So…what should be done about the Economy? We’ve all been bombarded lately with increasingly frantic news story about the economy headed either for ‘slowing’, recession or…it’s Armageddon! Depending on who you believe the problem is either a concern, bad or very bad.
Myself, I’m in the (potentially) ‘bad’ camp. The question though is…what should (and can) be done about it? Most of the politician types seem to think that some kind of government hand out is the way to go. They merely vary on what kind of hand out, to who and how much. Is that the way we should go? Will it help? In the short term…medium term…long term?
What do you dopers think we should do? Is there anything that CAN be done? Myself, I’m skeptical about the whole tax break/hand out to middle/lower class citizens being anything more than a (very) short term economic boost. If you REALLY want to inject confidence into the system then a decision needs to be made on the tax cuts Bush has enacted. I think that on top of all this other stuff happening companies are squirrelly about growth because they are unsure if their taxes are going to go back through the roof in 2010.
But I’m one of those evil capitalist types who thinks that if you want economic growth you have to get the money and incentives in the hands of those who actually effect, you know, the economy. People who actually employ OTHER people and all that. Perhaps giving me and my fellow citizens (well, not the ‘rich’ ones of course) $500 or $1000 will do something. It will probably convince some folks to go out and buy that new Playstation or TV…or just pay bills. And then…well, I’m unsure. Maybe that short term stimulus will have a magical effect and the economy will straighten up and fly right. Or maybe politicians of all stripes actually don’t know anything about the economy after all and are simply giving us bread and circuses in an effort to fob us off…or to push through their own economic agenda.
When I heard that Congress is talking about tax rebates (as much as $800 per single househould), I got a flashback to the summer of 2001, when I received that $300 tax rebate. I remember being kind of happy about it (that’s a lot of money to a starving graduate student), but also concerned that we were only being appeased.
Seems to me that increased spending is not a good solution for the individual. We should be saving or paying off debt, not burning money at Walmart or Best Buy. But if people decide to sit on their checks, that doesn’t really help the economy very much, right? So it just feels like…appeasement again. The politicians want to throw us scraps so that we feel like they’re doing something, but everyone knows it’s not really going to go very far.
(I know that for me, if tax rebate checks are cut in the near feature, mine will most likely head right back to the treasurer when the IRS comes a-knockin’.)
I don’t know much about economics to recommend a solution. It just seems to me that the benefits of tax rebate are too short-term to boost anything except politicians’ poll ratings.
All I know is that when Bernanke asks for $150 billion to prime the pump, I’m just wishing we had back that trillion we spent in Iraq. Would come in handy right about now.
Nothing. There is no reason to think that a “stimulus” package put together by politicians will do anything to help the economy (which I don’t think needs much help – I think the concerns about a recession are very, very overblown). Politicians respond to political pressure in how they allocate funds and tax breaks. They will give money to politically connected interests and end up wasting more money than they do already. The only thing they could do to actually hep the economy is reduce regulations, cut spending, and reduce taxes. Removing some of the governmental dead weight on the economy and givng people more freedom and money to innovate would be a boon for businesses and consumers. But there is absolutley no chance of DC actually trying to reduce its role in our lives.
I favor a massive public works program. Rebuild the interstates. Put subway systems in some of our mid size metro areas. Improve airports. If we spent $100 billion on infrastructure, the money doesn’t disappear. The contractors hire workers. Those workers pay taxes and have spending money. The mines and steel mills have to hire more to meet demand for materials. More tax money coming in, more people hired and having money to spend. Do you get back all that you put into it? No. But you create work and stimulate the economy. I think this would be more effective than throwing bones at the taxpayers or even worse, thinking that cutting taxes for the rich is going to help.
Our path is clear: Since the economy is struggling, it is imperative that we make the Bush tax cuts permanent.
It might surprise some to hear that the response to a economic downturn is precisely the same as the appropriate response to the days when our economy was in surplus. You should stop thinking about it and should definitely stop remembering historical events.
Also, nobody could have predicted a real estate market collapse.
Furthermore, as has already been sagely noted by Renob: “Problem? What problem?”
A “recession” means that the 1% most wealthy will still make obscene gobs of cash, but a slower rate than usual.
For most of us, it won’t be any different. I’ve been in a personal recession for the past 5 years. College professor, able to buy a house in my area within 10 miles of the university I teach at? HAH!
Like the highway bill passed a couple years ago that had funding for a variety of pet projects approved not out of necessity but out of political connections (Bridge to Nowhere, anyone?). Again, politicians allocate money based on politics, not based on need or where they will do the most good. It’s an inefficient use of our taxpayer money that would be put to better use if it were in the pockets of consumers.
Manufacturing is down. Consumer spending is down. Inflation is up. If the economic situation has even made it through the Bush reality screen, I think there is a problem.
It’s interesting to note that the “taxes through the roof” didn’t hurt economic growth in the '90s. Nor did the onerous regulations. If spending is down now, do you think that saying taxes won’t go up in 2010 will make business invest more today? 2010 might as well be 2525 for this purpose. It might indicate to business that the deficits and weak dollar will continue, and might even hurt investment. But most likely it won’t do anything.
Investment in infrastructure is needed, but the problem I’ve seen with it is that it won’t kick in for a long time.
Fixing the subprime mortgage mess is good also, but if house prices are sinking to more reasonable levels, as they must, there still won’t be equity for people to leverage for their purchases.
I think the best solution is to redirect the tax cuts to the people who will spend them, as should have been done in the first place. I don’t know what the size should be. Clearly Wall Street doesn’t think much of the Bush plan.
BTW, basically the reduction of regulation got us into the subprime mess in the first place. Saying that more deregulation will get us out of it is absurd. Right wing economic policies have been tried for the past seven years, and paradise has not yet arrived. I think just as the Clinton-Congress agreement in the early '90s gave business confidence that government at last had its act together, and led to the boom, we should concentrate on getting our act together. If China or the Saudis bail out on the dollar, it will get much worse.
To be perfectly fair, how consumers treated they money in their pocket is what brought us down this recessionary road to begin with.
I don’t mean to speak from authority, but I am kind of close to these events. I am a financial statistician in a fortune 100 consumer finance company. Our competitors are taking multi-billion dollar writeoffs and are laying off tens of thousands of skilled workers. My company’s stock has fallen 30%, our own delinquencies and writeoffs have skyrocketed, and consumer credit as we know it is in a real state of flux. The “richest 1%” are losing billions hand over foot, and the banking industry is holding out its cup in Saudi Arabia. My company alone just stuck a billion dollars on its balance sheet, and the street punished us accordingly.
Yet there are people here who think this is overblown? Gee whiz. I crunch these numbers every day. Not only aren’t they overblown, they are only the beginning.
After how much millions of private citizens have utterly failed to manage their financial lives, it is hard for me to believe that the government could do worse.
Where we can use it to repair the suspensions of our cars ruined by poorly maintained roads. :rolleyes: The money spent fixing the freeway I use to go to work is surely improving my life. That some money is spent on useless museums doesn’t mean that all museums are worthless. Same for roads.
Frankly, this is a good thing. If people made bad ecnomic choices, they should pay the consequences. Yes, people took bad loans, companies made bad loans, and a lot of people failed to manage their financial lives. Let them pay the consequences without trying to have government “fix” it. Perhaps then people and companies will be more prudent with their money in the future. But if the government bails them out it merely gives them an incentive to continue taking unjustifiable risks, because when they get in trouble the next time the government is just going to take money from people who are financial responsible (though taxes) and give it to those who are not.
Most of the money for transportation comes from local and state governments. Obviously we need roads and infrastructure. But if you want the feds to stimulate the economy by infrastructure spending you’re going to get a wasteful transportation bill filled with money for worthless projects that go to politically-connected interest groups.
Well I didn’t say let’s go nuts with pork. With some prudent oversight by the states, an infrastructure program can be an overall economic stimulus. If our goods can move faster and less expensively around the nation, it makes the US more competitive in the world marketplace. If some congestion can be addressed, you’d see a dip in carbon emissions. Done the right way, an infrastructure program can do a world of good for the economy and the environment.
What kind of logic is this? On the one hand you argue that money is better served in the pockets of individuals who can allocate it more efficiently than the government. On the other hand, you are not in support of government assistance for these legions of failed individuals, because they need to learn to fix it. Which one is it? Are people competent or aren’t they?
The issues we are facing transcend any individual accountability or personal responsibility. Prudent people will be paying the social costs that profligacy created. It is irresponsible to sell the banking industry out so that individuals learn how to manage their lives. After all, I haven’t had a problem managing my money, but I sure am getting dragged down in all of this mess. My portfolio is getting hammered, and my colleagues across the East River are getting laid off. I agree: institutions that made poor choices should be punished. And as it turns out, they are being punished. A $10B writedown in one quarter is not chump change even for Citi.
Our social diswelfare is going to get worse before it gets better. We are all getting punished here. A little redistribution wouldn’t even be the icing on the icing on the cake.
So state taxes aren’t taxes? And state legislatures never decide on infrastructure improvements based on politics?
States don’t have the freedom to run deficits, so cutting federal support will either raise state taxes or reduce the amount of work to be done. Increasing the federal contribution (about 30% from one source I saw) will relieve pressure and get more projects built. I’ve already said that this is too long term to answer the OPs question. I’m certainly not denying some projects aren’t very worthwhile - but what percentage do you think these are?
Good thing the government didn’t follow this advice during the 1930s.
I’m just curious when you feel the government should step in. Not saying that the situation is dire enough now, (I have no idea, but I’ll wiling to believe people who are " in the know" like Maeglin) but wouldn’t you admit that leaving all the solutions up to the “free market” is like expecting the patient to cure himself?
I work for the state. We’re in budget crises mode, and we’ve had to cut back tremendously on spending. Projects have been pared back or squashed all-together. Perhaps it’s good to get rid of frills, but we’re responsible for environmental regulation. Should mercury in your drinking water be one of the consequence of your neighbor’s poor spending habits? When people get laid off, who’s sins are they paying for? If this thing is as bad as people say it is, it’s not going to just impact the people who made poor decisions. It’s going to affect everyone.
Some are competent, some are not. The vast majority are on the competent side. Look at the home foreclosure situation. Only a very tiny fraction of mortgages are involved in this fiasco.
Yes, everyone is interconnected in the economy, so if irresponsible businesses go down it will have some effect on others. But what’s the alternative? Bail out the irresponsible ones and create an incentive for people to continue to act this way?
Good. And those who invested in those corporations are being punished, too (my portfolio is also getting hammered).
It was my impression that this discussion was focused on what the feds should do to help the economy.
Of course state taxes are taxes, but in general state infrastructure money hasn’t seen the same type of political shenanigans played with it that we see on the federal level.
Who is talking about cutting federal support for transportation? Apart from any stimulus package (and probably deserving of another thread) I certainly would approve of any reduction in the federal gasoline tax (which is the source of federal transportation funding) and, if states wanted, they would then raise the state gasoline tax to make up for the loss of federal revenue.
As the federal transportation budget is structured, that would mean an increase in gas taxes.
Couldn’t tell you off the top of my head, but I think the whole federal transportation funding method is flawed. There is no need for a federal gas tax to collect money and then hand back to states. Eliminate it completely and let states set their gas tax prices in a way to adequately fund their transportation needs.
No, the government passed numerous “stimulus” packages and made the recession into the Great Depression. It worked so great then. :rolleyes: Of course, people have bought the myth that the New Deal “fixed” the Great Depression.
Thinking the government can “cure” economic problems seems ridiculous to me. When people make bad choices and spend their money unwisely, it will eventually come back to bite them in the ass. That’s life and government can’t stop that and shouldn’t stop that. As it always does, the economy (meaning inviduals making millions of choices each day) will right itself.
Glad to hear it. Many states have expanded their spending during the boom years since the last recession and now that spending is catching up to them. Instead of being good stewards of taxpayer money they instead started throwing money at every favored pet project or program. Since legislators fail to realize that years when tax revenue increases by 10% or 20% is rare, they make foolish choices. I have no sympathy for state governments.
Hell, my state government had a speciall session to deal with a budget deficit and it approved hundreds of millions of dollars in new spending. If you make dumb choices (as either an individual or a legislator), then you pay the consequences.