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Thread: weekend commentary - Fiscal Stimulus is doomed to fail

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    Default weekend commentary - Fiscal Stimulus is doomed to fail

    (snip)"Lost in the Congressional debate over how to provide stimulus is a more fundamental question: Does anyone remember how we got to where we're at?

    The answer is Greenspan put the pedal to the medal by irresponsibly slashing interest rates to 1%. Banks thought this was free money and responded by borrowing short and lending long to finance all kinds of risky endeavors but typically centered around residential and commercial real estate.

    Residential real estate has long since imploded. Now, a Glut Of Mall Space Headed Our Way will start an implosion in commercial.

    Pointing The Finger At Greenspan

    I have been pointing the finger at Greenspan for years. Fingers are now flying from many corners. Economist Anna Schwartz blames Fed for sub-prime crisis.

    The high priestess of US monetarism - a revered figure at the Fed - says the central bank is itself the chief cause of the credit bubble, and now seems stunned as the consequences of its own actions engulf the financial system. "The new group at the Fed is not equal to the problem that faces it," she says, daring to utter a thought that fellow critics mostly utter sotto voce.

    "There never would have been a sub-prime mortgage crisis if the Fed had been alert. This is something Alan Greenspan must answer for," she says. According to Schwartz the original sin of the Bernanke-Greenspan Fed was to hold rates at 1 per cent from 2003 to June 2004, long after the dotcom bubble was over. "It is clear that monetary policy was too accommodative. Rates of 1 per cent were bound to encourage all kinds of risky behaviour," says Schwartz.

    She is scornful of Greenspan's campaign to clear his name by blaming the bubble on an Asian saving glut, which purportedly created stimulus beyond the control of the Fed by driving down global bond rates. "This attempt to exculpate himself is not convincing. The Fed failed to confront something that was evident. It can't be blamed on global events," she says.

    The lesson of the 1930s is that swift action is needed once the credit system starts to implode: when banks hoard money, refusing to pass on funds. The Fed must tear up the rule-book. Yet it has been hesitant for three months, relying on lubricants - not shock therapy.


    Anna has the right target, unfortunately she has the wrong cure: more of the same medicine that made us sick in the first place. The lesson of the 1930's has not been learned. The proper lesson is that there are eventually enormous consequences for unsound credit bubbles. The Fed has responded to every credit crisis with liquidity. Eventually liquidity fails. It fails when the problem becomes solvency not liquidity."(snip)

    (snip)"Congressional Budget Office Reports On Fiscal Stimulus

    Professor Depew carefully poured over a long 35 page CBO PDF on Fiscal Stimulus. Thanks Kevin! This is what Kevin found:

    In the CBO report was this vital recognition as it relates to fiscal stimulus targeting consumers:

    "In general, tax cuts or increases in transfer payments from the government to people (such as Food Stamps or unemployment insurance benefits) increase household demand by providing consumers with additional spending power."

    True, but here's the recognition and caveat from CBO:

    "But households do not predictably spend a fixed proportion of the extra income left in their hands when taxes are reduced or transfers are increased. Rather, a household’s propensity to consume appears to vary with its income and depends on expectations of the household of what will happen to that income over the longer term."


    In other words, you can lead a horse to credit, but you can't make it consume. That is why the combination of both monetary and fiscal stimulus will inevitably lose out in a deflationary credit contraction and unwinding of debt. Keep the following in mind: Fifteen rounds. Fifteen long rounds.

    Thing's That "Can't" Happen

    Fifteen long rounds sounds about right. Land prices in Japan fell 18 consecutive years. Supposedly that couldn't happen. Fifteen long rounds is plenty of time for Things That "Can't" Happen to happen.

    Treasury against raising GSE loan size limit

    Fortunately, the Treasury is against raising the GSE loan size limit.

    The U.S. Treasury Department said on Wednesday it would not support raising the size of home loans that Fannie Mae (FNM) and Freddie Mac (FRE) may buy until a comprehensive reform package is passed by lawmakers.

    "With the potential for an economic recession increasing, now is the time for all of us to put aside our parochial interests and focus on the job of stabilizing the housing market and getting the economy back on track," said Brian Catalde, president of the home builder group.


    I disagree with Catalde and suggest we look at the role GSEs played in creating the housing bubble and dismantle them, perhaps over a period of 5 years or so. For now anyway, this "stimulus idea" is DOA where it belongs.

    Bush And Congress March Ahead

    Bush and Congress are marching ahead without ever bothering to ask why we are in this mess in the first place. Here we go again. Bush Stimulus Plan Includes $1,600 Rebate, People Say.

    The Bush administration is close to completing an economic-stimulus proposal that will include $800 rebates for individuals and $1,600 for households as well as tax breaks for businesses, people familiar with the plan said. Congressional leaders say a stimulus package may be as much as $150 billion.

    Businesses would get a tax break under the plan that would allow them to deduct 50 percent of the price of new equipment they purchase this year. Small businesses would be able to deduct as much as $200,000 in new equipment purchases, up from the current $112,000 limit.

    Asked about the details, a Treasury spokeswoman declined to comment. A package of $100 billion "would certainly be measurable, it would not be window dressing," said Bernanke.


    How Much Stimulus Comes From $100 Billion?

    $100 billion sounds like a lot. It is a lot. It is measurable. It is nowhere near enough to matter.

    Look at this another way. Banks such as Citigroup (C), Bank of America (BAC), and Washington Mutual (WM), and Brokers like Merrill Lynch (MER), Lehman (LEH), Bear Stearns (BSC), and Goldman Sachs (GS) have written off over $100 billion in capital.

    Remember this is capital we are discussing, not spending stimulus. Because of fractional reserve lending, most banks are leveraged 10 to 1. A destruction of $100 billion in bank capital will result in reduced lending power of $1 trillion."(snip)

    (snip)"Asymmetric Benefits

    Think about California for a second. Look how asymmetric the Bush proposal is. Everyone gets $800. Whoop to do. Double that. It's double whoop to do. Does an extra $133.33 a month constitute stimulus? For who?

    It is very helpful for those at the very bottom of the socioeconomic ladder that need income to buy food and gas. But that will not "stimulate" anything. It may mean the difference for some small set of people being able to buy pork chops instead of pork steaks and perhaps go out to dinner once a month on the side. For others it will pay a fraction of a credit card bill.

    It will not do much for anyone reasonably well off. Nor will it do anything for anyone in California (or anywhere else) that is about to lose their job in state spending cutbacks, financial cutbacks, retail cutbacks, or any other kind of cutbacks.

    Here is the key question: What does a onetime payment of $1,600 mean to someone who just lost a $45,000 job? The correct answer is not much.


    We have still not accounted for waves of commercial real estate defaults, rising unemployment, rising credit card defaults, and rising foreclosures on Pay Option ARMs. Furthermore, I still expect a mammoth cascade of collapsing CDS dominoes at some point. There are $500 trillion in derivatives out there. What if 10% of them default? Heck, what if a mere 1% of them default? This is uncharted territory.

    In the grand scheme of things, $100-$150 billion spread evenly is irrelevant. Such "stimulus" is doomed from the start.

    Mike "Mish" Shedlock"(snip)


    Not wanting to get political, but GWB's ill conceived economic stimulus package merely being ineffectual may actually turn out to be a good thing. This is of course in contrast to alternate economic stimulus proposals coming from the Democratic presidential hopefuls ... many of which also include proposals for TAX INCREASES on the very segments of the US economy that are typically responsible for the most economic growth and new jobs creation !!!

    ~
    Last edited by Melonie; 01-18-2008 at 11:26 PM.

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    Default Re: weekend commentary - Fiscal Stimulus is doomed to fail

    The results of globalism is about to be exposed in a way even the spinmeister's can't sell it anymore.

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    Default Re: weekend commentary - Fiscal Stimulus is doomed to fail

    Quote Originally Posted by Melonie View Post
    Not wanting to get political, but GWB's ill conceived economic stimulus package merely being ineffectual may actually turn out to be a good thing. This is of course in contrast to alternate economic stimulus proposals coming from the Democratic presidential hopefuls ... many of which also include proposals for TAX INCREASES on the very segments of the US economy that are typically responsible for the most economic growth and new jobs creation !!!~
    The CBO seems to like the dems plans, what do they know though huh?

    http://news.yahoo.com/s/ap/20080116/...my_stimulus_16

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    Default Re: weekend commentary - Fiscal Stimulus is doomed to fail

    Quote Originally Posted by Melonie View Post
    Snip analysis written by a clueless idiot who doesn't understand the basic concept of the interrelationship between money supply, productivity, savings & investing.

    Greenspan may have kept the interest rate low just a tad bit more, but only with the benefit of hindsight.

    These contrarion bloggers miss the most critical point of the rate cut; The post dot-com bubble recession was mild and US actually recovered pretty quickly posting good GDP growth rates and keeping unemployment relatively low.

    Yes, there was a side effect of high risk taking, but who is to say that there weren't positive benefits of risk taking, like investing in riskier medical, technical, environmental projects that'll do greater good for the productivity and mankind?

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    Default Re: weekend commentary - Fiscal Stimulus is doomed to fail

    These contrarion bloggers miss the most critical point of the rate cut; The post dot-com bubble recession was mild and US actually recovered pretty quickly posting good GDP growth rates and keeping unemployment relatively low.
    arguably, the contrarian bloggers will tell you that this was the result of the GWB TAX CUT and not the Fed's rate cut. They will also tell you that the new tone in Washington DC that has developed since the 2006 election, i.e. high or higher taxes on the 'rich' (i.e. those earing more than $75k per year in the case of AMT) and on (certain) US businesses (i.e. new taxes on oil companies, carbon tax on utilities and industries), actually has a lot to do with our current economic situation developing. Hell it was less than a month ago that the US congress was still arguing over allowing the AMT tax increase to proceed or not, with Democrats insisting that taxes must be raised somewhere else in order for the implied tax increase of the GWB AMT tax relief's automatic expiration to be tax revenue neutral.

    Also, all of the Democratic stimulus proposals essentially boil down to putting more cash in the hands of the working poor ... which will quickly be spent to either pay down back bills or on more consumption (with some 50% of that new consumption flowing to foreign manufacturers). Thus all of the Democratic stimulus proposals do extremely little to encourage savings or investment either by businesses or individuals.
    Last edited by Melonie; 01-19-2008 at 04:29 PM.

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    Default Re: weekend commentary - Fiscal Stimulus is doomed to fail

    Quote Originally Posted by Melonie View Post
    Also, all of the Democratic stimulus proposals essentially boil down to putting more cash in the hands of the working poor ... which will quickly be spent to either pay down back bills or on more consumption
    I think that's the point though isn't it? This is not meant to be anything but a short term stimulant. I also believe that the benefits (the rebates anyways) would go to all taxpayers making less than $85K a year ($115K for couples), that would hardly benefit only the working poor.

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    Default Re: weekend commentary - Fiscal Stimulus is doomed to fail

    ^^^ I guess it boils down to exactly what you're trying to 'stimulate' ! Obviously, putting more cash in the hands of people earning $85k a year or less, while doing nothing for higher earners or for businesses, will stimulate a lot of additional consumption of (50% foreign made) consumer products / paydowns of credit card balances / paydowns of overdue utility bills etc. However, extremely few people earning $85k a year or less will take it upon themselves to 'save' their tax rebate (which would stimulate future US bank lending) or 'invest' their tax rebate (which would stimulate business / jobs growth).

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    Default Re: weekend commentary - Fiscal Stimulus is doomed to fail

    Quote Originally Posted by Melonie View Post
    ^^^ I guess it boils down to exactly what you're trying to 'stimulate' ! Obviously, putting more cash in the hands of people earning $85k a year or less, while doing nothing for higher earners or for businesses, will stimulate a lot of additional consumption of (50% foreign made) consumer products / paydowns of credit card balances / paydowns of overdue utility bills etc. However, extremely few people earning $85k a year or less will take it upon themselves to 'save' their tax rebate (which would stimulate future US bank lending) or 'invest' their tax rebate (which would stimulate business / jobs growth).
    I think you pretty much nailed it when you mentioned using the money to pay down debt.

    Ie, putting money into the banking system.

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    Default Re: weekend commentary - Fiscal Stimulus is doomed to fail

    ^^^ well, the same contrarian crowd would argue that the amount of proposed stimulus money that might be involved in paying down debt is a drop in the proverbial bucket relative to the total size of US bank's bad debt problem. I would sooner think that the actual result they are seeking is to allow a few million Americans to avoid bankruptcy filings for a couple more months by using their tax 'gift' to help them keep making minimum monthly payments.

    But back to the original point being made by Mish, none of this is actually going to accomplish much in terms of actually stimulating economic growth, jobs creation, business investment, or anything else that is normally associated with a 'healthy' economy - at least via the Democrat proposals which do not contain any provisions whatsoever to help businesses, large or small.


    The CBO seems to like the dems plans, what do they know though huh?
    Arguably they're still using an old playbook. Agreed that the CBO's conclusion is correct that putting extra cash in the hands of low and 'middle' income Americans will result in that cash being spent (rather than saved or invested). However, this demand stimulus only completely helps if the supplier that is the ultimate beneficiary of this increased consumption spending is also American. In other words, 10 years ago an extra $500 in discretionary spending might have resulted in $400 finding its way back to a US manufacturer via increased product sales, which would then prompt that manufacturer to pay employees for working more hours, to add jobs, to invest in equipment to increase production capacity etc. However, today, some $250 of that extra $500 in discretionary spending will instead find its way back to a manufacturer in China or Japan - who will not say 'thank you' and who will not add jobs in the USA as a result of a marginal demand increase.

    And all of this CBO analysis assumes that the low to 'middle' income American will actually spend the tax 'gift' money on new consumption, versus paydown of existing credit card debt or paydown of overdue bills. Paydowns of existing debt do not create additional demand for anything ... they merely allow the consumer to actually pay for consumption that has already taken place.

    ~
    Last edited by Melonie; 01-20-2008 at 01:41 AM.

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    Default Re: weekend commentary - Fiscal Stimulus is doomed to fail

    Yep. And I am still amazed at those who go on about globalism.

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    Default Re: weekend commentary - Fiscal Stimulus is doomed to fail

    I don't know, I think I have more faith in the CBO than I do in right wing pundits with an agenda to oppose any plan economic plan proposed by a dem.

    Quote Originally Posted by Melonie View Post
    I would sooner think that the actual result they are seeking is to allow a few million Americans to avoid bankruptcy filings for a couple more months by using their tax 'gift' to help them keep making minimum monthly payments.
    Is that such a bad thing?

    Quote Originally Posted by Melonie View Post
    But back to the original point being made by Mish, none of this is actually going to accomplish much in terms of actually stimulating economic growth, jobs creation, business investment, or anything else that is normally associated with a 'healthy' economy - at least via the Democrat proposals which do not contain any provisions whatsoever to help businesses, large or small.
    Correct me if I'm wrong here but doesn't the fact that people are spending help businesses, large or small???

    Quote Originally Posted by Melonie View Post
    Arguably they're still using an old playbook. Agreed that the CBO's conclusion is correct that putting extra cash in the hands of low and 'middle' income Americans will result in that cash being spent (rather than saved or invested). However, this demand stimulus only completely helps if the supplier that is the ultimate beneficiary of this increased consumption spending is also American. In other words, 10 years ago an extra $500 in discretionary spending might have resulted in $400 finding its way back to a US manufacturer via increased product sales, which would then prompt that manufacturer to pay employees for working more hours, to add jobs, to invest in equipment to increase production capacity etc. However, today, some $250 of that extra $500 in discretionary spending will instead find its way back to a manufacturer in China or Japan - who will not say 'thank you' and who will not add jobs in the USA as a result of a marginal demand increase.
    You honestly don't think the Congressional Budget Office would take something like that into account before endorsing it? These are not neophytes we're talking about here.

    Quote Originally Posted by Melonie View Post
    And all of this CBO analysis assumes that the low to 'middle' income American will actually spend the tax 'gift' money on new consumption, versus paydown of existing credit card debt or paydown of overdue bills. Paydowns of existing debt do not create additional demand for anything ... they merely allow the consumer to actually pay for consumption that has already taken place.
    Paying down debt does allow people to spend the money they had allocated to paying down the debt in other places too though doesn't it.

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    Default Re: weekend commentary - Fiscal Stimulus is doomed to fail

    Quote Originally Posted by Deogol View Post
    Yep. And I am still amazed at those who go on about globalism.
    I'm amazed about how people still don't get globalism.

    Here's a simple exercise. Try to live in a country that hasn't embraced globalism for just a month and report back your findings.

    Even with plenty of stupid and lazy people, US is pretty well off compared to smart and hard working people from closed economies. Thats proof of globalism for you. Its your turn to prove otherwise

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    Default Re: weekend commentary - Fiscal Stimulus is doomed to fail

    I don't know, I think I have more faith in the CBO than I do in right wing pundits with an agenda to oppose any plan economic plan proposed by a dem.
    Again this depends on the actual result that is being sought. The ultimate answer of course can't be determined until after such plans are put in place and hindsight analysis can be applied. Of course, this also involves an element of 'what is' versus 'what might have been'. As to applying this hindsight analysis to Democratic policies, "are you better off today than you were in November of 2006" ?

    Is that such a bad thing?
    again this point of view depends upon whether you are a US registered voter on the brink of bankruptcy, or a foreign investor whose ongoing confidence is needed to keep financing America's 3 billion dollar a day consumption deficit 'habit'. Handing extra money to US registered voters on the brink of bankruptcy will definitely achieve one result over the course of the next few months, while handing forced losses to foreign investors will achieve another result over the course of the next few years.

    Correct me if I'm wrong here but doesn't the fact that people are spending help businesses, large or small???
    Yes ... IF (and this is a big if) they are spending private sector money. However, if people are actually spending a tax 'gift' that is funded by tax dollars, and if the spending of that additional money only circles back to increase taxes on US businesses and their investors in order to fund the tax 'gift' behind the additional spending, then those US businesses and their investors aren't any better off at all. Of course the foreign manufacturers, who aren't subject to US tax increases in the future, will benefit directly !

    You honestly don't think the Congressional Budget Office would take something like that into account before endorsing it? These are not neophytes we're talking about here.
    ah yes, but keep in mind that the first word in the name CBO is Congressional. They are using 'classic' business models which, like the Wall St models that led to CDO's, arguably no longer work in today's globalized US economy. And like all gov't entities, there isn't any possibility that the results of their research will be 100% objective.

    Paying down debt does allow people to spend the money they had allocated to paying down the debt in other places too though doesn't it.
    valid point ... but still clearly in the category of too little too late.


    Even with plenty of stupid and lazy people, US is pretty well off compared to smart and hard working people from closed economies. Thats proof of globalism for you. Its your turn to prove otherwise
    I don't think that anybody is arguing that globalization hasn't in fact greatly increased the standard of living of many US citizens by making available much cheaper consumer products from Asia. However, that standard of living increase has been funded by creating a mountain of new US debt. At the same time, the transplantation of America's former consumer product manufacturing operations to Asia has greatly reduced the ability of many US citizens to now earn enough money to ever pay back that debt.

    In a closed economy, by definition the supply side and the demand side must stay balanced. In an open 'global' economy, the supply side and demand side can operate in a state of imbalance for long periods of time - but ultimately that continuing imbalance is dependent on foreign suppliers / foreign lenders continuing to extend credit to finance consumer demand that is no longer able to be financed domestically. But if / when the foreign suppliers / foreign lenders decide they actually want to get paid / paid back, the open 'global' system will come to a screeching halt.

    Arguably, the lower standard of living you refer to for a closed economy versus an open 'global' economy only represents the fact that consumption in the closed economy has not been financed by piling up foreign debt but by actual productivity. Taken one step further, it is totally arguable that if / when foreign suppliers / foreign lenders pull the plug on extending additional debt to US consumers, that the US standard of living will drop right back to where the closed economy standard of living has been all the while - or even lower due to 'overshoot'.
    Last edited by Melonie; 01-20-2008 at 10:56 AM.

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    Default Re: weekend commentary - Fiscal Stimulus is doomed to fail

    Quote Originally Posted by Melonie View Post
    As to applying this hindsight analysis to Democratic policies, "are you better off today than you were in November of 2006" ?
    Seems to me that can be attributed more to GOP obstruction and 7 years of GOP economic policies than to Democratic policies since November of 2006, but to each his own I guess.

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    Default Re: weekend commentary - Fiscal Stimulus is doomed to fail

    ^^^ well, according to most objective economists, the course set by the Democratically controlled congress to increase the minimum wage, to allow tax increases to take place by refusing to permanently accept income tax and AMT cuts that will otherwise automatically expire, and until a month ago to insist that taxes must be raised in order to fund any sort of increased gov't spending (with some specific tax increase targets in mind i.e. the oil companies), have all been anti-business and anti-growth.

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    Default Re: weekend commentary - Fiscal Stimulus is doomed to fail

    Quote Originally Posted by xanfiles1 View Post
    I'm amazed about how people still don't get globalism.

    Here's a simple exercise. Try to live in a country that hasn't embraced globalism for just a month and report back your findings.

    Even with plenty of stupid and lazy people, US is pretty well off compared to smart and hard working people from closed economies. Thats proof of globalism for you. Its your turn to prove otherwise
    The proof has been out there for thirty years. At first it wasn't obvious - but these days it's in one's face. I am not even going to waste my time trying to convince the faithful to lose their beliefs. All I am going to do is continue figuring out what is going on and plan to handle it.

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    Default Re: weekend commentary - Fiscal Stimulus is doomed to fail

    Actually, the proof has been there for way longer than that ! But as usual, those who refuse to learn from history are doomed to repeat it ... in this case the 'Long Depression' of 1873 ... which the US managed to partially avoid by its general refusal to play 'global' economics.



    (snip)" The dominant faction in British economic policy, increasingly after the 1846 Corn Laws repeal, was not industry or agriculture, but finance and international trade. In order to ensure the supremacy of British international banking, those bankers were willing to sacrifice domestic industry and investment, much as happened in the United States after the assassination of President John F. Kennedy in the 1960's.

    But the consequences of this new Bank of England interest rate policy for British industry came home with a vengeance when the Great Depression hit Britain in 1873, and lasted until 1896.

    Beginning with a financial crisis in the English banking world, as the pyramid of foreign lending for railway construction to the Americas, North and South, collapsed, the British Empire entered what was then called The Great Depression. Reflecting the rising unemployment and industrial bankruptcies of that depression, British prices collapsed by almost 50% in nominal terms, in an unbroken fall from 1873 to 1896. Unemployment became widespread.



    A 23 year depression? Sounds pretty bad! The present Japanese depression is so far, only 13 years old. They have a decade more to go and from the look of things, I suspect they will cling to this depression with the same tenacity England clung to their depression. These depressions are obviously useful for EXPORTERS as we can see: British consumers lost income rapidly as prices dropped so they couldn't unbalance trade via making purchases. Instead, they were locked out of the economic system as far as getting wage increases and the power to buy imports! This is identical to what Japan is doing. England didn't become 'poorer' during this time! The industrial base grew but this was for EXPORT. Indeed, a certain country fought off this British push to drop prices and beggar the lower classes. It was our very own nation, the US! After 1873, the US raised tariffs and barriers!"(snip)

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    Default Re: weekend commentary - Fiscal Stimulus is doomed to fail

    Quote Originally Posted by Deogol View Post
    The proof has been out there for thirty years. At first it wasn't obvious - but these days it's in one's face. I am not even going to waste my time trying to convince the faithful to lose their beliefs. All I am going to do is continue figuring out what is going on and plan to handle it.
    Yup, an average american with a super fast internet connection, 300 channels and HD, safer cars, abundance of food, and advances in medicine is poorer compared to an average american 30 years ago

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    Default Re: weekend commentary - Fiscal Stimulus is doomed to fail

    Quote Originally Posted by Melonie View Post
    well, according to most objective economists
    I guess that depends upon you're definition of 'objective economists' doesn't it? Just a wild guess here but I'm guessing most of your sources are far from objective.

    Quote Originally Posted by Melonie View Post
    the course set by the Democratically controlled congress to increase the minimum wage, to allow tax increases to take place by refusing to permanently accept income tax and AMT cuts that will otherwise automatically expire, and until a month ago to insist that taxes must be raised in order to fund any sort of increased gov't spending (with some specific tax increase targets in mind i.e. the oil companies), have all been anti-business and anti-growth.
    Not to nitpick here but I hope people realize that you're taking these things a bit out of context to suit your purposes (as you so often do). There are other ways to stimulate the economy other than to keep cramming that 'trickle-down theory' down everybody's throats.

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    Default Re: weekend commentary - Fiscal Stimulus is doomed to fail

    Yup, an average american with a super fast internet connection, 300 channels and HD, safer cars, abundance of food, and advances in medicine is poorer compared to an average american 30 years ago
    obviously, technlology moves forward on all fronts. However, 30 years ago, your average American was current on his phone and cable bills and his 25" color TV was paid for ... 30 years ago the average American eventually owned his car (rather than leasing it) plus another American earned his living producing that car (instead of a Korean) ... 30 years ago a low US food price wasn't as heavily subsidized by the US taxpayer or by special interest laws (i.e. Del Monte's legal sub-minimum wage) ... and 30 years ago gov't subsidized medical costs composed a far smaller percentage of GNP than they do today

    - in other words, for the first time in history, todays advanced but incredibly expensive medical treatment possibilities have now exceeded the earning power of working class people to afford them ... either individually, or pooled together via private insurance, or pooled together via public health taxation and spending by gov't. This is a new problem, and must eventually be faced by the acknowledgement that just because medical science can prolong life, not everyone's life is 'worth' prolonging. This can be solved either by financial constraints, or by gov't restraint i.e. rationing of national health care, but it must be constrained.


    Not to nitpick here but I hope people realize that you're taking these things a bit out of context to suit your purposes (as you so often do).
    What's 'out of context' in regard to stating common knowledge facts ? Up until a few weeks ago, Charlie Rangel was laying out the Democratic economic position very clearly.

    (snip)"Unlike the Republican Ways and Means chairmen over the previous 12 years, Rangel has a comprehensive tax strategy and a tactical game plan. His wedge is the AMT, the latest and most egregious lunacy imposed on the American taxpayer. In its present form, the AMT would raise $1.4 trillion in revenue over the next decade, through taxation of 23 million additional families this year alone. Congress regularly prevents this calamity by enacting a patch that limits AMT coverage to 4 million upper-bracket families.

    But Rangel has refused to pass a patch, and he has not hidden his intentions. When Congress returned from its summer break, Ways and Means summoned the usual lineup of tax redistributionists for a Sept. 6 hearing on "fair and equitable tax policy for America's working families." Jason Furman, director of the Brookings Institution's Hamilton Project, deplored "the increase in inequality" caused by the Bush tax cuts, which he said "have exacerbated after-tax income disparities."

    The day after the hearings, Rangel called in reporters to tell them that a one-year AMT patch is "not on the radar screen." Advocating total repeal, he promised to pay for $800 billion in lost revenue over the next 10 years with "the mother of all reforms."

    Rangel talked about closing "loopholes," but the real money would come from drastically increasing the number of Americans paying the top income tax rate, 36 percent, and applying that rate to those who currently pay only capital gains taxes. Rangel also is considering the old millionaires' tax, but he would apply it to much more than millionaires: a surtax on household incomes over $200,000. All this would reverse the tide of across-the-board tax reduction begun by John F. Kennedy and Lyndon B. Johnson and renewed by Ronald Reagan.

    While Rangel appears to be preparing for big-time tax increases in 2009, he is giving it a try in 2007. Something surely will be done to blunt the AMT this year, but Rangel is holding it hostage, with the ransom to be paid through left-wing tax revision. Even if this tactic will not enable passage of the mother of all reforms, it could force passage of more limited redistribution this autumn.

    In his meeting with reporters, Paulson claimed to be puzzled that Congress had not yet passed an AMT patch. But he is not nearly so clueless. He understands Rangel's game and takes it seriously. Paulson views a tax increase as the worst possible medicine for today's economy.

    Indeed, Paulson is alarmed that the U.S. advantage in tax policy is gone, with corporate taxes here now higher than those of foreign competitors. However, cutting corporate taxes, no matter how desirable for the sake of American prosperity, is no part of Charlie Rangel's desire to make history."(snip)

    above commentary by Robert Novak

    There are other ways to stimulate the economy
    Indeed ... the next president could start a "hot" war to stimulate the US economy - as FDR and Truman and LBJ did. Granted that GWB has tried to do this as well, but in reality he's been unable to get things anywhere near 'hot' enough to alter domestic US production / consumption in any truly significant way.
    Last edited by Melonie; 01-20-2008 at 06:10 PM.

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    Default Re: weekend commentary - Fiscal Stimulus is doomed to fail

    Quote Originally Posted by Melonie View Post
    What's 'out of context' in regard to stating common knowledge facts ?
    Facts don't always tell the full story do they? First off, if the Republicans really wanted a permanent fix to the AMT they could have easily passed one over the seven years they controlled the White House and Congress couldn't they? In this past vote, the Dems simply didn't have the votes (considering the GOP's fillibuster tendancies and the Bush veto powers) and ended up with a compromise. The republican talking points are then "see I told you so, they want to raise your taxes, they don't want a permanent fix to the AMT, they have no intention of adhering to the "Pay-go" rules when the fact is that they were the ones actually doing the blocking and obstructing. So while the facts are technically correct, it's also quite disingenuous to be spinning it in this manner, but that's how politics works isn't it?

    Quote Originally Posted by Melonie View Post
    above commentary by Robert Novak
    Another objective source I see, thank you for proving my point.

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    Default Re: weekend commentary - Fiscal Stimulus is doomed to fail

    Facts don't always tell the full story do they? First off, if the Republicans really wanted a permanent fix to the AMT they could have easily passed one over the seven years they controlled the White House and Congress couldn't they?
    actually, history shows that the answer is NO. The AMT and permanent enactment of the GWB income tax cuts were one of the issues that gave life to the senatorial de-facto 60 vote majority requirement in the last two congresses ... where 40 democrats were able to kill proposals that had 59 or fewer supporting votes. You are correct that republicans eventually offered a compromise proposal that did NOT involve permanent cuts, mostly as a result of horse-trading for other votes i.e. appointment of judges. Of course now that democrats have a senatorial majority, they refer to the use of this 60 vote filibuster rule by minority republicans as 'republican obstructionism' and seldom offer compromise proposals. It was only through IRS heavy-handedness and mounting reports of the US teetering into recession that finally prompted the democrats to accede to another ONE YEAR extension of the AMT and GWB tax cuts at the end of last month - which they have positioned themselves to again allow to expire at the end of 2008 !!!

    My basic point was not about Washington machinations re tax votes, but was that this sort of democratic tax policy has not and does not go unnoticed in the boardrooms of US corporations, or by the financial advisers to uber-rich Americans. Thus high stakes financial decisions are being made with this sort of future democratic tax policy in mind ... decisions that typically involve more elements of tax avoidance than straightforward growth investment in America which are likely to be subject to even higher tax rates in the near future.

    Another objective source I see, thank you for proving my point.
    actually, it only proves that there a huge range of difference in viewpoint over democratic fiscal policy / proposals. The fact that Rangel ( and Hilary and Barack etc.) have proposed massive tax increases in total dollar terms, however, is not a matter open for debate - unless of course you wish to officially 'revise history'.

    ~
    Last edited by Melonie; 01-21-2008 at 04:47 AM.

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    Default Re: weekend commentary - Fiscal Stimulus is doomed to fail

    Quote Originally Posted by Melonie View Post
    30 years ago the average American eventually owned his car (rather than leasing it) plus another American earned his living producing that car (instead of a Korean)
    People say the Horse-Buggy analogy is a cliche. But, when smart people fail to 'get' cliches, you have no choice but to repeat it.

    So, here you go

    Horse-Buggy

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    Default Re: weekend commentary - Fiscal Stimulus is doomed to fail

    ^^^ there isn't any cliche' if the owner can no longer afford to buy feed for the horse, thanks to ethanol subsidies jacking the price of corn and wheat sky high LOL. Be that as it may ...

    If you dispute my premise about Democratic tax increase policies having real world effects on US companies and uber-rich US investors, how do you explain today's announcement that Cisco Systems is breaking ground on a new corporate headquarters in Dubai ... which when completed will absorb about 1/2 of the jobs at Cisco which are currently located on the US west coast ?

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    Default Re: weekend commentary - Fiscal Stimulus is doomed to fail

    Quote Originally Posted by Melonie View Post
    If you dispute my premise about Democratic tax increase policies having real world effects on US companies and uber-rich US investors, how do you explain today's announcement that Cisco Systems is breaking ground on a new corporate headquarters in Dubai ... which when completed will absorb about 1/2 of the jobs at Cisco which are currently located on the US west coast ?
    What exactly are you basing this on? From what I know that's been in the works for awhile and not related to democratic tax policies. And what of all the companies that relocated under GOP control of congress? Should we just dismiss them?
    Last edited by Richard_Head; 01-21-2008 at 11:44 AM.

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