Might the Bush bunch actually do something right?

[flamin lib]

The Bush administration has finally discovered that the economy isn’t all roses. The fiction of full employment foisted upon us by the 2002 change in computation methods and the collapse of the banking industry brought on by deregulation has finally gotten their attention. Like a pit bull hanging onto their butt it got to the point it just couldn’t be ignored any more.

The new Fed Chairman, Ben Bernacke, testified before congress that the economy was at its slowest growth since 2000. He couldn’t bring himself to say “recession” but said if something isn’t done immediately we might sorta’ kinda’ find the economy might sorta’ kinda’ slow down some more and that isn’t a good thing. His suggestion for a short term fix is to add $100-150 Billion to consumer spending immediately. Yesterday would have been better, but today will have to do. He further said that messing with the tax code would not have the desired effect, that it would be too long term. Bernacke suggested the stimulus take the form of a $300-800 tax rebate to households making under $100,000. Not a “pre-bate” like we got in 2001 where it came back out of the next refund but an honest-to-God refund of past taxes. A freebie.

Bush immediately said we had to make his tax cuts permanent instead of letting them sunset in 2010. How is messing with the tax code three years from now going to have an immediate effect? Besides, if those tax cuts, all aimed at the top 2-4% of incomes, were supposed to stimulate the economy why is the economy in the tank now? Better yet, if those tax cuts were such a great idea, why is Bernacke saying the entire stimulus needs to go to lower and middle class incomes? Could it be that Republican economic policies are a disaster? You betcha’!

According to the Bureau of Labor Statistics 60% of the GDP (the economy as it were) is consumer spending. Consumer spending drives the other 40% which is the makers of stuff consumers buy. Bernacke says to stimulate the economy we have to give a freebie to the people who will spend it immediately and not invest or save it. Here’s how that works: Give a one-time $300 gift to someone living in an apartment with three kids and they go out and buy food, let’s say bread. The grocery store buys more bread to restock and hires one of the kids to keep the shelves full. The bakery buys more flour so the farmer sells more wheat. The trucking companies hire more truck drivers to deliver bread and flour. They need more trucks, so the automaker builds more trucks etc, etc, etc. That $300 got spent 7 times in this example. Giving more money to households making more than $200,000 won’t stimulate the economy because they aren’t as likely to spend it immediately. Giving tax cuts to business won’t help because they don’t have customers for their goods. The only way to stimulate the economy is to feed cash to the middle and lower income families. Trickle up economics, folks.

This is a complete refutation of Republican economic policies since Reagan. It is an admission that tax policies favoring the rich do not stimulate the economy and that it isn’t big business but simple, everyday people who drive this economy.


http://www.bls.gov/opub/mlr/2002/11/art2full.pdf

[Adsos Letter]

I wonder how many people would use that...

money to pay down credit cards, or other debt? In that case, it won't be a stimulus at all because that money has already been spent...

[flamin lib]

3. That is what happened to a lot of the pre-bate of 2001.

It isn't a case of too little but too late. Too many consumers have dipped into the credit cards for everyday expenses so the cash will go to paying off already spent money. Still, it will give a few $ hundred breathing room and will eventually get spent even if on the same credit card it was applied to.

[Adsos Letter]

5. It would be a good step towards helping

people in debt cut down at least some of their indebtedness. It is the stimulus part that I question. But I do see your point, it is just unfortunate that any stimulus will have to come from further personal indebtedness down the road from people who are forced to use credit cards to get by...

[Cant trust em]

1. Glenn Beck is opposed to a stimulus package

showing off his mastery of economic issues. What a blowhard.

[Fredda Weinberg]

2. There's nothing new about the multiplier effect, but you have to

understand the Fed's job. I took years of college level economics to understand this, but here goes:

If the administration, which handles fiscal policy, works in conjunction w/the growth of the money supply (something the fed can control), you can have productivity growth, growing wages and low inflation. Get out of sync and you thrash around ... and if one party, this case *, is unable to react intelligently, the swings turn into full blown crisis.

Haven't seen one since the 70's but we've apparently not learned the lessons we needed. I've survived before ... will be all right personally, but others will suffer.

So, the worst thing the politicians could do now is yield to the moment. Until the central banking authorities are purged of this accomodating cohort, we can't regain equilibrium.

The Keynsian prescription of increased government spending, directed at the lowest eschelon of consumers, would have the greatest bang per buck. Bernanke admitted as much in testimony this week. Yes, you can cut taxes for business, but capital is useless w/o demand and demand needs income. We must avoid the vicious spiral.

[Adsos Letter]

7. Where do we get the money to go "Keynsian?"

Wouldn't that require an immediate reversal of current tax policy toward the wealthy? Where is that in their equation?

[Fredda Weinberg]

10. You allow deficits to rise. When asked about the long term

Lord Keynes famousely said, "In the long run we are all dead." But econometric models validate his theories, hence Bernanke's reluctant support for tax payments directly to low income earners.

Tax rates can rise again, especially on the highest income earners, in the next administration. This one isn't capable of seeing past short term interests.

[sinkingfeeling]

4. It sure won't be Bush doing anything. I fully believe we need to 'suffer' through this, because a

'freebie' will just add $145 billion more to our debt. More debt, a bigger hit to the dollar, and more inflation isn't the answer. We need to reduce debt, increase taxes on the rich, create jobs and increase wages to those working people to see any long-term improvement.

[flamin lib]

6. Suffering through a recession isn't necessary if handled right.

Of course getting into one isn't necessary either, but too late for that discussion.

A one-time expenditure of $100 billion, .1% of GDP, can have a 10-20 times affect because of the multiplier effect. While a 1-2% stimulation probably won't set the economy on fire it can stop the bleeding. The GAO says that for every $1 in stimulus there is a 30% return in revenues, more if done extremely well, so the net cost would be .007% of the GDP.

The biggest threat to the debt, the deficit and the dollar is another round of tax cuts which build the debt year after year as opposed to a one time kick in the pants.

[sinkingfeeling]

8. Again, a temporary fix to let Bush escape and then have the shit hit the fan.

We're borrowing $1.92 billion a day! I think it's way too late to 'solve' our economic problems without a complete reversal of Bush's tax cuts to the rich and a deep reduction in all DOD spending and an end to our occupation of Iraq.

[flamin lib]

9. You and me both. The whoe point of the OP was that Republican

economic policies are the anthisis of what a healthy country needs to prosper.