Companies don’t create jobs out of the goodness of their hearts. They create jobs because there’s an unfulfilled demand for goods and services. If demand is low, then companies with money will sit on it.
The solution, of course, is to take some of the money away from individuals and companies who are just sitting on it, and give it to people who will spend it to increase demand. Then companies will hire new workers in response. As money starts flowing again the government can back off and let the economy run on its own.
That’s one theory. Another is that the government will piss a large portion of said cash away on unproductive activities, and when companies do want to expand, in order to meet or create demand, they will find it harder to do so because they don’t have any capital.
“I’ll pull out, baby.” “The check’s in the mail” “Your call is important to us.”
Germany hasn’t engaged in austerity. They’ve also benefitted from signifincant trade surplusses with southern europe, the effects of whch are now coming to an end.
Got any examples of countries actually engaging in austerity and seeing growth?
“Unproductive activities”? Like what? Anything that gets money in the hands of people who will spend it would help. It’s better if you spend it on something like infrastructure or education that multiplies productivity down the line, but even if you spend it on something with no long-term multiplying effect like the military, you are at least driving demand.
And you make sure that companies have access to capital by keeping interest rates low.
[QUOTE=The Hamster King]
Because there’s no demand.
[/QUOTE]
That’s certainly one factor. Uncertainty as well. Companies don’t expand if they are uncertain what their costs will be, and there are all sorts of uncertainties and risks right now. What’s the Euro going to do? How will health care reform effect the bottom line? Hell, what WILL the final health care reform be? Will the Bush tax cuts remain, be allowed to expire, or be some piecemeal continue/expire kludge set at some arbitrary dollar amount…and what will that be? Will the Republicans and Democrats be able to compromise and come up with a budget, or will we get something like last time…and will our credit ratings be lowered again because our politicians can’t accomplish anything? Will we go back into a recession after the first of the year as some are predicting…and if so, how will that affect a given business? How will the deficit (that supposedly no one worries about in reality :p) affect fiscal policy or fiscal reality? Will there be a Diablo III expansion this year, and will it include new classes…and will those new classes be the classic classes, or new ones??
I mean, there is just a lot of uncertainty right now.
Exactly. They also don’t expand if they are uncertain as to what their costs will be. Right now, a lot of companies are in a bunker mentality because of those uncertainties.
I disagree that this is the solution. I think ‘the solution’ is pretty complex, but simplistic ‘silver bullet’ approaches like this are pretty much going to fail. To me, there are multiple aspects that need to be addressed. First off, somehow the Democrats and Republicans need to start working together again, to compromise and set a sane fiscal policy and budget. That means both sides are going to have to give…and more than a little. There needs to be some spending cuts in the short term. And yeah, that means that we’ll have less services, and that folks are going to be pissed off because while they are good with cutting the other sides programs they are adamant about not cutting their own. At the same time, we need to expire out ALL of the Bush tax cuts…and probably look at tax increases. But here’s the thing…those increases in tax (over the expiration of the Bush tax cuts) need to be short term and highly focused on the deficit, not on building out shinny new programs that will need to be funded indefinitely. Trouble is, and the reason many ‘conservatives’ are opposed to tax increases is that this isn’t what usually happens…instead, the government spends the money on new programs that some block of voters wants or feels they just have to have.
Lastly, some of the uncertainty needs to be removed to allow business to expand. Whatever taxes we are going to set, we need to set them and tell business that this is what they will be for the next X number of years, and that they will be $Y for that time without change. We need to set policy for exactly what we will do wrt the deficit (even though no one worries about this in reality)…and policy for what we’ll do if various things with the Euro come into play. And we need to figure out a compromise and set firm policy on the health care reform bill that locks in what the real, actual costs WILL BE…so, again, business can plan and know what their real costs will be a year, 2 years and 5 years down the pike.
And the above is just the tip of the iceberg wrt what needs to be done. The point is that simply saying ‘well, let’s take away that money business is sitting on to get the economy rolling, then ???..and then PROFIT!’ is ridiculous and doomed to failure. It will have exactly the opposite effect to the one folks THINK it will have to do something like that (and even if you think I’m wrong, the reality is that it’s never going to happen anyway…it will just make the Republicans dig in their heels more, and the political wrangling will just continue an even heat up).
A plan to “fix the debt” by getting us back to a balanced budget? No, he has not.
He presented a plan that, if everything went according to his hopes, would reduce the* deficit* slightly, but not come anywhere close to eliminating it. And according to the CBO’s “alternative scenario” (i.e. their realistic projection), it would not even do that.
[QUOTE=Hentor the Barbarian]
Germany hasn’t engaged in austerity. They’ve also benefitted from signifincant trade surplusses with southern europe, the effects of whch are now coming to an end.
[/QUOTE]
We’re talking past each other here. Germany certainly did engage in austerity…in the 90’s. And it worked well for them. That’s why they push it so hard. If you need a cite that they did so then I’ll be surprised that you were unaware of it, but I’ll be happy to get one for you…but I figure we are talking about two different points in time here. My guess is you mean they aren’t doing austerity NOW…which is true. But you claimed that austerity never works and that in not one place has it ever worked…and you are wrong. I gave you a single example off the top of my head where it did work in the past…and there are plenty of other examples of it working in Europe alone in the past.
What, today? During a nasty recession and the Euro on the verge of collapse? And various countries with systemic problems trying a single silver bullet fix (i.e. ‘austerity’), and then only reluctantly with huge amounts of resistance? And you figure this proves that cutting budgets is something that can simply be waved off the table because it never works?
No. There’s ALWAYS a lot of uncertainty. “Uncertainty” is just the current ring-wing dodge for avoiding addressing the problem.
Why on Earth would you do that? How will that help things? How will laying off more government workers and cancelling more government contract stimulate demand?
Republicans want to slash taxes. They refuse to raise taxes, at all, under any circumstances. They want to cut spending on things like education, science, and welfare programs. They refuse to cut spending on the military, which is I believe the 2nd biggest item in our budget.
Democrats want to raise taxes, particularly on those with the most wealth. They are not particularly interested in cutting taxes. They want to cut spending on the military. They refuse to cut spending on welfare programs. That being said, they have made proposals that would cut welfare program spending as part of large tax cuts, usually involving also cutting the military budget.
The reality is that we need both, and we need it badly. We need to cut spending on the military (easily done on paper, less so in DC), and we need to continue to revamp the welfare system. Taxes need to be, if not raised, than revised. There is no need whatsoever, for example, for Oil companies to get tax breaks and subsidies. None. Most corporate tax loopholes should be closed. If a company is profitable, it will survive without my dollars making it easier for them.
Neither side seems willing to compromise, though from my perspective the democrats have attempted to do so more in the last 4 years, and have been soundly rebuffed by the republicans.
It also seems the republicans are willing to say “yes” now, and then try to weasel out of that yes down the road (ex: the automatic budget cuts to be enacted after the failure of the budget committee, which the republicans are trying to get out of …for the military. They have not stated a desire to get out of it for education or welfare programs to my knowledge).
Both sides will stick to their guns until the whole house of cards collapses, and they will then blame the other for making it happen.
I’m pretty sure this will get no traction, but thought I’d post it anyway just for drill (yeah, it’s an opinion piece, and from a Republican to make matters worse):
I have no idea who Alex Castellanos is (he is probably a neo-nazi who likes to kick puppies and lights his fine Cuba cigars on the backs of the peasantry or some suck), nor what his credentials are…but to me a lot of this makes sense. MMV of course and probably does.
Like overpaying government contractors, so the money just goes into the coffers of a different, better-connected corporation, to pick one example.
Always? If I got extra income right now, I’d put all of it into my retirement account, not increase my spending. If you got an extra $1000, would you go out and spend all of it on consumables?
Thought experiment: Apple, one of the most successful companies in the world, is famous for keeping enormous cash reserves on hand. Is this indicative of greed, stupidity, or a smart, if conservative, business model?
[QUOTE=The Hamster King]
No. There’s ALWAYS a lot of uncertainty. “Uncertainty” is just the current ring-wing dodge for avoiding addressing the problem.
[/QUOTE]
There is always SOME uncertainty…but right now it’s rampant. And if you just dismiss that or hand wave it away you are no better than the OP in understanding complex problems. It’s a real factor, and it IS impacting, heavily, the current bunker mentality of many businesses, both large and small. It’s not a dodge, no more than the ‘fact’ that people really don’t care about the deficit, but merely want to beat up Obama and the Dems over it.
Government spending doesn’t stimulate demand except in very narrow and artificial/short term ways. We need spending cuts AND tax increases…and a lot more. I realize that on this one there is certainly room to debate (unlike the first part of your post here), and it’s an economic/philosophical question. To ME, with my own economic and philosophical stance, this makes the most sense. Cut spending (in the short term at least, though we need to balance our budgets as well as our expectations in the long term) and increase taxes with the goal being a reduction in our overall deficit, and remove at least some of the uncertainties that are causing business to bunker down as well as attempt to encourage growth of both domestic as well as foreign companies to set up shop here and take advantage of our labor and resources. Sounds simple…but it’s not. In fact, I doubt it’s even do-able in our current political environment, since neither Dems nor Pubs are going to be willing to compromise. C’est la vie…I guess we all go over the cliff early next year and hope we survive the fall.
With the exception of replacing the work “oil” with “any,” I agree with all of this.
But really, it comes down to us: we keep electing the assholes, and until we start voting for people who will tell us ugly truths, we get what we deserve.
And short-term stimulus is exactly what we need to pull us out of the recession.
You still haven’t answered my question. WHY do we need spending cuts RIGHT NOW? How does cutting government spending help our current economic situation?
And don’t say “It reduces uncertainty.” Changing things increases uncertainty.
[QUOTE=The Hamster King]
And short-term stimulus is exactly what we need to pull us out of the recession.
[/QUOTE]
I don’t believe that a short term stimulus will pull us out of recession right now (we actually aren’t in a technical recession in any case, but I figure you meant the one we might be headed to or the current doldrums we are in economically atm). If a short term stimulus was going to work for our problems it would have worked when Obama tried this early on in his presidency. What we got was a short term stimulus that pretty much ended when the stimulus ended, without any additional momentum. Even if you want to make a case that it worked perfectly, I think the current problems we are facing can’t be fixed by another short term stimulus.
Because we need to show the financial and world communities that we are serious about addressing our own deficits to stimulate investment in our treasury instruments and investment in the US. We NEED to be the safe place that the world takes their money to as a sheltered harbor in the current storms wracking the financial world. By cutting spending AND increasing taxes we’d be demonstrating our willingness to tackle the real problem head on, and it would show some pretty immediate results IMHO…if nothing else we’d get our high credit rating back.
Changing things CAN increase uncertainty…but it’s not necessarily a given. I think that even increasing taxes, if you set limits on the increases, would lower uncertainty and stimulate growth, since businesses would be able to know what their costs would be, and if the increased taxes were coupled with spending cuts that were focused on addressing the deficit I think you’d see that growth. Tax increases (for ‘the rich’) and spending increases without any limits is going to have the exact opposite effect, IMHO, and won’t really fix anything. Like I said, YMMV.
Goalpost shifting much? Obama’s plan does not claim to balance the budget. Neither does Paul Ryan’s, at least not within its 10 year framework. It theoretically reduces the deficit to 1.6% of GDP, while Obama’s plan reduces it to 2% GDP.
