Can the Govt really fix the economy?

I hate it when a thread is this old before I find it. But I'm sure many of you don't.

Whatever the cause(s) for our current economic predicament, we don't get out of it by cutting gov't spending, or cutting taxes. The reason is simple: without spending, the economy will soon be in a full-blown Depression. Keeping the fire stoked by keeping the money moving is the only way to stop the slide down into the deep-freeze. And I'm pretty sure that nobody here will like it when/if we reach that point.

So the gov't is the only major "buyer" left in the economic arena. If the gov't spends, then all the things that Reagan and Dubya argued about trickle-down economics should happen, albeit in different order: jobs will be created, people will earn wages, they'll spend that money, other jobs will be created by the consumer spending, and that biz cycle will continue to expand, with everybody in it paying taxes that would not be paid if they weren't employed by the growth which the gov't spending spawns. (The only difference, and it is a difference only in the character of the deficit, is that this deficit is going to fund spending by the gov't, rather than to cut taxes, which only promotes spending when consumer confidence is high.)

It may not work, but it's the only remaining shot we've got as an alternative to watching the economic "fire" going out, more or less completely, and having to deal with a Second Great Depression, this time worldwide.

stockingfull wrote:So the gov't is the only major "buyer" left in the economic arena. If the gov't spends....

The issue is what they are spending it on. For example all that money they dumped into extending unemployment could have went towards creating jobs. What they could have done instead was said we're going to match (as a loan) whatever you can put on the table to start a business no questions asked. There's certainly quite a few problems with my idea and it may very well be a bad idea but my point is that money could have been better spent elsewhere because those people are going to be in the same spot when the extension runs out.

OK, Richard, let's take your unemployment example because it's been perhaps the most misunderstood or mischaracterized expenditure in the entire stimulus bill.

What happens to an unemployment check? Classically, it gets spent in the grocery store.

That doesn't create jobs?

I`ve been on the un-employment ext. in the 80s during the creation of the rust belt. If you leave people who were employed, tax paying (& they take taxes out of un-employment checks) americans who just happened to be victims of this resession there will be more morgage defults, cars repoed, credit cards not paid etc. Then they end up on welfare. I can only speak for myself but I took all kind of part time & temp. jobs. I never was late on my morgage because of this, people collecting checks know that those checks will run out. It`s not like they are on vacation hopefully some will have a chance of being called back. A lot of very talented people are out of work right now & could use the help. Don`t forget they all paid into that fund when working.

Stocking, are you really suggesting the government taking my money, spending it in ways that by your own admission may or may not help, is better than letting me keep my money and spending it on what I want? I'd love to buy a new car or two. But after the government gets done with me every week, there just isn't enough left. But I'm sure all the countries that benefit from our foreign aid or the people who drive over a bridge in Iraq that was built with my tax dollars will come over here and buy me that new car.

stockingfull wrote:.

What happens to an unemployment check? Classically, it gets spent in the grocery store.

That doesn't create jobs?

Yes but once its gone, its gone... My point is they should be investing with long term goals in mind to benefit those workers through job creation or something meaningful that is going to provide something down the road. I don't know what that is but surely there is a better way that money could be used.

Jeff, I'm confident that the overwhelming majority of the stimulus money spent by the gov't has the desired effect, even if it's not going directly into a new bridge or other classic infrastructure.

The key is to SPEND it, not save it. That was the problem with last year's $600 stimulus funds; they got deposited in banks or paid to reduce credit card debt and vanished almost without a trace, like the bank bailout billions.

We need SPENDING right now, and that's why a tax cut or other consumer rebate generally won't work. Actually, though, the unemployment and other expenditures to low-income people are the exceptions, because poor folks usually have neither debt nor savings, so the cash they receive in fact does go back into the economy almost immediately.

We have to keep the fire going. Whether short- or long-term, whatever does that isn't wasted as "stimulus."

Richard S. wrote:Yes but once its gone, its gone... My point is they should be investing with long term goals in mind to benefit those workers through job creation or something meaningful that is going to provide something down the road. I don't know what that is but surely there is a better way that money could be used.

President Obama said yesterday that he is attacking the financial crisis with both short term & long term goals in mind.
Short term- to hopefully "shock" our economic heart back into operation
Long term - to provide sustained economic health

I'll try to find links to his exact words but I think I paraphrased hi m accurately.

Eidt: I think it was at this conference ........President Obama had a meeting with Business Roundtable, an association of chief executive officers of leading U.S. companies, on the economy & stimulus issues.
Washington, DC : 1 hr. 8 min.
http://www.c-span.org/Watch/watch.aspx? ... my-A-16309

Parable of the broken window, by Frédéric Bastiat in his 1850 essay Ce qu'on voit et ce qu'on ne voit pas (That Which Is Seen and That Which Is Unseen):

The parable describes a shopkeeper whose window is broken by a little boy. Everyone sympathizes with the man whose window was broken, but pretty soon they start to suggest that the broken window makes work for the glazier, who will then buy bread, benefiting the baker, who will then buy shoes, benefiting the cobbler, etc. Finally, the onlookers conclude that the little boy was not guilty of vandalism; instead he was a public benefactor, creating economic benefits for everyone in town.

The fallacy of the onlookers' argument is that they considered only the benefits of purchasing a new window, but they ignored the cost to the shopkeeper. As the shopkeeper was forced to spend his money on a new window, he could not spend it on something else. For example, the shopkeeper might have preferred to spend the money on bread and shoes for himself, but now cannot so enrich the baker and cobbler because he must fix his window.

Thus, the child did not bring any net benefit to the town. Instead, he made the town poorer by at least the value of one window, if not more. His actions benefited the glazier, but at the expense not only of the shopkeeper, but the baker and cobbler as well.

Ah, but the shopkeeper didn't have insurance! And so not the historic running expense of insurance premiums.

The point is that, in a perfect world, everybody agrees that no "stimulus" should be necessary. But we surely now know we don't have to worry about the potential problems of living in a perfect world.

Not to mentoin that the shop keeper sued the kids parents for the windows cost. Then the parents spanked the kid & got fined& thrown in jail which left the kid a ward of the state & on & on.

stockingfull wrote:Jeff, I'm confident that the overwhelming majority of the stimulus money spent by the gov't has the desired effect, even if it's not going directly into a new bridge or other classic infrastructure.

The key is to SPEND it, not save it. That was the problem with last year's $600 stimulus funds; they got deposited in banks or paid to reduce credit card debt and vanished almost without a trace, like the bank bailout billions.

We need SPENDING right now, and that's why a tax cut or other consumer rebate generally won't work. Actually, though, the unemployment and other expenditures to low-income people are the exceptions, because poor folks usually have neither debt nor savings, so the cash they receive in fact does go back into the economy almost immediately.

We have to keep the fire going. Whether short- or long-term, whatever does that isn't wasted as "stimulus."

I have news for you Stocking, I used the $1200 GWB borrowed from China and sent to me to pay down debt. If BHO wants to do the same thing, I'll gladly pay down more debt. Every extra penny from the last month worth of 60+ hour weeks is going to pay down debt. And once I've paid it all down, you can be sure I won'r be collecting any more. So plug the banks full of money "to get credit flowing again." I won't be participating in the very activity that got us to this point. And what we'll be left with is crushing inflation. Sounds like a good plan.

Spending ue checks in a grocery store does help the economy, stores employ a lot of people, most of the products in as far as canned goods are concerned are produced in the U.S.. In season a lot of local crops are sold there, trucks need to haul the goods, farmers to grow, factories to can, steelmakers to produce steel & on down the line. The bottom line as I see it is every dollar spent here even if it`s on foriegn goods either directly or indirectly helps here. I try as hard as I can to buy American but it`s hard to find American Made anymore & thats one of the main things that got us in this mess. Not only are greedy ceo,s & union workers to blame but the politicians & tax breaks for taking businesses overseas. I say spend here & buy here whenever possible, no more time shares in Cancun. I never wanted to vacation in an area that had to have armed guards anyway. But Mexico is going to be our biggest worry soon IMO.

jpete wrote:

stockingfull wrote:Jeff, I'm confident that the overwhelming majority of the stimulus money spent by the gov't has the desired effect, even if it's not going directly into a new bridge or other classic infrastructure.

The key is to SPEND it, not save it. That was the problem with last year's $600 stimulus funds; they got deposited in banks or paid to reduce credit card debt and vanished almost without a trace, like the bank bailout billions.

We need SPENDING right now, and that's why a tax cut or other consumer rebate generally won't work. Actually, though, the unemployment and other expenditures to low-income people are the exceptions, because poor folks usually have neither debt nor savings, so the cash they receive in fact does go back into the economy almost immediately.

We have to keep the fire going. Whether short- or long-term, whatever does that isn't wasted as "stimulus."

I have news for you Stocking, I used the $1200 GWB borrowed from China and sent to me to pay down debt. If BHO wants to do the same thing, I'll gladly pay down more debt. Every extra penny from the last month worth of 60+ hour weeks is going to pay down debt. And once I've paid it all down, you can be sure I won'r be collecting any more. So plug the banks full of money "to get credit flowing again." I won't be participating in the very activity that got us to this point. And what we'll be left with is crushing inflation. Sounds like a good plan.

I think that's the whole point of gov't spending instead of tax cuts, Jeff.

Paying off debt doesn't stimulate anything but the bank balance sheet. To stimulate the economy, you need to put the money where it'll stay in commercial circulation, whether for wages or for things people make or construct or sell.

So borrowing from China is a good idea? I had no idea. I would have thought allowing me to keep my money and paying down my own debt would be better. Using stimulus money borrowed from China which I use to pay down my debt only succeeds in me shifting my debt to you. Thanks Stocking!!