Jon Stewart, of the Daily Show, has an interesting idea for economic stimulus.
In a nutshell, he thinks the best idea is for the government to give people money, but in the form of paying down people’s consumer debt.
This way, people are less burdened with debt, and the banks to whom they owe this debt still get the money for liquidity.
It’s pretty much exactly the same as the Great Boondoggle Bailout… money is given to the banks so they can resume lending… it just has the additional benefit of increasing consumer confidence, reducing consumer debt, and making people more willing to spend because they are not swimming in debt any more.
This idea sounds quite appealing to me, so I thought I’d present it to all you bright and learned Teemers and see what you thought.
Damn…if that goes through I wish to hell I had run up as many credit cards as I could as irresponsibly as possible.
Tell you what…pay down consumer debt if they have debt. For those of us who were responsible give us the same in cash.
Not sure that is a good or workable idea but at least it would be fair.
On the whole I am getting tired of throwing billions as companies who then payout billions in bonuses and spend millions remodeling an office or have to be bullied to not buy that new corporate jet (and so on).
I would much much rather see the cash go to the people.
Isn’t that kind of circular though? “Let’s have Uncle Sam pay us X dollars this year, and we will pay him back through taxes later”. Sounds like more borrowing to me.
First, I think Jon is mainly illustrating a point, rather than actually offering a policy. His point being that a plan that puts more money into the hands of us consumers is, in a consumerist economy, probably pretty good, and “probably” is the best we’re gonna get.
Rest assured, our Pubbie Loyal Opposition will commit mass seppuku on the floor of Congress before they’d let anything like this happen.
Hmmmm. No, nevermind. Just musing, for a moment. Not a good idea. Gory. Messy.
It actually made some sense to me - at least compared to what was done. His plan required that the money end up in the banks, but in the process it would retire consumers’ debt. Seems vastly preferential to the current system where it goes directly to the bank to do with what they will, with consumers never seeing any benefit.
Of course, I was never a big fan of any financial bailout. And as someone without a mortgage or any consumer debt, I am not thrilled with subsidizing the irresponsible and incompetent.
If you’re going to have a stimulus, you have to encourage spending. Handing out checks won’t do that the best way. If the gov’t were really smart, they’d send out prepaid credit cards (that you have to call and activate for security purposes). That way, you can help try to force people to actually spend the money rather than save it.
I watched the Daily Show in which Jon presented his idea. Some friends of mine already voiced it except with your addition. Take the bailout and just dividedit up amoung consumers rather than billions to banks. Those that owe mortgages and CC debt are required to pay those debts with the money. That way the banks still get billions. Those that have properly managed their finances just get a bonus that they will like spend a bunch of anyway which will also boost the economy.
I know little about finances on any national level but this makes a whole lot more sense to me than just giving billions largely unsupervised and controlled to banks and Insurance companies.
Jon’s guest was Lawrence Lindsey former director of The national economic council under George Bush, and now is plugging a book about what a president should know.
Lindsey’s first recommendation was focus on substance rather than communication. It was actually an interesting discussion and is available on the Daily Show site. He pointed out that while we’re right to be outraged by cooperate jets and bonuses that’s actually nothing compared to the real scope of the problem, and maybe the president should focus on that.
He also proposes a payroll tax cut, Reduce Fica and let people have more money.
He proposed something simple I wondered about. High Risk loans get charged higher interest. That makes sense except that what it comes down to is the people with less ability to pay are put in a position where payment becomes increasingly more difficult. If a bank has billions in adjustable rate mortgages at interest rates that people can’t afford to the point where there are so many defaulted loans that the banks are in serious trouble, it seems to me they can choose to change the terms of the loans and try to get the payment down to where the folks can afford it and stay in their homes. Granted the banks overall profits are way down but in a crisis sometimes breaking even, or losing billions less than you thought you might is success. Of course if you can convince politicians to just hand you billions then why do that? Continue to foreclose and watch property values drop so those who survive can scoop up property cheap and begin the whole process all over again.
If we somehow knew that this was the thing that would fix the economy in the best way possible then yeah, I’d swallow it albeit not like it.
Thing is it almost certainly is not the best way. You are essentially rewarding incompetence and penalizing those who were careful. It is similar to the bailout as it stands now. Except going to the people it is a cash handout to the companies that fucked-up disastrously in the first place and expecting them to somehow do things right this time.
Without meaningful efforts at reform expect more of the same somewhere down the road be it from irresponsible companies or irresponsible individuals.
I certainly agree that the values represented in the economy are completely out of whack these days. Somehow, people convinced themselves that law and order are just not necessary in the world of billions of dollars.
What if the idea was that everyone got X amount of a rebate, but those with outstanding debt had to apply it to said debts, whereas those without debt could just keep the cash?
I understand that office remodeling and corporate jets and bonuses are a relative drop in the bucket. However, I think it is indicative of the warped and unchanging views of those in power. Their companies are in the crapper, they are laying off thousands but hey…multi-million dollar bonuses all around for those in the club, new jet cuz we just need one, new office because the posh one we already have clearly needs a $30,000 commode. How many jobs could be retained for the cost of one corporate jet? Bet there is one person who could have a job in lieu of a useless commode.
Obviously these jerkwads are clueless. They are inured to the strife all around them. Like Nero fiddling while Rome burned or French aristocracy blithely going about their shallow lives a day before they find their head on a Guillotine.
As such I am distinctly NOT comfortable handing this lot MORE money. They do not get it…at all. They are nowhere close to caring about anything but themselves. They cannot possibly be the people we need running things to get this disaster fixed. Yet there they sit and here we keep shoveling them gobs of money.
Not to put too fine a point on it but call be displeased.
While I hate paying taxes as much as the next guy I am not sure I like this. Unless you make a LOT of money almost any payroll tax cut will be hardly noticeable. Even a 10% decrease would only save most people several hundred dollars per year. Consider that money is spread out over 12 months and they get back $20-30/month. Hardly going to change anything for them. However, the loss of that money to the government added across all workers is substantial.
Much as I hate to say it I’d rather taxes remain as they are and use the money to get the government’s books back into fiscal health (admittedly a tall order and one that will take many years).
Cosmosdan mentioned that above and I think that is a MUCH better solution. Not only fair but makes better sense as a stimulus (banks get debt paid down, citizens reduce their debt load/payments, consumers have more money to go buy stuff).
Makes a jillion times more sense than tossing it all to banks.
Seems to me if you take the remaining $350 billion in bailout and divide it evenly to all citizens that is over $1100 to everyone. Of course lots of those are kids who would get none. Additionally I would cap it so it does not go to those above a certain income level (say $100,000/year for example). Maybe shave at a few more corners and you can get real money into the hands of the public. It may not absolve all debts but the point is to lighten the load, ease the pressure.
I think it would be critical that money given must be used to pay debts however. If you are debt free then take the cash (and yeah…some are debt free out there…I am one such).
Yeah… because it’s us “Pubbies” who are pushing the idiotic stimulus. And because we’ve been so strongly against tax breaks and ways of returning money back to the taxpayers before.
I have a nagging suspicion that this is an inflationary move, which may be okay at the moment, but essentially you’re “printing money” to cover up a problem. Of course just about every other bailout plan has the same issue.
I’m also curious to get into how this would affect our money in the eyes of our lenders, i.e., foreign investment in dollars. One of the key issues in this crisis is what happens to the interest free loan we get from other countries that buy up dollars? Will they now invest in their own internal infrastructure projects, or will they continue to place money into dollars as a safe refuge?
Not at all. Cutting your own throat to make a childish reaction palatable is not good. The stimulus went to the banks with some weird hope that if they had more money they would lend it. But conditions were bad for lending. They could see the economy was tanking and lending was risky. So they took the money and make acquisitions of other banks, paid bonuses and kept the rest for their own solvency. That is perfectly logical from their viewpoint ,if you chose to ignore their responsibility in the creation the mess. So that did not work.
But there are still millions more mortgages that will default. The banks will be taken down again if we do not address that problem. The people have to make payments and stay in their homes or the system will just fail again and again. I am sorry people can not get it ,but we have to find a way to keep them in and paying. That will be a redoing of the mortgages. Being resentful that these people might be getting away with something you didn’t is counterproductive. Once they start paying again ,the banks will have more money and less empty homes on their books. lending will then be relaxed.