Some folks are just bewilderingly stupid. Does she not believe in roads and bridges? 
Well, wouldn’t want all those male road crew types to get all the room at the government trough after all…
-XT
“In theory, there is no difference between theory and practice, but in practice, there is.”
Politicians do things to get re-elected.
The pressure to do ‘something’ is overwhelming. There’s a recession - OMG fixitfixitfixit!!! A politician who said “there’s nothing we can do to make it better except not to make it worse” is committing political suicide. Why do you think FDR was so popular even though there are a number of economists who believe what he did about the Great Depression made things worse?
Obama’s saving grace, if he has one, is that the average recession since the end of WWII has lasted about eleven months. If whatever Obama does doesn’t make things worse, and if this is an average recession, then he just needs to look busy for a while and take credit when the recession ends on its own. The odds are in his favor - the Dems in Congress have just announced they will not have a stimulus package ready by Jan. 20.
So he takes office, messes around for a while, and then the recession is over and everyone hails him as the Messiah (again) because he single-handedly saved Western civilization and so on. Hallelujah. Trouble is, now we got a trillion and a half in deficit spending that we no longer need, if we ever did. Plus the Medicare crunch. Plus, if he wants UHC, we need another couple trillion for the transition, plus the increases that will occur in health care inflation because the demand has increased (all the uninsured now have coverage).
Now, in theory, because these infrastructure projects aren’t really needed, they were just more or less make-work to stimulate the economy, we could cancel them and be none the worse. Therein lies the rub - each individual Senator has much, much more to lose than Obama if spending in his state is reduced. So he is going to fight like fury to keep the money whether the economy needs it or not.
Regards,
Shodan
You are exactly right. Imports siphon off the advantage of a fiscal stimulus. And infrastructure spending has a strong effect precisely because the work is done right here.
But I wouldn’t say that imports are the biggest potential problem of the tax cuts. We could also see the extra money disappear into savings instead of being spent. And if the banks continue to sit on those funds, instead of lending the money out, then we’re not going to see a strong positive effect from the government giving out money. This is, again, an advantage to infrastructure spending, because with construction work we know that the money will be spent instead of hoarded. I’m concerned that these tax cuts are a sop to conservatives to get the bill passed quickly, instead of it being the best way to conduct the stimulus. But Obama’s advisors know a thousand times more than me, so I’ll just wait and see.
No, it is not. We had a catastrophic market failure in the financial sector. The GSEs eventually joined the subprime game, but they were followers, not leaders. The private sector was doing a fine job fucking themselves and the rest of us over before Fannie or Freddie ever got involved. Wall Street failed both with their initial approval of shitty mortgages and their credit default swap deals that were almost entirely unregulated, even though the swap is basically a kind of insurance.
No, Marx does not win. The fact that the market fundamentalists are profoundly ignorant does not mean absolve Marx of his almost countless faults. The extremes on both sides are wrong.
Which is why a middle class tax cut, and not a one time stimulus check, is to be preferred.
If everyone had lived within their means, the recession would have happened ages ago. Which might have been a good thing, but you can blame Mr. Bush and Mr. Greenspan for it. To live within your means you either have to have the means increase (which the stagnation of income for all but the top 5% prevented) or reduce spending, which would have caused a recession - and which is the reason so many retail companies are going under. I trust you were equally vocal about this when Bush pushed through the big tax cuts for the rich or mortgaged the country to find those elusive WMDs.
Care to cite evidence that the consensus of economists is against stimulus during a recession? Calling it political is a no-content comment - of course it is political, as is balancing the budget during a recession. Anything the government does is political. Hoover balancing the budget in '31 didn’t help a lot - nor did FDR raising taxes to try to balance the budget in 1937.
Your faith in the perfect idiocy of politicians is touching. Perhaps there are useful infrastructure projects in all states? Is there any reason you think politicians will uniformly favor useless projects at the expense of equally expensive useful ones? A project on the road I take to work, just completed, save me twenty minutes a day in commute time, and no doubt saves gas also. Amazing the politicians managed to support that one, isn’t it?
Like the invasion of Iraq and tax cuts for the rich? Totally agree.
And for exactly the same reason - neither idea is realistic about human nature.
The 2003 cuts that totaled maybe $40 Billion? Vs a trillion dollar “stimulus” plan? Is that the equivalence you’re trying to draw?
Too late. The recession started in December 2007, so is already longer than average - and you might have noticed it isn’t getting better. The average recession also doesn’t involve a liquidity crisis. The average recession also does not involve a major decline in housing prices all over the country, as opposed to in selected markets.
Gee, you cut out Iraq. It’s the principle of the thing, anyway. Taxcuts were indeed called for in 2001, too bad the ones we got went to the wrong people to truly improve the economy.
Do you have a cite to show that people spend a permanent tax cut but use a one-time stimulus check to pay down debt, in similar circumstances? Also that the middle class is more likely to spend than, say, the rich.
Did you have a cite to show that the tax cuts back in 2001 caused the recession in 2008? I was under the impression it had more to do with the mortgage collapse.
I rarely feel the need to cite evidence for things, unless I actually say them. I’m funny that way.
Only if badly misinterpreted.
Correct - which is why it is such a bad idea to have politicians decide how to spend money, instead of consumers and the free market. Sometimes it is unavoidable, but in general, it is not a good idea.
Exactly because the reasons for their decisions are political rather than economic. A project, as mentioned, is often more likely to be funded because it helps a politician get re-elected than if it is really needed. See Sam Stone’s earlier post for a fuller discussion. See also “Nowhere, Bridge to”.
I am glad to see that you agree that many of FDR’s attempts to fix the Great Depression were unsuccessful.
But it goes further than that. Remember how I mentioned that a politician could say “Let’s not do anything to make things worse”, but that the pressure against him would be overwhelming? One of the major causes of the Great Depression was the Smoot Hawley tariff. Cite, as if that were necessary. Here’s what seems like a great idea - let’s reduce demand for imported goods, and increase demand for domestic goods. It will stimulate the economy.
Only, oops.
“We have to do something - this is something - therefore, we have to do it” is a stupid syllogism, but one which appears all too often in the annals of government management of the economy.
It’s not faith; it’s observation.
Perhaps there are. If so, a whole shit load of money will be dumped into them. If there are not, guess what - same shit load whether it is useful or not.
No, there isn’t. As a matter of fact, I don’t think that.
What I do think is that which projects get funded will not be based on whether they are useful or not, but whether they will get the Congress critter from that state or district re-elected. And simply to spend whatever funds are allocated, regardless of whether the infrastructure improvements will pay for themselves, or not.
The various states will be given access to a big pot of money. If you think any politician, especially a Democrat or “compassionate conservative” type, is going to say “no thank you - we don’t need to spend that much”, then I have a bridge in Brooklyn that I can sell you, and it doesn’t need much infrastructure spending at all. (and it actually leads somewhere).
No, they will spend every dime they are allocated, and more. And then we will wind up with a whole bunch of projects, some of which are necessary and the rest of which are not. And all those which are not are going to be exactly what the first line of your post said was not desirable - a one-shot stimulus.
But, perhaps I am wrong. Okay - how about if you come up with some cites to show that there is $775 billion in projects pending, and why you believe that all of that $775B will more than pay for itself in the long run? And please be specific - the notion that we should just borrow money and dump it into circulation is what I - and you, in the first line of your post - are arguing against.
Regards,
Shodan
When the extra money is coming in every paycheck, don’t you find it somewhat plausible that some will be funneled into consumption? I will look for a cite. As for the rich, the argument made for that kind of tax cut is for investment, not consumption. Please let me know what things the rich can’t afford if they wanted them without a cut? Hell, I’m not rich (but rich enough to not get a stimulus check last time) but there is precious little I’d buy with a government check that I couldn’t buy today if I wanted it.
Not what I claimed. I was just wondering if you were such a deficit hawk back then. No, the 2001 recession had nothing to do with it, and neither did the current deficit - though it does make the deficit spending we actually need now more painful. I guess you can find a connection because the low interest rates used to get us out of the 2001 recession accelerated the housing bubble, but there were ample opportunities to deflate it without a disaster if Greenspan was not quite so trusting of Wall Street.
You might have noticed that consumers don’t have money to spend. The stimulus is going to create money for them to spend. Risky, yes. Do I read you as agreeing that most economists disagree with you?
You think Ted really needed that bridge to get reelected. Hell, he almost won under indictment. A politician coming up with a new project is unlikely to get it funded, since to stimulate the economy we need projects that can start very soon. Sam’s concern about there not being enough projects is a lot more valid than your concern that they are all boondoggles. For every bridge to nowhere there are probably 100 like the one near me which needs an earthquake retrofit. Would be handy if the bridge didn’t fall down when I was on it. Since the bridge is a couple of miles long, it is a bit too long to gun my car and jump to the other side.
Especially when he tried to follow your budget balancing philosophy. Given the primitive state of economic theory back then it is not surprising FDR made mistakes, but they were mostly on the side of too little stimulus, not too much.
So? Making the economy less efficient is hardly a solution. I haven’t heard Obama saying much these days about renegotiating NAFTA, and if he did it would be a mistake.
How do you compute if earthquake retrofitting a bridge or a school pays for itself? There are plenty of projects lined up before the money was ever dreamed of. And money is going to projects, not lump sums to states (though that might happen also to help with state budget deficits.)
California has just halted work on a ton of projects because of our budget issues. Do you think the people thrown out of work by this are going to help the recovery or hinder it?
I’ve actually published on ROI calculations - in an engineering context - that shows how difficult it is to forecast correctly. I used to get my group paid based on cost benefit analyses we submitted to our funders in the company. We got our money but it was bullshit, and no one I know has done any better. You can create a good argument for payback based on risk reduction, trip time reduction, accident reduction, but there are so many guesses involved that I wouldn’t expect you to believe it. Big successes, like the interstate highway system, were probably not even forecast correctly. It was done to help tanks drive around - do you think the proposal included the creation of exurbs? If we agreed to build only stuff that can prove payback to your satisfaction, or beyond a doubt, I expect we’d build nothing.
BTW I never opposed borrowing. The stimulus checks were one time things and too little. This was done before the size of the problem became apparent, so I’m not even denigrating the effort. In any case, even infrastructure projects are not going to be the only thing needed. I trust the next $350 billion is not going anywhere until the banks start using the first batch to do some lending. Maybe that will happen when Paulson gets the boot.
I can provide at least one of these cites.
Wikipedia’s article on marginal propensity to consume cites the book European Economics. I don’t know it, but the explanation should be clear:
As for your second question, there’s still good reasons to favor middle class tax cuts over cuts for the wealthy even if the MPC is the same for both groups. One point with respect to welfare economics is that the marginal utility of an extra dollar is going to be higher for someone with less money, so the lives of more people can be more significantly improved with cuts geared toward the lower ends of the tax bracket.
In addition to that, US taxation is not especially progressive (that is, when all forms of taxation are considered, not just income taxes). There are strong arguments to be made that the marginal rates for the wealthiest should be increased after the economy recovers. And since permanent tax cuts work better for stimulus, it would be be best to keep the middle-class cuts permanent so that we can increase the marginal rates to more reasonable levels once our fiscal concerns return once again to budget balancing instead of priming the pump. There’s a lot of talk of salary caps, which aren’t a great idea because of market distortions, but higher marginal rates could actually work to decrease the distortions that currently exist at top executive salary levels.
Right there is the problem: "the lives of more people can be more significantly improved "? That’s social engineering, not any type of economic planning. If you want to argue for the desirability of that, or the necessity of it, fine, do so, but don’t pretend that it’s designed in any way, shape or form to improve the economy.
Economic planning *is *social engineering. A Conservative economic agenda is every bit as much an attempt at social engineering as is a progressive agenda. The question is only to whose benefit the tinkering is done.
We should be very careful whom we allow to practice such engineering. We should examine them closely and have the option to fire them. If they screw every pooch in the pound, we should give the other guys a shot at it.
Welfare economics happens to be a subset of economics. Hence the name. So welfare economics planning is, in fact, economic planning.
You would be right to note, however, that the desire to improve the utility of citizens instead of, say, crushing them under the oppressive heel of a tyrannical and capricious government is a subjective normative decision. I’ll cop to that. I want economic policy to improve the lives of as many people as possible in as significant way as possible. Guilty as charged. Once that decision is made, however, there are objectively verifiable ways of going about that business. I was providing one such way.
And yes, welfare economics planning does concern itself with improving the economy. That’s an integral aspect of it. The fact that I’m concerned with who gets which slices of the pie does not in any way mean that I’m not interested in creating a bigger pie. The stimulus plan is designed to get us a bigger pie again. Permanent tax cuts are one potential part of that plan. But to give permanent tax cuts to the very people who managed to wreck this economy would not be a smart idea. These large salaries in the financial sector, which have been entirely divorced from their actual productive abilities (a problem that also seems to exist in much of the rest of the corporate world), are quite likely a terrible distortion in that market, and better tax policy in the form of higher marginal rates might fix that distortion, which would also help with making a bigger pie.
These various concerns can be balanced. The fact that I have subjective goals does not mean I’m incapable of objective analysis.
“Social engineering.” What a typically fatuous, Rush Limbaugh, pretentious, right wing, pseudo-academic phrase. You’re probably one of those people who uses the word “government” without a definitie article because you think it makes you sound smarter.
I’ve got news for you – ALL government is social engineering.
I agree.
Hey, that sounds like a moral superiority statement with a dash of false modesty sprinkled on top.
Can I try and join the club too?
I (and others) also want to improve the lives of many people as possible in as significant way as possible. However, my economic method would be different; that doesn’t mean I don’t have the same lofty (big picture) goals as you.
What?!?!?! :mad: I can’t believe you agree!
(actually, I agree too, but didn’t want to disappoint Voyager who would no doubt be shocked to see that I agree with him ;))
-XT
Tell that to Weirddave. He was the one doing the sneering.
Don’t know about sneering, but I’ll take a moment to spread some more sarcasm sauce on the argument(s) buttressed by appeals to “human nature”. You mean the human nature of our ancestors, with the cooperative social units whereby they thrived? Or are we talking about the entrepreneurial monkey, the Milo Minderbinder of primates?
'Cause if somebody’s going to slap me upside the head with an argument based on “human nature”, is it too much to ask just what the bleeding fuck that actually means?