opposite. I expect them to continue to cry crisis and continue to do the wrong thing. Eventually all the hard work of individuals will not be enough to overcome this idiocy.
We are in serious trouble because of their actions. This artificial crisis (because it’s self correcting if they just quit trying to fix it) will be used over and over for more power grabs. Goodbye citizen, hello subjects.
> Cutting a lot of checks has an appealing simplicity, but runs the risk of having many or most of those checks being saved or used to pay down debt.
Saved money is spent by someone else.
Getting out of debt also frees up money.
Jim’s real problem is that folks won’t voluntarily spend money the way that he’d like.
I prefer a different calculation. Assume Nancy was mistaken, and really meant 500,000 jobs a month, as is supported by the jobless claims for January (and FoxNews showing how she gaffed).
So, over the next year, we can expect 6,000,000 job losses, and to save those jobs, we will spend $600,000,000,000. Or roughly $100,000 per job. In terms of wage, that’s greater than $48 an hour.
In terms of, “we must act quickly”, I’d think we can handle a few months of welfare for these people at $15 an hour before we panic. Sorry Dems, but I’m not hearing a reasonable story for supporting this pork bill.
Saved money is not necessarily spent by someone else. If you put it in a bank, the bank breathes a sigh of relief because now its balance sheet looks a bit better, but it’s under no obligation to loan that money out. They’ve been burned by taking imprudent risks, so they’ll likely do the risk-averse thing and sit on it. And that’s why we’re in a recession — lots of people and institutions sitting on money that could be greasing the wheels of commerce. The government is the only institution that can break the economy out of a deepening cycle of retrenchment.
Yes, we could immediately turn those funds into millions of government jobs — Hopkins did it in the 30s. But there’s no way you could get 60 Senators to vote for it.
As for “acting quickly”, we’ve been in a recession for 14 months now, and have lost 3.6 million jobs in that time. The cost of doing nothing is huge.
Jim:
I take issue with your statement “The government is the only institution that can break the economy out of a deepening cycle of retrenchment.”
That’s simply untrue. In fact, the government CAN’T do that. Only the individuals and corporations which make up the economy can break out of that cycle. To do so they need two things: capital and the confidence that new investment will pay off. The government can’t create either of those things, but it can (and currently IS) destroy them. The higher taxes and government competition for credit involved in this huge “stimulus” choke off the capital supply, while the prospect of crippling future debt and the admin’s overtly anti-business rhetoric are not creating confidence.
Politicians mostly understand this: that’s why they’re rushing to be seen to “do something” before the economy recovers on its own, so they can take the credit. That’s also why the “stimulus” contains little which would actually stimulate the economy; instead it’s nothing but a huge bribe to loyal voting blocs.
Okay, I’ll put it a bit differently. Right now the smart thing for individuals and corporations to do is to retrench — to spend less, hire less (or lay people off), and hunker down until the storm passes. But if everyone does what’s in their individual best interest, the economy slows down even more. The government is the only institution with an interest in the economy as a whole. Because it’s regarded as the last safe investment, it can borrow money for free. That gives it the opportunity to shorten the recession by spending when everyone else is afraid to do so.
By the way, there is no “government competition for credit” at the moment. Investors are throwing money at T-bills, driving the yields negative — it’s today’s version of putting money in a mattress.
If the government does nothing things will eventually turn around, but at a huge opportunity cost of millions of idle worker-years, a cost which may exceed the cost of the stimulus being discussed.
’d like to believe that the Republicans know it, but they had eight years of control of both Congress and the White House, and yet they accomplished bupkis in terms of tax simplification and reduction, so probably not.
Well, six years, but point taken.
Saved money is not necessarily spent by someone else. If you put it in a bank, the bank breathes a sigh of relief because now its balance sheet looks a bit better, but it’s under no obligation to loan that money out. They’ve been burned by taking imprudent risks, so they’ll likely do the risk-averse thing and sit on it.
Banks are businesses trying to make a profit. They don’t make profit by sitting on deposits. Quite the opposite, they have to pay at least minimal interest on savings so they represent a liability. Banks make money primarily by loaning money and charging interest.
As for “acting quickly”, we’ve been in a recession for 14 months now, and have lost 3.6 million jobs in that time. The cost of doing nothing is huge.
Sounds like an even better argument for government to stop. We acted quickly in October, 4 months ago. Now we’re losing jobs at a faster rate. We know right now the gain for doing nothing is $1 trillion saved, and more importantly; stability in the economy. If we did the same in October, we would be up $2 trillion.
Whenever someone talks about the need to “act quickly,” I am reminded of how the plains Indians used to hunt buffalo before the horse was re-introduced to North America.