First, there is no true definition of a depression, but the one we all agree on was the Great Depression. And that was made far worse by protectionist policies such as you propose.
Jonathan
Protectionism is what China and India are being accused of. They are increasing tariffs and limiting trade. If we do it ,it becomes anti capitalistic protectionism.We need to level the playing field and quit being taken for fools.
Well, we have to go back to our basic Keynes here.
Problem : bad bad economic mojo goes down. In this case, a bunch of mindless greedy assholes lied billions of dollars into existence and then one day, the spell wears off, and that money disappears, making the money supply drop like a felled steer and scaring the bejaysus out of everyone.
This is easily bad enough by itself. However, it leads to something even worse:
Everyone hears about the bad economic news. Jobs vanish because banks aren’t lending. Businesses disappear, same reason. Anyone who still has money has no idea what they should do with it, but they know one thing :
They sure as hell aren’t spending it!
So economic activity nosedives, and brothers and sisters, that is BAD. Spending is the blood of capitalism. A healthy capitalism moves lots of money around all the time. When the blood stops flowing, THINGS START TO DIE.
But you can’t very well expect people to spend money they really shouldn’t, quite likely sacrificing their own economic futures, just to keep things flowing.
What you really need is some massively rich guy who has tons of money to suddenly start spending it. But gee, who is rich enough?
Nobody, that’s who. Not Warren Buffet, not Bill Gates, not the rich couple from Gilligan’s Island, nobody.
Capitalism is, at this point, helpless to save itself.
The only thing that can save the patient is a massive blood transfusion.
And the only doctor who can do that is the government. Only a government is big enough and can borrow enough to get that blood flowing again. They essentially have to do whatever they can to be the heart and lung machine of the economy until the patient can live and breathe on its own again.
That is stimulus.
That does mean that, technically, all spending is stimulus. However. there’s a few factors to consider :
- If you’re going to be spending a hell of a lot of money that you’re borrowing from the future (better than letting the patient die and having the whole world turn into Iceland), you might as well spend it on things that need doing anyhow, and that have just been waiting around for someone to have the political will to do.
- Not all spending is equally good for the patient. Construction, for example, is great because it provides a huge economic stimulus while it’s going on. Labour, materials, planning, legal issues, the whole shebang. On the other hand, once it’s done, it’s done, and whether or not it will generate a significant amount of economic activity afterwards tends to be highly debatable.
This is where all that “shovel ready” ballyhoo comes in.
So sorry, conservatives. Stimulus is real and it really really needs to happen and government is the only entity that can do it.
Feel free to argue about what, exactly, should be stimulated, though.
First, yes, I am. The Bush tax cuts aren’t enough, neither, likely, are the ones proposed in the current stimulus package, but are we serious in the belief that the money that we borrow from the rest of the world and our future to get us out from underneath the mess we put ourselves in is the best way to shore this mess up? Are we really saying that betting on the future (which in theory is what got us here in the first place) is the only way to fix this problem, or is there a better, more fiscally conservative, and in fact, permanent way? I suggest there is, and creating more “credit” is definitely not it.
If, for instance, I borrow from my children to put myself to work, I create a cycle of need for that borrowing to continue, thus creating a legacy of debt that it takes incredible sacrifice or incredible luck to pay off in tomorrow’s dollars debt that was accumulated today, which can’t truly be done by just printing more money. I agree we need to put people back to work, but that’s the job of the market, not the government. The sub-prime mess, for example, is the fault of the bankers and the people asking for the loans, both sides gambled, and everyone lost. Shoring that up with money is a crutch, there is nothing preventing that from happening again because the market demands freedom to make as much money as it can. Better that the banks fail and the lesson be learned today that the market and those guiding it learn the lesson for the long term. Further, if the infrastructure is in such disrepair, there isn’t a sitting politician that should remain in office past the end of this week. They’ve been fiddling while Rome burns. This happened on their watch. If it’s NOT truly crumbling the way they say, and it’s just an excuse to spend money we don’t have just to “put people to work” then it’s waste. If the tax burden on the individual was lower AND the government worked to incentivize American companies and protect American jobs,
THEN we would have a stimulus.
The current package will STILL take years to fully deploy, well into the 2012 race in fact. If companies, for the sake of profit, decide to move offshore, the government has the ability to set fees and tax rates as incentive to prevent or reduce that to level the playing field for companies that choose to remain American exclusively. Sure, the economy of China, Mexico or India may be impacted, but frankly, better them than us.
Nope. But not maintaining roads and bridges and failing to retrofit for earthquakes in a year-to-year consistent manner IS. The capital improvement program of our nation is apparently a failure and the elected officials need to answer for it.
No, I don’t believe he was or could have been, seeing as how Keynes didn’t arrive on the planet until some 18 years after Lincoln’s death, but he DID follow the lead of DeWitt Clinton, then governor of New York who was largely responsible for the Erie Canal, which was a true “government stimulus” of the economy. Subscribing as he did to the WhigPhilosophy of creating the real infrastructure that will assist businesses in their success. Lincoln had much to do with the public works projects of the day and got behind a state-chartered bank to back it up. Though Lincoln wasn’t completely successful at this effort of creating rail and bridges and so forth, the lesson for America has already been learned, there needs to be a balance struck between government take-over and management of industry and truly having a stimulative effect on the economy. This package, IMO, is more about rubber stamping the culture of greed and waste by creating more waste and through that waste, more greed.
Say you need $10,000 to buy tools in order to start a job. No bank will lend you the money, since you don’t have a job. If your kids do, with the understanding that it is a risk, isn’t it likely that you will generate enough money over time to pay them back, whereas if they didn’t lend you the money you’d have no chance, and probably would be asking them for small amounts to live on? As for the cycle of borrowing, we need a government that understands that tax increases during good times are required to pay back the money borrowed during bad times, and can work because no stimulus is needed. The Republican philosophy of taxes are evil any time is part of the thing that got us into this mess - in the sense at a smaller debt thanks to reasonable taxes during the times of reasonable prosperity in the past 8 years (for the rich at least) would make it easier to borrow now.
Well we tried letting a bank fail, and it didn’t work out very well; in fact it is pretty much universally thought of as a terrible blunder. The biggest blunder was lack of regulation, since both sides of the mess (and the rating companies and the investors who bought the bonds) were doing what was necessary for short term competitive advantage. Only the government can look at the long term, and tell the bankers that it is too bad if they don’t make quite as much money this year taking unsafe risks.
The reason it happened is that they didn’t want to spend money they didn’t have, and didn’t want to raise taxes to get more. Or, worse, they cut taxes for political advantage which made it worse. As for jobs, we need to charge companies the social costs of moving offshore. They may still do it, if it is profitable, but the taxpayer won’t be left holding the bag. There shouldn’t be penalties just for penalties, since that is economically inefficient.
Some of the package, such as aid to the states, will help very quickly. The Chinese economy is already suffering from our slowdown, btw.
We the people need to, actually. We are telling them we want safe bridges, but we don’t want to pay for them. In California, state spending that has risen faster than inflation over the past 10 years has universally been on stuff mandated by initiatives.
Interesting. The railroads, like the interstate highway system, paid back their investment many times over. No doubt there is waste, but no package is perfect, and infrastructure improvement is not waste by definition. How we got to the point where we have rotting roads does not mean fixing them isn’t necessary.
This, I think is the problem. You can’t borrow from the unknown to address the known. This is overextension, spending money you haven’t earned based on guesswork you can’t confirm. It’s a very religious way to look at money. You are right though that consistent small increases during the good times will help prepare for the bad ones. As much as I’m loathe to use outdated examples, much of today’s businesses or brands were built in the leanest years our country has known on a shoestring with savings taken from years of sacrifice. We’ve gone from that proven system to a get-rich-now mentality that, while providing for extreme peaks in economic growth, also gives us epic valleys. It’s like a financial coke binge, sure, while you’re snorting you feel like you can do anything, but when it wears off, you crash and crash hard. That’s exactly what’s happened to us. Uncontrolled growth has served to whet the appetites of the bankers AND the consumers and now we expect it when in fact what we’re seeing as a recession or depression today is likely where we SHOULD have been. As far as the Republican philosophy, well, bigger government is worse than smaller government, but taxes are a necessary component of any government and I doubt any pubbie worth his salt would argue otherwise.
What’s the real failure? Allowing the bank to fail or failing to regulate it and oversee it’s rescue? I think the latter. Banks are companies, companies fail, there’s nothing wrong with failure unless you’re an investor. The problem is that the culture of greed and the mismangement that put the bank in that spot hasn’t been removed, eradicated or changed. THAT ensures nothing will ever be different, only that this is sure to happen again unless the Gov’t, through her people, tightens the noose.
True enough, but also, hard cheese. We pay them to make the hard decisions that we have to live with. None of them are honest when it comes to explaining the particulars of certian issues and that, is our fault. We’re sound byte driven idiots with short attention spans. I agree with no penalty for penalties sake, your explanation is what I was trying to say in the first place. Thanks.
I know that, some won’t hit for years. I know about China and frankly, I’m OK with it.
That’s rather the point. We demand free action and to keep their seats in power they try to force change in through the backdoor instead of the front by charging us secondary fees/fines and putting the onus on corporations and other agencies instead of saying “OK, look, we need to fix a bridge and build a road, we need $120 million to do it, everybody’s gotta kick in, here’s the deal…” But they don’t, they use smoke and mirrors, they use deception and fear and instead of taking that $120mm over 10 years with a muni bond at $12mm a year we’re stuffed with two $60mm tax/fee increases over two years. It’s econ for idiots.
Isn’t it? Who knew about Lincoln. You’re right, they have, but we don’t seem to be learning the lesson. The pols say “OK auto guys, what’s your plan if we give you this money” but nobody’s saying “OK senator, how are you going to prevent this in the future, what’s YOUR plan” The politicans aren’t innocent in their attempt to fall on the side of the angels here, they’re part of the reason this mess is happening.