| Topic: |
Politics > Politics-Economics |
| User: |
"Dr. Cavortian" |
| Date: |
27 Jan 2008 09:09:51 AM |
| Object: |
The "STIMULUS" Won't Be Very STIMULATING ... |
"Even if you do somehow manage to increase spending, that doesn't mean
you'll put Americans to work. More likely, you'll put Asians to work
producing goods for the U.S. market. President Bush seems to have
become confused on this key point because he misunderstands supply-
side economics. He has vaguely remembered that tax cuts put people to
work, but he's forgotten that only marginal tax cuts put people to
work. Non-marginal tax cuts -- such as the ones in the stimulus
package -- have exactly the opposite effect, when they have any effect
at all."
-- Steven E. Landsburg
The sham Bush-Pelosi stimulus package is, mainly, merely a political
ploy, with no real chance of helping America stay out of the recession
it's already in.
Word of caution: Don't spend your "tax rebate" just yet!
-----------------------
"Why the Stimulus Shouldn't Stimulate You"
By Steven E. Landsburg
The Washington Post
Outlook
Sunday, January 27, 2008; B03
As a general rule, economic policies command bipartisan support only
when they're incoherent. Take, for example, the fiscal stimulus
package now bulldozing its way through the legislative process. It's
poorly conceived, it's unlikely to work, and it's sure to do a lot of
collateral damage.
The idea, we're told, is to stave off an all-out recession by
stimulating both investment (through tax cuts for businesses) and
consumption (through tax rebates to individuals). But hold it right
there.
Investment and consumption are natural rivals.
Investment means converting resources into machines and factories;
consumption means converting those same resources into TV sets and
motorboats. In anything but the very short run, more of one means less
of the other.
Ah, say the package's more honest proponents, that's exactly what we
care about -- the very short run. And in the very short run, we can
have more of everything if only we put more people to work.
Fine, but what makes you think that this package will put anyone to
work? The idea behind the stimulus deal is to give people tax cuts so
they'll feel richer and spend more. But government can't make people
richer on average; all it can do is shuffle wealth around. To pay
Peter, you must tax Paul (or at least promise to tax Paul in the
future, when your debts come due). Peter spends more, but Paul spends
less.
Now maybe you can time things so Peter goes on a spending spree today
but Paul doesn't tighten his belt until next month. (Then again, maybe
you can't: Paul's no fool, and he's likely to start cutting back as
soon as he sees higher taxes on the horizon.) But even if you manage
to pull this trick off, sooner or later you must tax Paul. So today's
fiscal stimulus comes at the expense of tomorrow's fiscal drag.
Moreover, even if you do somehow manage to increase spending, that
doesn't mean you'll put Americans to work. More likely, you'll put
Asians to work producing goods for the U.S. market. President Bush
seems to have become confused on this key point because he
misunderstands supply-side economics. He has vaguely remembered that
tax cuts put people to work, but he's forgotten that only marginal tax
cuts put people to work. Non-marginal tax cuts -- such as the ones in
the stimulus package -- have exactly the opposite effect, when they
have any effect at all.
The reason: When people feel richer, they're less eager to work. An
unemployed laborer with a tax rebate in his pocket might well feel
less urgency about getting retrained or finding a new job. (Not every
unemployed laborer will react this way, but you can be sure that some
will.) If Americans demand more but produce less, the difference has
to come from abroad.
Here, then, is the great irony: To stimulate spending, tax cuts have
to make people feel richer -- but the richer people feel, the slower
they'll be to rejoin the workforce. The more effective the tax cuts,
the longer they threaten to prolong the expected recession.
That's why the stimulus package is unlikely to work.
Now let's talk about why we shouldn't want it to.
First, a little history. In real terms -- that is, after adjusting for
inflation -- the average American worker today earns roughly nine
times as much as his 1840 counterpart. That's because today's worker
is roughly nine times as productive. (You might have thought it had
something to do with labor unions, but even at their most powerful, no
union could ever extract blood from a stone or extract wages that
exceeded the value of production.) Today's workers are more productive
because they're working with better equipment -- computerized looms
instead of handlooms, for example.
That equipment was built from raw materials that were available
because someone chose not to consume them.
So if 19th-century Americans had been encouraged to consume more,
you'd be earning less today. And if you and I are encouraged to
consume more, our grandchildren will earn less in the future.
If you care about your grandchildren, you should be encouraging
everyone else not to consume, but to save.
But much of the stimulus package is designed to achieve exactly the
opposite: It encourages consumption, not saving. Not that there's
anything wrong with consumption; it's what makes life worth living.
But my consumption benefits me, while my saving benefits you.
I've already got plenty of incentive to consume. What you should be
worrying about is my incentive to save. To say it again: The more I
consume, the poorer your grandchildren will be; the resources I use
won't be available to build machines that make your grandchildren more
productive. It's all well and good to worry about the people who are
struggling today, but let's also remember the people who will be
struggling in the future. The worst thing we can do for them is to
encourage consumption.
And while we're thinking about our grandchildren, let's also think
about our contemporaries. Over the course of a typical decade,
millions of people lose their jobs one at a time. In a severe
recession, millions lose their jobs all at once. But it's no more
painful to be unemployed for five weeks in the middle of a recession
than it is to be unemployed for five weeks at the height of a boom. In
fact, it's arguably less painful: Isn't it better to be unemployed at
a time when unemployment carries less stigma and when you've got
unemployed friends to hang around with? (Ask those striking Hollywood
writers.) So it's hard to argue that we should do more for displaced
workers during a recession than we do at any other time -- especially
when people who lost their jobs a few years ago, and others who will
lose them a few years hence, are footing a good chunk of the bill.
And to what end? Ultimately, the only solution to unemployment is for
displaced workers to get retrained and find their way back into the
workforce. The new stimulus package only delays that process by
propping up dying industries for a while and postponing the day of
reckoning. Ultimately, there will be just as much hardship because the
stimulus package can't last forever. Why spend all this money trying
-- and probably failing -- to delay the inevitable?
armchair@troi.cc.rochester.edu
)Steven E. Landsburg, a professor of economics at the University of
Rochester, is the author of "More Sex Is Safer Sex: The Unconventional
Wisdom of Economics.")
http://www.washingtonpost.com/wp-dyn/content/article/2008/01/25/AR2008012502047.html
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| User: "ChristsNemesis" |
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| Title: Re: The "STIMULUS" Won't Be Very STIMULATING ... |
27 Jan 2008 09:37:58 AM |
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***
"Let's drop the euphemism of stimulus package" and call this agreement
by its proper name: "deficit spending."
As if the deficits under your Nincompoop-In-Chief haven't been
astronomical!
-----------------
"A Better Way to Deal With Downturns"
By Andrew A. Samwick
Op-Ed
The Washington Post
Sunday, January 27, 2008; B07
Shortly after House leaders and the White House reached a tentative
deal Thursday to stimulate the economy, President Bush hailed the
agreement as the result of "patience, determination and good will on
all sides." While politically expedient, the stimulus package is
unjustified in the short run and harmful in the longer term. We would
be better off if "forethought" had figured into Bush's description.
The $150 billion agreement calls for tax rebates to low- and middle-
income households as well as business incentives. Doubtless, this will
boost economic activity. If you pull levers, you get movement.
Personal consumption and business investment will increase relative to
what they might otherwise have been. But there is no discussion of
repaying the money through higher taxes in the near term. Let's drop
the euphemism of "stimulus package" and call this agreement by its
proper name: "deficit spending."
It is ironic that additional borrowing is prescribed as the remedy for
a malady that arose from unwise borrowing. In recent years, cheap
credit and some imprudent lending policies generated excessive
consumption and investment in the real estate sector. This boosted
economic activity beyond the level that would have prevailed with more
sensible policies. That level of economic activity is the starting
point for discussion of a recession. If we acknowledge that bad loans
fueled the activity, why is it now a widely shared policy objective to
maintain that level of activity?
The answer is a combination of three factors. The first is elected
officials' fear that they will be punished in November for an economic
downturn unless they do "something" to avoid it. Few things
precipitate bipartisan agreement so quickly. Using the incomes of
future taxpayers to purchase reelection today is irresponsible but
common public policy.
The second factor is policymakers' fear that unless "something" is
done, a temporary economic downturn could become more protracted. This
fear, to the extent that it is justified, is better addressed by the
Federal Reserve lowering short-term interest rates, which would
stimulate the economy more quickly and comprehensively than would
fiscal policy. The Fed did just this on Tuesday. Yet the fiscal-policy
lever has been yanked before any data have indicated whether the Fed's
stimulus has had its intended effect.
The third factor is the recognition that some households will bear a
disproportionate burden of an economic downturn, combined with a
belief that "something" should be done to help them. Government has a
choice in whom it taxes to finance this relief -- other taxpayers
today or all taxpayers in the future. That the agreement holds the
former group harmless was also praised by Bush. This "stimulus bill"
is really $150 billion worth of some future generation's resources
appropriated to finance our own consumption. Why are we entitled to
pass on this additional debt?
The imperative to do "something" is all the entitlement politicians
need. In political arguments, you can't beat something with nothing.
But we can learn from this experience to have a better menu of fiscal
policy options the next time around. Two changes to our budget policy
would go a long way toward that goal.
First, we should rule out deficit spending to finance a consumption
binge. As the economy slows, the deficit will widen even without
changes in fiscal policy. But an honest budget policy would be
calibrated to balance the budget over a complete business cycle. Years
of cyclical deficits will be offset by years of cyclical surpluses. As
a corollary, we must not waive pay-as-you-go rules that require
spending that increases the current deficit to be offset later, when
the economy is stronger.
Second, we can plan well in advance. The federal government has a
critical role in maintaining and developing public infrastructure,
whether in transportation, telecommunications or energy transmission
projects. A sensible capital budget would include a prioritized list
of projects that need attention. Some would be slated for this year,
some for 2009 and so on, over the useful lives of the projects. When
economic growth falters, the government would be in a position to move
some of the projects from later years into the present year.
This approach to counter-cyclical fiscal policy has several
advantages. Perhaps most obvious is that it forces the government to
establish priorities for capital projects. It reduces overall
expenditures by doing more of the work in times of economic slack,
when costs are lower. It also abides by pay-go rules, since projects
moved up to 2008 need not be done in 2009. With a little forethought,
short-term economic concerns and long-term budget goals need not be in
conflict.
(Andrew Samwick, an economics professor, directs the Nelson A.
Rockefeller Center at Dartmouth College. He served as chief economist
on the staff of President Bush's Council of Economic Advisers in
2003-04. He blogs about economics and other issues athttp://voxbaby.blogspot.com.)
http://www.washingtonpost.com/wp-dyn/content/article/2008/01/25/AR2008012502593.html
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| User: "" |
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| Title: Re: The "STIMULUS" Won't Be Very STIMULATING ... |
27 Jan 2008 02:30:05 PM |
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And to what end? Ultimately, the only solution to unemployment is for
displaced workers to get retrained and find their way back into the
workforce. The new stimulus package only delays that process by
propping up dying industries for a while and postponing the day of
reckoning. Ultimately, there will be just as much hardship because the
stimulus package can't last forever. Why spend all this money trying
-- and probably failing -- to delay the inevitable?
My $600 bonanza covers the gross bloated gas prices...in effect it
rolls back gas prices for me to $1.50. So BP and Shell will get the
bulk, with a slice for Visa...JG
armch...@troi.cc.rochester.edu
)Steven E. Landsburg, a professor of economics at the University of
Rochester, is the author of "More Sex Is Safer Sex: The Unconventional
Wisdom of Economics.")
http://www.washingtonpost.com/wp-dyn/content/article/2008/01/25/AR200...
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| User: "Democracy Highlander" |
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| Title: Re: The "STIMULUS" Won't Be Very STIMULATING ... |
27 Jan 2008 02:18:00 PM |
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-- Steven E. Landsburg
You really get to wonder why some people, like the author of this article
observe very well some facets of the truth, while a second later purposedly
ignore the another facet.
Moreover, even if you do somehow manage to increase spending, that
doesn't mean you'll put Americans to work. More likely, you'll put
Asians to work producing goods for the U.S. market. President Bush
seems to have become confused on this key point because he
misunderstands supply-side economics.
Correct. Once the manufacturing base has been offshored, any increase in
spending will stimulate more the offshore economies while having a very
little impact on ours.
He has vaguely remembered that
tax cuts put people to work, but he's forgotten that only marginal tax
cuts put people to work. Non-marginal tax cuts -- such as the ones in
the stimulus package -- have exactly the opposite effect, when they
have any effect at all.
A statement not only absolutely FALSE, but a statement that ignore (in
purpose ?) the basics of the capitalist economy.
What Mr. Landsburg is doing here is completely forgotten the ......
offshoring factor he correctly remembered one statement above. Some people
seems to have an unbelievable short memory, one millisecond is here the
next millisecond is completely gone like never been.
Here are the basics, Mr. Landsburg, write it down so you'll remember next
time. The marginal tax cuts are most likely to go toward investment rather
than consumption. Here we agree. The big question is WHERE THESE
INVESTMENTS ARE GOING TO BE MADE ? By completely ignoring the capitalism,
you assume they are going to be domestically made.
Every investor is going to eye the investment that generate the biggest ROI.
In the presence of cheap labour force offshore and no tax/tariffs/VAT/etc
incentive to make the investments on-shore it makes a lot of economic sense
that new investments to be made where labour expenses are lower. Therefore,
the investments generated by cutting the marginal tax will be as likely to
be invested offshore as the consumption tax cuts will be likely to
stimulate offshore economies. When you buy something and your dollar goes
offshore, that means some investor decided to invest some of his dollars
offshore to open the factory producing your merchandise.
OK, so we reach the following point:
The probability of a dollar in marginal tax cuts to go offshore it is as
likely as the probability of the dollar in non-marginal tax to go offshore.
Therefore, at this point the author preference toward marginal tax cuts
instead of non-marginal tax cuts it is completely a personal bias without
ANY form of economic backing.
But wait, there is more. A non-marginal dollar going offshore pass first
thru a domestic retailer, portion of that dollar is given as wage to
retailer employee, portion of it is taken as retailer profit and parts of
it it is taxed as income and profit taxes. All these money (5...50 cents
for every dollar in non-marginal cuts) are directly recirculated in
domestic economy. By contrast, a marginal tax cut dollar that goes offshore
is doing this tax free without putting back anything in domestic economy
before it leave. And since there is an equal probability for a marginal vs
nonmarginal dollar to go offshore, the preference toward marginal tax cuts
it is actually the opposite with the truth. The preference for marginal tax
cuts it is actually quite the wrong one.
This does not mean that the non-marginal tax cuts are a good solution for
avoiding a recession. I just argue that the non-marginal tax cuts are less
damaging than the marginal tax cuts.
So if 19th-century Americans had been encouraged to consume more,
you'd be earning less today. And if you and I are encouraged to
consume more, our grandchildren will earn less in the future.
Not necessarily. We can imagine a "green economy" where:
- all the energy is obtained from renewable sources (mainly sun)
- all the trash is recycled:
= metals, glass etc smelted and reuse as raw materials
= organic waste (including sewers) biodegraded, then feed to earthworms
then providing new compost for
= rubber, plastics etc being recycled in ... crude oil (using renewable
energy for that) by catalytic cracking or similar methods
(ref: http://www.patentstorm.us/patents/6777581-description.html)
- no new natural(non renewable) resources are brought into the economy
This is called a sustainable economy and can provide an increased
consumption while not doing any harm to the future generation (as mater of
fact making their life better).
And you know the SAD thing ? WE DO HAVE THE TECHNOLOGY TODAY to achieve this
kind of sustainable society. There is only one problem preventing us to do
so: GREED !!!
A sustainable society, where most of the things are produced (recycled)
locally at city level is not going to provide anymore business for large
multinational corporations that will start to decline. The oil cartel will
loose all his power. The rich investors making billions on Wall Street
gambling on scarce resource will need (HORROR) to get a job and do
something useful for a living. ETC...
If you care about your grandchildren, you should be encouraging
everyone else not to consume, but to save.
IF YOU REALLY CARE ABOUT YOUR GRANDCHILDREN, you will start to tell the
truth, instead of supporting mythologies like "supply side
economics", "marginal tax cuts are good", "increasing minimum wage is
harmful", "GREED IS GOOD" etc.....
)Steven E. Landsburg, a professor of economics at the University of
Rochester, is the author of "More Sex Is Safer Sex: The Unconventional
Wisdom of Economics.")
http://www.washingtonpost.com/wp-dyn/content/article/2008/01/25/AR2008012502047.html
Mr. Landsburg need to do a little more learning of economics before teaching
it.
--
The world of the future will be fully democratic or will not be at all.
Democracy Highlander
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| User: "" |
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| Title: Re: The "STIMULUS" Won't Be Very STIMULATING ... |
27 Jan 2008 10:13:22 AM |
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On Jan 27, 10:09 am, "Dr. Cavortian" <kink...@yahoo.com> wrote:
"Even if you do somehow manage to increase spending, that doesn't mean
you'll put Americans to work. More likely, you'll put Asians to work
producing goods for the U.S. market. President Bush seems to have
become confused on this key point because he misunderstands supply-
side economics. He has vaguely remembered that tax cuts put people to
work, but he's forgotten that only marginal tax cuts put people to
work. Non-marginal tax cuts -- such as the ones in the stimulus
package -- have exactly the opposite effect, when they have any effect
at all."
-- Steven E. Landsburg
I wonder if Mr. Landsburg can explain the current fear of recession
when the tax cuts put in place by the Bush administration
are still in effect?
The sham Bush-Pelosi stimulus package is, mainly, merely a political
ploy, with no real chance of helping America stay out of the recession
it's already in.
Yes, I think this is partly true, the republican party is afraid they
won't win in this years elections.
Investment means converting resources into machines and factories;
consumption means converting those same resources into TV sets and
motorboats. In anything but the very short run, more of one means less
of the other.
Who is going to buy these things? Why do I keep hearing this
cry from certain economist and Wall St. people that "it's up to
the consumer, it's up to the consumer"?
Fine, but what makes you think that this package will put anyone to
work? The idea behind the stimulus deal is to give people tax cuts so
they'll feel richer and spend more. But government can't make people
richer on average; all it can do is shuffle wealth around. To pay
Peter, you must tax Paul (or at least promise to tax Paul in the
future, when your debts come due). Peter spends more, but Paul spends
less.
This is true regardless of whether it is a tax rebate or tax cut.
Aren't the Bush tax cuts still working? or maybe not.
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| User: "pg" |
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| Title: Re: The "STIMULUS" Won't Be Very STIMULATING ... |
27 Jan 2008 09:34:25 AM |
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On Jan 27, 7:09 am, "Dr. Cavortian" <kink...@yahoo.com> wrote:
"Even if you do somehow manage to increase spending, that doesn't mean you'll put
Americans to work. More likely, you'll put Asians to work producing goods for the U.S.
market. President Bush seems to have become confused on this key point because he
misunderstands supply- side economics. He has vaguely remembered that tax cuts put
people to work, but he's forgotten that only marginal tax cuts put people to work.
Non-marginal tax cuts -- such as the ones in the stimulus package -- have exactly the
opposite effect, when they have any effect at all."
-- Steven E. Landsburg
You've missed one big important issue, and that is, this so-called tax-
cut, will only worsen American's debt situation.
Putting who to work isn't a big issue if the debt thing isn't solve,
because when the debt bubble finally burst, ain't no one is going to
get any work - Asian OR American !!
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