CN argues that it’s the lynchpin problem, and I can’t see any reason to disagree.
So what do we do about it? Obama thinks more public works will help. Conservatives think that a tax cut for businesses would produce more in jobs than it costs in lost revenue.
Whaddya think? Whatever you believe is the right solution, how likely do you think it’d be implemented? Are we doomed to just “wait this out”?
I think the first thing to do is to put a Media Blackout on the Financial Crisis. Ignore it and pretend it’s not happening, except for the really big business failures.
Most of the “jitters” and “lack of consumer confidence” stuff is, IMNSHO, caused by the constant coverage of the Financial Crisis. It’s like Paris Hilton- it’s news because the media keep talking about it.
Admittedly, I’m writing this from an Australian perspective, where most of the job losses and so on here are being caused by low retail sales figures, which are being caused by people not buying anything… because of the Financial Crisis in the US, which until a month ago wasn’t affecting many people here at all.
I think that a tax cut for everyone- not just people with kids or on pensions- and an increase in Government or City Council employment (ie, actually hiring people instead of subcontracting everything out) would go a long way towards helping the economy, along with a removal of all taxes, duties, and tariffs on the purchase of a primary residence- doesn’t matter if it’s your first home or your sixteenth, as long as that’s the house you plan to live in- and a Government-secured First Home Buyer’s Mortgage at, say, 3% p.a. for 15 years and then 5% for the next 15 years.
I know, it will never happen, but I can dream…
I have a couple ideas (nothing necessarily new):
How about tax breaks for businesses that actually create and maintain jobs in the US instead of incenting them to ship the jobs offshore? (I heard it during the campaign, but I want to see it in practice).
When we talk about public infrastructure, how about technical infrastructure as well?
Public works require a considerable amount of long-term planning before any actual construction can be done. I don’t see that as a good way to stimulate short-term economic growth.
My totally uneducated opinion is that, assuming anything should be done (like Martini Enfield, I believe a lot of it is in people’s minds - but I don’t like in the US either so…), Obama’s in the right.
First of all, while tax cuts to businesses could create jobs, the money could also end up in a fat cat’s pocket, or raising the salaries of existing workers leaving just as many people out on their ear, or even saved “just in case, there’s a crisis after all”. By comparison, public works face much higher corruption scrutiny and create jobs from scratch.
Note also that by definition, public works benefit everyone, not only those who are paid to do them, whereas private businesses may or may not. OK, maybe not all public works do, roundabouts every 50 meters only aggravate - but again, there’s more open scrutiny.
The downside would be that public works don’t create the basis for future income generation and are only a temporary measure to get people to start spending again, but isn’t that what the whole deal is about, emergency measures ?
I’ve never understood this reasoning. We are in a recession; no one is spending, so demand for products is down. So why would tax cuts for business produce jobs? What business expands capacity when demand is down? Business tax cuts in this economy go straight into the pockets of the stockholders.
Because smart people realize that we won’t always be in a recession, and they will want to invest in the future. The less it costs to do that, the more likely it will happen. You can invest without expanding capacity.
But if it makes economic sense to “ship the jobs offshore”, why would we want to de-incentivize that? I don’t want the government deciding which jobs should be done in this country and which things we should just import. That’s a decision for the private sector.
Most of the jobs that are sent offshore are manufacturing and other production jobs. If we kept them all here, retail prices would skyrocket due to giant increases in wage and benefit costs to the employers. So the “people” would still get screwed, because they couldn’t afford to buy anything.
Alternatively, we would have to keep wages and benefits here competitive with the rest of the world.
No one really wants that.
Could you go into a little more depth with this?
Product development. New business start-ups. R&D.
This is my take on it: its not just jobs, its the lack of well paying jobs. As everyone knows, despite the fact the economy has grown quite a bit since 1980, middle class people’s salaries have not. Almost all the gains have been pocketed by those at the very top. In order to maintain their lifestyle, middle class people have been forced to spend more and more of their savings or go into debt. Fast forward to today, and middle class people are maxed-out. The savings and credit are gone. This is, imho, the root cause of the problem. People aren’t going to have money to spend, allowing the economy to recover, until they are paid more at their jobs.
No.
The root cause of the problem is quite simply people have lost perspective.
“People” have been “forced” to spend more and more of their savings or go into debt? I don’t think anyone “forced” the middle class to buy McMansions that you liberals hate so much. I don’t think anyone “forced” the middle class to buy those useless SUVs that you liberals hate so much. I don’t think anyone “forced” the middle class to buy those expensive wide-screens, or Xbox or Wii, or etc. etc. etc etc.
The truth is that people were led to beleive that the prosperity of the '90s would last forever. People still think the prosperity of the 90s was the norm, not the exception.
The norm, everyone, is something a lot less extravagant than the 1990s. Which we are now figuring out.
Once we begin to accept that, normality will eventually and truly return.
FYI, offering a $3k tax incentive to businesses that hire each $50k/year employee won’t help, either, because the simple math says that 50-3 = $47k loss. Why would I hire someone that costs me $50k per year to employ if I get only a $3k tax credit for doing so? Especially if my business isn’t selling enough product to keep that employee busy in the first place? The whole idea is absolutely ridiculous.
A better solution is to give Americans on an individual level another individual tax break or individual tax credit or incentive or rebate or something. When Americans have cash, they typically spend it and vote with their wallet on where that money needs to be spent first (and if they again choose SUVs and McMansions instead of saving it or paying down debt, well again it’s their own damn fault). But I think people have learned . . . I hope, anyway . . .
Ah, yeah. I can see where there would be quite a lot of incentive to either differentiate your product or increase production efficiency.
shallora, I don’t really disagree with most of the content of your post, but since this is GD, why don’t you provide a cite regarding how liberals hate McMansions and SUVs.
This kind of invective is pretty damn offensive and ruins a perfectly good point. Now instead of wanting to expand on what you said, maybe reach some common ground (since I am not so far away), I only feel like pitting you for trying to paint me into a corner when you know nothing about me and mine.
Funny, maybe it’s because I’m a “liberal”, but in MY job I’m actually expected to produce, not just sit there and draw a check. So, in your idiotic example, my boss doesn’t see employing me as a $47K loss - because if he did, he wouldn’t employ me.
I actually generate a relative revenue in excess of $47K. Maybe you don’t?
-Joe
Here’s an idea… If so many people are unemployed, and there is a $50k job that existed last year that is now worth $47k to the employer, then why can’t he hire someone for $47k without dipping into my pocket to make up the difference? If the job isn’t worth $50k to the employer, then it shouldn’t be offered at that rate.
You entirely missed shallora’s point, which is completely compatible with yours. S/he was pointing out that a $3K tax break will not encourage a business to hire someone to a $50K job they would not have hired them to anyway.
…
To make another point, I have to be pedantic, but people are usually NOT paid their salaries based on how much they “produce.” You aren’t paid $50K because you generate $50,001 or more in revenue, you’re paid $50K because that is the market price for your services. It wouldn’t matter if you produced a million dollars; if the market rate for your experience and talents is $50K, that’s what you get. Obviously, many or most employees do not have easily definable “productivity” by revenue; how do you define the revenue generated by a custodian, or a bookkeeper, or the manager of preventive maintenance?
Some people do get paid piecework or commission, but that’s a minority of jobs.
My solution is nothing new. Fast track existing infrastructure projects. Tax cuts to corporate tax rate, capital gains, and make it easier to buy second homes and investment property (something has to be done with the extra capacity). Relax TARP money lending requirements. I’ve been helping out in our capital finance group lately and if banks have the same problem we have (my friends at Merril/Bank of A confirm this), it’s government excess regulation that is keeping banks from lending. But, what can you do? Bad lending was one of the reasons for this mess in the first place. I guess enforce stricter regulations later. My whole plan will involve growing the economic pie and let the government create safety nets.
Ron Suskind, in his excellent book The Price of Loyalty, quotes Paul O’Neill, Bush’s first Secretary of Treasury and former Alcoa CEO, as saying (paraphrasing here): “No [sane] CEO ever makes his business decisions [like hiring or choosing whether or not to do R&D] based on tax policy.” He ought to know, so I believe him. Although he is quite a solid right-winger (for example, he believes desperately in privatizing Social Security), he thought the tax cuts of 2001 were wrong, because they would not stimulate the economy.
As I understand it, it’s pretty well understood that cutting taxes, even for individuals, doesn’t typically lead to increased spending, especially in a period of economic downturn when people are afraid. To get the most bang for the buck, the best bet is to put money in the hands of people who don’t have any, and thus will spend any they get. This is done by increasing unemployment benefits and by creating jobs.
Let’s be honest here, if nowhere else. The whole business with tax cuts is a sop to the Republicans to get them to buy into the stimulus package. While I have been saying consistently from well before the election that we don’t need a Bush of the left, I could wish that Obama was a little less determined to be so overwhelmingly non-partisan in this case. The stimulus package doesn’t need anything like eighty votes to pass, and I think that sixty-five to seventy would be plenty to qualify as having bi-partisan support. I’d like to see us put our money into the area where it will actually generate the greatest result.
If anyone doubts this, let’s look at TARP, in the course of which we granted very large amounts of money to businesses that supposedly were in serious trouble. Have they created jobs or increased R&D? No. Several bought other companies, thereby leading to more debt. Others increased dividends and/or executive bonuses.
With respect to “shovel-readiness,” the government could spend a fortune just working on repairs to current infra-structure, which presumably would not require a lot of lead time to get under way. That would give people ample time to ramp up for planning any new infrastructure projects, assuming there are any states that don’t have a number of projects ready to go and simply lacking funds. Repairing dams alone would probably take quite a bite, and we desperately need to do this. There are an estimated two million dams in the US and 25% of them exceed fifty years in age. Highways, power grids, bridges - all of these need fixing, but there’s no money, and since people will elect anyone who promises lower taxes, there’s not going to be any money.
Personally, I’d like to see the stimulus package include a small, progressive tax increase to help at least a little in paying for the spending, but I know that won’t happen. Political reality is what it is, and the Democrats ran on a platform of bipartisanship. In real terms, that means that the far right wing of the Republicans will be able to block anything it wants to, by screaming really loud.