Economists: Second Economic Stimulus Needed

[TomCADem]

Source: CBS News

The suspension of the payroll tax is one of the measures expected to be announced by President Obama on Wednesday. Some analysts are skeptical that it, along with other programs, would be able to lift growth significantly. But Zandi said it will have an impact.

"I think if we suspend the payroll tax for businesses that go out and hire additional workers, expand the job tax credit that is in place today, I think that could be effective and be helpful in the next six, 12 months, when the recovery really needs it. I think that would be a boost to the economy," he said.

Tyson also expects Mr. Obama to announce permanent tax cuts for research and development spending.

* * *

Tyson suggested paying for this tax cut by rescinding the Bush tax cuts, due to expire in January, for the top two percent of income earners, while keeping them in place for middle class earners.



Read more: http://www.cbsnews.com/stories/2010/09/05/ftn/main6837357.shtml?tag=cbsnewsSectionContent.5

---

The title of this article is somewhat misleading, because the economists both agreed that President Obama's proposals on Wednesday constitute a stimulus even though the White House is not labeling them as such. Thus, you may have some folks complaining that the Obama administration has not embraced a second round of stimulus, when technically they have according to both Democratic (Tyson) and Republican (Zandi) economists.

[FreakinDJ]

1. Bring back confidence in the Markets - ARREST the THIEVES

Lets face it folks - the biggest surges in the DJIA I've seen in the last 2 years has been on heels of a High Profile Wall St arrest.

You want to improve the economy Pres. Obama, you have to restore faith in the markets

[JDPriestly]

9. You are right, FreakinDJ.

The Wall Street reform bill did not reassure anyone. Wall Street is as dishonest as ever -- just tricking people into trusting it and then pulling the rug out.

[TheFarseer]

2. suspend the payroll tax?!?!

How the hell are we going to pay for anything with no taxes? Do what we can to stop outsourcing and leave everything else the hell alone. A few more buck in people's paychecks isn't going to make them go on a buck nutty spending spree and how does that help the country long term even if they do? Bring back manufacturing and IT jobs where people can make some good money and people will spend money, buy hoses, invest, pay down debt and every other thing. People working at Home Depot for $10/hr are not going to much give a crap if they aren't paying payroll taxes. This misunderstanding of the basic problem is just fu*king embarrassing. It goes for both parties.

[Moostache]

3. You are assuming that its a misunderstanding...

I do not believe its a misunderstanding, which implies honesty and integrity in the failed actions of those who caused this in the first place. No one can EVER convince me that "nobody KNEW" is a legitimate defense of the banking industry or its leadership or its governmental co-conspirators.

The mere fact that criminal assholes like Blankfein, Paulson, Bernanke, Geithner, and the rest of the cabal of Wall Street thieves are all still free and all STILL raking in 100's of millions a year is simply rubbing the noses of us all in shit.

THERE WILL BE NO RECOVERY WITHOUT JUSTICE, RESTITUTION (OR AT LEAST BANKRUPTCY FOR ALL THE CEOs AND MANAGEMENT THAT CAUSED THIS MESS) AND NEW RULES (ALTHOUGH I BELIEVE THAT RE-INSTITUTING THE OLD RULES WOULD BE A GREAT START).

This wide-eyed, open-palmed wonderment that there is no sustained recovery is akin to being dismayed that no one wants to build wooden shelters in a town surrounded by arsonists running around free; but instead of matches, the arsonists are carrying fucking flamethrowers and have tons of NAPALM!!!!

DISARM AND PROSECUTE THE CRIMINALS OR WATCH THE SUFFERING LINGER ON AND ON AND ON...

[ipaint]

17. +1000 the criminals need to be brought to justice.

Put William Black and his kind in charge, they know what to do to purge the rot that infests our financial sector.


"In an interview with Corporate Crime Reporter last week, Black laid out his top ten.

Number ten: Hire 1,000 FBI agents.

Number nine: Appoint a chief criminologist at each of the financial regulatory agencies.

“Each agency needs someone who understands white collar crime,” Black said. “If you don’t understand fraud schemes, if you don’t understand how accounting is used to run these scams, you will always have a disaster in the making.”

Number eight: Fix executive compensation.

Black would tie executive bonuses to long term corporate performance.

Number seven: Target the top 100 corporate criminals.

Number six: Regulate first.

“When you desupervise or deregulate an industry, in fact you are decriminalizing control fraud.

Number five: Bust up the FBI partnership with the Mortgage Bankers Association

Number four: Get rid of Ben Bernanke as chair of the Fed. Replace him with Nobel prize winner Joseph Stiglitz.

“Ben Bernanke should not have been reappointed as head of the Fed,” Black said. “He was the most senior regulator. And he was an utter failure. Under President Bush, he was President of the Council of Economic Advisors. So, he was a failure as a regulator. And he was a failure as an economist.”

Number three: Get rid of too big to fail.

There are about 20 banks that have assets of $100 billion or more. They are considered too big to fail. “You do three things,” Black says. “First, you stop them from growing. Second, you shrink them (to below $20 billion in assets.) You create the tax and regulatory incentives where they have to shrink below the level where they pose a systemic risk. And third, you regulate them much more intensively while they are in the process of moving from a systemically dangerous institution to a more leaner, smaller, more efficient, less dangerous institution.”

Number two: Create a consumer financial protection agency headed by Harvard Law School professor Elizabeth Warren.

Number one: Fire Treasury Secretary Timothy Geithner, Office of Thrift Supervision chief John Bowman, Fed chief regulator Patrick Parkinson, and Office of the Comptroller of the Currency Chief John Dugan.


“Tim Geithner was testifying before Congress a couple of years ago,” Black said. “And in response to a question from Ron Paul (R-Texas), Geithner said – ‘I have to stop you right there – I’ve never been a regulator.’ Well, that’s true. But you are not supposed to admit it.”

“Can you imagine. This is the President of the New York Fed, testifying about the greatest failure in banking in the history of the nation. And he is so completely out of it – the mindset of capture is so complete, that he says – I’ve never been a regulator. This is the ultimate capture. You don’t even think of yourself as a regulator.”
“Ben Bernanke in October 2009 appointed Patrick Parkinson as the top supervisor at the Fed,” Black said. “He’s the guy who, under Alan Greenspan, led the Fed charge against Brooksley Born when she wanted to regulate credit default swaps.”

“Patrick Parkinson, on behalf of the Fed, testified that credit default swaps should be left completely deregulated.”

http://www.corporatecrimereporter.com/billblack030510.htm

[area51]

23. +1 n/t

[PSPS]

6. This would amount to a 7.5% "raise."

So, let's see. Your $10/hour full-time employee would take home an extra $125/month for the duration of this "tax holiday." The employer's share (also 7.5%) I presume would also be forgiven, although it would do nothing to stimulate the economy. An employer wouldn't be induced to hire anyone over this alone.

Of course, this will hit medicare because part of this goes into that fund. The rest goes to Social Security trust fund, which will also take a big hit since the high-wage earners don't pay this payroll tax on most of their earnings anyway.

The idea that this would be "paid for" by altering the income tax rate is bogus. Most of this tax never sees the general fund anyway, as it goes into the separate SS Trust Fund.

In other words, this is a back-door way to destroy Social Security. It has trillions of dollars sitting in it now, so this is a way they can launder it out of that and into the general fund where they can give it away to the rich via our regressive tax rates and the military budget.

[JDPriestly]

10. I agree with you, PSPS.

This is a backdoor way to destroy Social Security and Medicare.

No Democratic president should sign a bill permitting this much less advocate for it.

Obama is not a Democrat. If he backs this, he is not a Democrat.

[ProgressiveEconomist]

11. IMO the SS tax credit would be much more limited than you seem to suggest. Note

the Mark Zandi quote in the OP:

".. suspend the payroll tax FOR BUSINESSES THAT GO OUT AND HIRE ADDITIONAL WORKERS".

He didn't say suspend for ALL businesses. IMO there would be some comparison of 2011-2012 quarterly SS payrolls to those from one or two years ago in order for employers to qualify--see reply #8 below for illustrative details.

This qualification hurdle for the credit would cut out businesses that are not increasing their payrolls or even decreasing their payrolls--and cut the cost of the program to $30 billion or so over two years.

[ProgressiveEconomist]

13. And the SS tax credit would be calculated only on the INCREASE in SS payroll

for the current quarter, not on the presumably much larger SS payroll amount reported in the corresponding prior quarter a year or two ago.

This is a second severe limitation on the size of the SS payroll tax credit program, for those employers who pass the first hurdle of having expanded their payrolls.

[xJx]

14. Lots of ink...

How are you going to pay? You will print and print lots of money... at least the FED will. And you will be stuck with the bill!! Look at the track record. This IS the plan! Shift all manufactering overseas, eviserate the middle class with several giant debt bubbles that the corporate banks make billions on and then foment civil unrest. After the chaos, the corporate banks will come in like vultures and pick the bones as usual!!

[bl968]

4. That won't help

According to a team at Bloomberg News, at one point last year the U.S. had lent, spent or guaranteed as much as $12.8 trillion to rescue the economy. That's $41,692.92 per every man woman and child in the United States... When can we expect this to trickle down? You guessed it! Never...

The next bailout needs to go to the every day people. Because that is the only way we save our economy is by getting people out of debt. They will spend it by paying off bills, loans, and by purchasing. The money will still end up at the banks, but it will help a lot of people along the way!

Debts paid off; New Businesses started, or expanded; Down Payments on new cars, homes, big screen TV's; College educations paid for; Medical and Dental care that has been put off for years taken care of. And every one of those industries would benefit first, then the money would quickly get to the banks. everyone wins

[PSPS]

7. The only "bailout" that will work is a living-wage job

The idea that people's debt should be "bailed out" is the wrong way to go. That would just transfer the debt onto the taxpayer. We've had enough of that.

Even if this bad idea were to be enacted, what good would it do? People still can't buy anything without a living-wage job. I'm sure you're not suggesting that we embark on another debt-fueled "bubble" by having everyone buy things they can't afford using more debt they can't afford to pay off, are you?

We need to return to "fair trade" with tariffs instead of "free trade" with no tariffs. (It's insane that we have no tariffs while other countries impose tariffs our exports to protect their domestic industries.)

Sadly, this will never happen while Obama is in office. Maybe we'll get lucky and get a worthwhile president in 2012, but I've pretty much written off the country by now. I really don't see any way out of the institutionalized corruption that permeates Washington.

[JDPriestly]

12. Do away with free trade.

It is easy to see why "free" trade does not work.
ns
Imagine that you have two glasses. At the bottom of each glass is a pipe leading to the other glass. The pipe in each glass has a valve that allows you to open or close the pipe.

You make sure the valves controlling the pipe openings are closed/ You have two protected markets. Then you fill one of the glasses to the top. With only one glass full, you open the valves of the pipe to allow water to flow freely from the full glass to the empty one. That's a free market.

Now watch what happens. The previously empty glass will fill up so that each of the two glasses holds the same amount of water.

Free markets are good in moderation. I do not favor total protectionism. But we opened our markets too quickly.

It hasn't worked because we did not change our tax system when we changed our trade policy.

A major part of our government's tax revenue is from wages. But American wages have been severely depressed because of our free market economy. We have to change and pay a portion of our taxes as a sales or value added tax and use tax (on certain services). We can then reduce income taxes slightly and we effectively encourage more employment and discourage some of the outsourcing and importing.

That would solve both our tax problem and some of our unemployment problem.

[Ghost Dog]

20. That institutional corruption will eat itself in the end,

history tells.

But natural processes of putrefaction and decay can be quite slow and quite smelly, along the way.

[bl968]

21. Wrong

12.8 trillion dollars we as a nation gave to Wall Street, the banks, the executives, and by extension the rich investors who were the beneficiaries from the entire scheme. Why do so many people feel that only the ultra rich deserve assistance.

Personally I feel that we need a world wide debt wipe. Every individual, every corporation, every nation. But before we do we need to enact measures designed to prevent the recurrence of rampant debt. But a debt wipe isn't likely to happen at least until the financial system totally crashes and hits rock bottom; which will happen if we don't do something to end the debt load on the average Americans so that they can spend again.

I am not talking about spending into debt, just every day spending and purchasing. Going out to eat now and then, buying clothes, getting medical care, seeing a movie, buying a dvd, etc. The poorest of us can't do that any more.

The American system is predicated on spending, on the movement of money from the poor to the rich. When the poor stop spending, eventually the rich feel it as well. Look at the number of businesses that serve the lower income brackets that have closed. Those people are now out of work, and can't pay their bills. They can no longer buy the accoutrements of middle class life, etc. Unemployment will mask the danger until it runs out, and when it does the whole house of cards falls. Currently businesses meeting the needs of the middle class are starting to feel the pressure; and will eventually close, putting even more people out of work. I am sure you can now see where this is heading.

A job doesn't help people get out from under crushing debt, massive interest payments, debt collection calls, the never ending stream of late payment fees, bounced check fees, reactivation fees, etc. The system is gamed to keep you in debt once you get there. People used to be able to declare bankruptcy which served as a pressure relief to the economy, but thanks to Congress that option is no longer available.

A massive stimulus for the American People is our best chance at avoiding a total collapse of the economy.

[Iowa]

5. More weak, ineffective, republican-lite "solutions".

What a joke.

2012 can't come soon enough.

[ProgressiveEconomist]

8. Here's a more detailed outline of a payroll tax credit to create 5.1 million jobs

over two years. As you read it, substitute "2011" for "2010" and "2012" for "2011", since it was proposed in fall 2009 rather than fall 2010.

From http://www.epi.org/publications/entry/bp248/

"The job creation tax credit. Timothy J. Bartik John H. Bishop

Economic Policy Institute--October 20, 2009--EPI Briefing Paper #248

Dismal projections for employment call for a quick, efficient, and effective response ...

€ A job creation tax credit that refunded 15% of new wage costs in 2010 and 10% of new wage costs in 2011 could create 5.1 million additional jobs in the U.S. economy over these two years.

€ The net cost of the tax credit would be roughly $27 billion, or about $5,400 per new full-time-equivalent job created over these two years. ...

The tax credit would equal 15% of additions to taxable payroll in 2010 and 10% in 2011. The reduction in the second year is a response to two assumptions. First, improved employment conditions in 2011 will reduce the need for the credit. Second, as conditions improve employers who would have expanded in the absence of the credit will still be able to take advantage of it, so reducing the second year credit helps control its cost. Moreover, the higher credit in 2010 encourages employers to front-load their hires. ...

The credit is paid on increases in total payroll subject to Social Security taxes. So firms could receive the credit for adding new jobs, adding hours for existing workers, or simply raising pay. ... Further, because the credit is based only on that portion of payroll subject to Social Security taxes, wage increases given to very highly paid workers (those whose earnings exceed the Social Security tax threshold of $106,800 in 2009) would not be eligible for the credit. ...

The credit would be provided for any payroll expansions (not just new hires, as mentioned above) in a quarter relative to the same quarter a year ago. The credit could be claimed for payroll expansions relative to the base period starting in the first quarter of calendar year 2010. At the end of March 2010, employers would receive a tentative quarterly jobs credit based on how much their first quarter payroll exceeded their payroll during the first quarter of 2009. The tentative jobs credit for the second and third quarters of 2010 would be based on comparisons with the corresponding quarters of 2009. The tentative credit for the fourth quarter of 2010, however, would be based on a comparison with the fourth quarter of 2008. ...

Almost all U.S. employers currently file Form 941 to report their liabilities for Social Security and Medicare taxes and income taxes withheld for their employees. Adding a few lines to the form would allow a wage credit to be implemented relatively simply and quickly. ...

We estimate that in 2010, 2.8 million jobs will be created by the credit, followed by 2.3 million in 2011. The net budgetary costs of the program are $13 billion in 2010 and $14 billion in 2011."

[Downwinder]

15. If you put the grease in the wrong place, the wheel will continue to squeak. n/t

[xchrom]

16. kick for the conversation this has started here. nt

[ProgressiveEconomist]

18. Conversation?

[xchrom]

19. I was enjoying reading posters who have more

In depth knowledge about this than me.

[ProgressiveEconomist]

22. Kick!