Economic Stimulus? Try These 7 Ideas
The American Recovery and Reinvestment Act of 2009 economic stimulus was an unfocused series of compromises that had a modest stimulative effect on economic activity. Indeed, no matter how haphazardly you dump a trillion dollars on the US economy, it will goose employment, industrial production, retail sales and GDP. Its hard to spend that much money and not have an impact.
The limitation of most of these spending increases and tax cuts was that they had a temporary effect: As long as the money flowed, they were stimulative. Once the spending stopped, the stimulus stopped also.
Talk has begun on a new set of stimulus plans. To avoid the limited and temporary impact, perhaps policy-makers, tax-payers and voters should be asking these questions about any stimulus: “What are our policy goals? Are these he most effective and efficient spending & tax plans for achieving these goals? What are the costs? What is the likely result of the alternative — doing nothing?
So far, most proposals have been either too timid or misdirected (The infrastructure rebuild is a good idea but its only a quarter of what is necessary). The goal of counter-cyclical government tax cuts and spending should be more than a temporary salve — it should be to “prime the economic pump.” With consumers and businesses so cautious, the virtuous cycle of hiring, spending, saving, investing has not gotten any traction.
If you were going to give me a trillion dollars to stimulate the economy so that the next expansion could proceed, here’s what I would do:
1) One Year Payroll Tax Holiday: Want to increase job creation and reduce unemployment? Tax it less. A 12 month employer FICA holiday will encourage job creation.
How to pay for it: Raising both the retirement age and the cap on FICA contributions.
2) Capital Investment 1 year 100% Deduction: The administration has already proposed a variation on this. It was an effective tax credit when done in 2004-05, but the drawback was it encouraged CapEx over new hiring. The idea of the payroll tax holiday is that it prevents that drawback.
How to pay for it: Via gains from the Corporate Tax-Free Repatriation (#3)
3) Corporate Tax-Free Repatriation: US corporations are sitting on trillions of dollars of cash in their overseas divisions. A one year tax holiday to bring that back to the US. It can be structured in tiers (0%, 5%, 10%). The goal should be to bring to the US a trillion plus in overseas profits.
How to pay for it: Its free; These are overseas revenues that are untaxed by the US.
4) Pure Science R&D Program for Alternative Energy: Gains in the basic science of solar energy conversion, battery storage, alternative biofuels, etc has been incremental. The private sector does not patience for multi-year or basic science R&D.
How to pay for it: Via a Pigouvian tax on gasoline, phased in over 5 or 10 years.
5) Mortgage Principal Write Down Plan: Buyers paid too much, banks lent too much against residences at the top of the RE cycle. To get the sector healthy again requires prices to normalize, which is now occurring thru Foreclosure. An alternative is a voluntary principal write-down, where both the borrower and lender split the losses. An underwater home is refinanced at its 2011 appraisal value, with the mortgage shortfall rolled into a 10 year interest free balloon payment. Banks cut the balloon loan in half in year 10, rolling it into the existing mortgage (assuming the owner stays current on mortgage).
How to pay for it: There is no costs, but Congress would need to make the 10 year zero interest free tax free, and permission the banks to defer reserving for eventual balloon defaults for the same 10 year period.
6) Electrical Grid Refurbishment: This is both an economic and national security issue: The electrical grid is an unreliable mishmash of public and private ownership, vulnerable to both blackouts and cyber-attacks. It needs to be upgraded yesterday.
How to pay for it: A one cent per kilowatt hour grid tax.
7) Airports, Ports, Roads, Bridges, Tunnels: The US was one of the first nations to build out a massive interstate highway system. We love big construction projects, but we seem to dislike the maintenance. Most of the transportation grid in the US is falling apart, in need of a massive repair. Many US airports look like they are from 3rd world countries.
How to pay for it: Usage tolls on roads, ports, bridges, landing slots.
Some folks believe the government should do nothing, spend no money, focus on balancing the budget. But is the ideal time to begin a new diet and exercise regime when you have pneumonia? The time to reduce the government’s economic deficit and footprint is during a robust expansion, not during (or just after) a contractions.
The alternative is to do little or nothing, and suffer through another lost decade, with an economy that is anemic at best. In a Democracy, the electorate has other options than misdirected austerity . . .
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September 16th, 2010 at 7:46 am
For those of you who will complain about the specific ways to pay for this — let me remind you that there is no free lunch, and policies must be paid for
September 16th, 2010 at 8:09 am
The policy goals should be clear so that there is clean debate on if the proposals are the most effective to achieve those goals. Many of those that got the TMT and credit bubble right believe that policies that encourage capital formation and capital investment should be front and center. Maybe there is merit in Andy Grove’s suggestion that we tax foreign manufactured products and services to fund re-building of our manufacturing base. Free trade does not exist except in the eyes of the dogmatic. Ultimately to get the economy rolling on a sound basis the TBTF banks need to be restructured. The real question is with our contemporary politics can sound policies be enacted.
September 16th, 2010 at 8:11 am
Agree that principal reductions might make sense but part of the problem with underwater mortgages is that they make it more difficult for people to move, including for a job and especially in situations where the mortgage is too underwater to cover through sale but not underwater enough to justify a strategic default. Under your scheme wouldn’t underwater homeowners be forced to live in the same location for 10 years before the actual balance owed is reduced?
I’ve wondered whether it would make sense for banks to offer mortgage products that are structured like a variable annuity, wherein the bank moderates the risk associated with housing market volatility over long periods of time by eating the extremes and the what the consumer sees in terms of the “value of their house over time” is more in line with long term historical averages…
September 16th, 2010 at 8:14 am
“The time to reduce the government’s economic deficit and footprint is during a robust expansion, not during (or just after) a contractions.”
=========
The problem is that our politicians and government bureaucrats/employees/unions have never shown the capacity to do this. There will never be a good enough time to do this. Lost money/fiscal responsibility weakens their power which they’ll never do voluntarily.
~~~
BR: * Sigh * You are (unfortunately) probably right
September 16th, 2010 at 8:19 am
btw, I’m for most of these suggestions. I think #3 is too limited. We need to find a way to encourage corporations to bring back a lot of that overseas investment. We’ve lost way too much manufacturing. Our shrinking middle class is a detriment to the whole country.
A good read about this (although skirts payment realities) >>
http://www2.macleans.ca/2010/09/14/third-world-america/2/
September 16th, 2010 at 8:21 am
This list is just another effort to steal from the average citizen to pay for expenditures and investments which will redound almost exclusively to the benefit of the top 1% of the population. Every new tax (or recommended cut in government benefits) is aimed exclusively at the median citizen, not the plutocrat. Just look at ‘em – cut the EMPLOYER’s contribution to FICA, accelerate the tax deductions on a historically low corporate real tax rate, increase gas taxes on the average citizen, slap another regressive tax on gasoline. Just when do the rich actually pay for an investment from which they will make more money. US business has totally lost its taste for risk unless its totally backed by the government and by the checkbook of the average citizen. That’s where the US has gone wrong, not the crazytown notions of the teabaggers.
~~~
BR: Did you even read this. or are you just an anti-EVERYTHING?
How are Roads &bridges and the electrical grid exclusively for the benefit of the top 1%? Commercial airports? Encouraging new hiring ?
Seriously, get a clue
September 16th, 2010 at 8:21 am
Instead of hiking the Social Security retirement age, a much better solution is to lop off the extremely elderly from the rolls. This is fair because (a) no one expected to live into his 90s in the first place, and (b) most of the extreme elderly can’t partake of the joys of retirement anyway — golf, travel, hookups, the sybaritic life of the boulevardier. Retirement is wasted on the very old.
September 16th, 2010 at 8:33 am
Barry
A lot of good ideas, but before we can do new ideas, we have to admit the old ideas were a total failure. Large chunks of this country still believe the old ideas work.
Somehow we need an education process for a public(and politicos) that has mostly tuned in to the echo chamber
September 16th, 2010 at 8:37 am
seneca,
you’re a sick fuck..
see
http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus&v%3Aproject=clusty&query=Eugenics
for reference..
September 16th, 2010 at 8:37 am
Of course we need investment in infrastructure, as what we have is obviously crumbling.
To your list of infrastructure projects, I’d add:
1. 100% hardwired high-sped internet to every home in the U.S. (along with a commitment to net neutrality, and the closing of many brick and mortar libraries and government offices). The internet would,or could, also be nationalized in the process (the justification for this is two-fold: 1. We already paid for it, through tax breaks to cable and telecom companies who underperformed without consequence, and; 2. the social benefit far exceeds the cost.
2. Alternative energy projects focused on renewable resources (at this point, every Federal highway in the US should have its ROW lined w/solar collectors).
3. All FedGov projects must be limit the contractor’s investment in durable goods (heavy equipment), in favor of man-power (picks and shovels). All FedGov projects should also have a profit cap. If the Corporatist don’t like it. fuck ’em — let them find a new host to bleed.
As for adjustments to finance and tax policies, we need to have some serious new ideas:
1. Cutting spending should begin with an immediate 50% reduction in the defense budget and the abolition and immediate defunding of DHS.
2. Public-sector unions should be outlawed and public salaries and benefits pegged to similar positions in the private sector. (as for talent going elsewhere, if someone else wants the level of talent that landed us where we are, let them hire away).
3. Investigations, prosecutions, and claw-backs for all of the criminality that has taken place since Clinton got his BJ from Monica (this seems to be the point at which blatant inanity and criminality took over).
4. Have the Fed distribute all newly-created “money” directly to the indebted citizenry — it will then find its way to the banks. After all debts are repaid, the banks can borrow money from the citizenry. Free money to the banks (actually, it isn’t free, because we give it to them while paying them interest to take it), is demonstrably insane.
Either we accept the truth that we took a wrong turn when we decided to allow the Corporatists to run our country, or we get bled dry.
September 16th, 2010 at 8:37 am
The SS retirement age was originally set at ~life expectancy.
That lifespan has increased framatically since SS was founded.
Its time to recognize that reality.
September 16th, 2010 at 8:38 am
THe most important one is the first rule. It is the only rule that address the TRUE nature of our current depression. It is exactly what this country needs. Wage inflation. Without, the rest of the rules are meaningless. Only thing is I would extend it for 2 years.
On the infrasturucture plan, I hate the idea of paying for it with usage tolls. Long after it is paid for, the gubbermint will still be collecting those tolls……. The goubbermenit never gives back, once they get their meaty paws in the door.
September 16th, 2010 at 8:40 am
BR:
Did you mean to say, “framtastically?”
September 16th, 2010 at 8:43 am
Payroll tax holiday is a bad idea. Better perhaps if on new-hires only. What? We front-end add more fuel to the SS deficits so that the imminent cuts have to be even more draconian?
Agree remove payroll cap.
Japan here we come. Infrastructure makes a lot more sense than most ideas, but they are still too top-loaded. Rather than fuel economic growth and general well-being, we will fund fat-cat Caribbean escape pods. Money velocity: zero. It’s an insiders game.
Sorry to be so negative, but we have achieved the point of diminishing returns on expecting any government spending to be efficient and productive.
@seneca: What? So we euthanize people when they turn 90? Is that what you’re proposing? I am going to assume you were being facetious. Even though some are living to the 90s, not many are, and the savings would be minimal. Much less than if they were more discriminating on handing out disability pensions to “depressed” people in their twenties.
~~~
BR: If we do it for new hires only, whats to stop new layoffs / new hires to save money ? Seems counter-productive
September 16th, 2010 at 9:01 am
$1,000,000 USD to each American-
think big (robust?)- think easy- so what if its 300 trillion?
it’s only paper- right?
and paper is one thing we can make right here right now- talk about shovel ready
September 16th, 2010 at 9:07 am
I’m 100% against the “ideas” #1 and #2 – like any temporary tax cut or $8k housing subsidy, the only delay the inevitable “adjustment”
#7 – yes, the airports in the USA are pathetic compared to HK, Singapore or Emirates. on the other hand, i think there will be fewer people traveling, so i wouldn’t spend too much on them.
September 16th, 2010 at 9:10 am
and where is the big dough for an intensive R&D on cold fusion-
now that would solve all our problems-
think big (or stay at home)
September 16th, 2010 at 9:11 am
1) One Year Payroll Tax Holiday: – what we need is a permanent break, no business hires employees just for 1 year, how about 10% permanent break instead of 1 year holiday
2) Capital Investment 1 year 100% Deduction – there is endless tinkering in this area, I know since I work in financial software support/ development, this is marginal. Does anyone think about what it costs corporation to constantly update their software to be able to comply with these unless rules/ exceptions/ breaks?
3) Corporate Tax-Free Repatriation – does it occur to anyone that the reason this money is not in the US in the first place is to avoid taxation? So, we let corporations to bring money tax free? They will never bring that money back afterwards, they’ll keep waiting for another tax holiday. This is a BAD PRECEDENT. Japan did this and it didn’t help them.
4) Pure Science R&D Program for Alternative Energy – OK
5) Mortgage Principal Write Down Plan – unrealistic and very open to abuse, also anti-free market
6) Electrical Grid Refurbishment: – OK
7) Airports, Ports, Roads, Bridges, Tunnels -OK
September 16th, 2010 at 9:16 am
ahab:
it’s not even paper — its keystrokes.
It’s FIAT,and it’s being used against us.
September 16th, 2010 at 9:21 am
Petey-
I know- but it ruins my little joke-
but cold fusion- that’s a winner right?
lol
September 16th, 2010 at 9:22 am
call me ahab Says:
“and where is the big dough for an intensive R&D on cold fusion-”
______________
I don’t care if the investment pans out or not (there are bound to be related breakthroughs), as long as public funding leads to a publicly-held patent. We need to stop making millionaires/billionaires via government-funded research/contracts.
September 16th, 2010 at 9:23 am
ahab:
How much could a buttload of zeros be worth?
September 16th, 2010 at 9:26 am
> Corporate Tax-Free Repatriation
I feel like a lot of companies are looking for exactly this, which is why they’re holding their cash overseas. Isn’t this a bit of problem? Avoid taxes (or pay less taxes) then wait until the once a decade or so you can move it home for free?
Plus, when they move it here, who says they’re going to spend or distribute it?
September 16th, 2010 at 9:27 am
We’ve got a long painful road to healing in this country. I don’t think any of us have the stomach for what is needed to be done, so we will just keep running a patchwork routine to keep it breathing. Hey, over 90% of are working, the rest are just lame and need to be euthanized, right?
We’ve got a lot working against us, and having government keep spending us deeper into it isn’t going to help. I like that each spending plan you outlined, BR, has a way to pay for itself, when applicable. That’s the kind of thinking that we don’t even have at the lawmaking level.
BOTTOM LINE TO THIS AND EVERY DISCUSSION ABOUT US POLITICS/TAXES>>>> We must all prepare to pay higher taxes. None of the developed nations that have successful healthcare or public spending programs have taxes anywhere near as low as ours. Nickel and diming it to death doesn’t count.
September 16th, 2010 at 9:30 am
BR,
The United States of America is not a democracy, it is a constitutional republic. You guys on the East coast and in Washington seem to think it is almost a monarchy of sorts in which the ruling elite can do whatever they want provided it is in the so-called “common interest.” As they say, a democracy is two wolves and a sheep voting on what is for dinner. Not the ideal kind of government, especially if you happen to be in the minority.
This nation was founded on certain principles that were designed to keep the power away from a strong centralized government and leave more control at the state level. This was done for a reason. More importantly, have you seen anything in Washington that would make you think these monies wouldn’t just get diverted into pet projects and the hands of political supporters. I do agree with a few of your points, such as corporate repatriation. Unfortunately, our system has become so corrupt that I think until we fix it, allowing Washington to dole out more money to various stimulus projects is akin to throwing it down a rat hole.
September 16th, 2010 at 9:37 am
Stimulus (stoking demand) ignores the obvious, Americans already have to much stuff. Many of the driveways (many three car garages) in our neighborhood and beyond have automobiles parked on them. This is because the garages are full of stuff. It also does not address the fact that much of the decline in spending is due to structural unemployment, i.e. incorrect skills for a changing employment landscape. Let’s face it any stimulus that just temporarily brings demand forward is a distortion. It is the supply of properly skilled workers that will engender long term organic economic growth. Education and vocational skills are where the stimulus money should be spent.
September 16th, 2010 at 9:38 am
5) Mortgage Principal Write Down Plan:
Conservative stubbornness and bank greed is why we have not done this yet. Here is simple example. Supposedly, it costs 30-50K bucks to bank for foreclosing on property.( though there are those that say it is a net benefit to bank on all the fees earned during foreclosure). If the $50K number is true, this is an implicit yet unrealized bank benefit from homeowners keeping current over the loan term. The term of the underwater loan is now about 1-2 years. In other words, the cost will become realized in the next two years. 50K is 25% of the median home price. It is substantial. splitting the difference on this unrealized cost by cutting the balance over the next two years by 25K would make the loan whole and likely keep the homeowner in the place. So why has this not happened? Uh, because it has never been done before? stupid.
September 16th, 2010 at 9:43 am
BR wrote: Indeed, no matter how haphazardly you dump a trillion dollars on the US economy, it will goose employment, industrial production, retail sales and GDP. Its hard to spend that much money and not have an impact.
—
It wouldn’t be “hard” to spend a trillion dollars and “not have an impact” — it would be impossible. Does anyone argue that spending a T dollars would literally do nothing? (But yes, you’re right.)
Then BR wrote: The goal of counter-cyclical government tax cuts and spending should be more than a temporary salve — it should be to “prime the economic pump.”
—
Yes, clearly that’s the goal — to “prime the economic pump,” but the question is How? There’s no argument provided here on how the spending will “prime the pump,” get “traction,” etc.
That said, only #4, #6, and #7 in the plan really count as the type of counter-cyclical spending that maybe, possibly, hopefully… will prime the pump. Rather than hope for something that won’t likely happen, why not just think of these items as “stuff we were going to buy anyway, so what’s it going to hurt?” Nothing wrong with a temporary salve if you get something useful out of it in the end. (I’m going to go out on a limb and suggest that the African weenie-washing program doesn’t fall under that category.)
Numbers 1, 2 and 3 are cuts or adjustments to the tax code. OK. Can’t argue with that.
But number 5 is the really creative one. Clearing out bad debt is crucial to recovery, but the pro-stimulus zealots (Krugman, DeLong, Romer, even Geithner) just want to pile on MORE debt, though of the public kind. If you think #5 is a good idea (and clearly you do), then shouldn’t we a) think more carefully about whether we need the debt load that comes from #4, #6, and #7? And b), shouldn’t we also think of ways to make #1, #2 and #3 (the tax cuts) closer to deficit neutral by cutting spending somewhere else — spending that is clearly wasteful? And wouldn’t the obvious place to look be our overseas adventures in Iraq, Afghanistan and Pakistan?
…
Bottom line, I like your plan much better than the ones usually drawn up by the pro-stimulus crowd, but it’s worth pointing out that your actual prescriptions are more in line with the ideas of Austrian economists (clear the debt) and the anti-stimulus crowd (cut taxes) than your snarky comments about “auserity” and doing “nothing” would suggest.
September 16th, 2010 at 9:49 am
Research into high tech confuses me as a recession fighter. It channels a relatively high sum of money through a relatively small number of hands to produce innovations that usually increase production while removing the need for human labor.
I personally like more machines and fewer people working in service, mines and factories, but if I worked in service, mining or manufacturing right now that would sound like very bad news. If you are over thirty and under sixty, have less than a masters degree, are healthy but not wealthy: high tech is not your friend! Thats most people.
If income could be separated from labor in some communist scifi fantasy way, then we could have robots producing everything while humans were gardening, watching TV or going where no man has gone before. In a labor-based market culture technology is a driver for working class bankrupcy.
~~~
BR: Don’t be confused, its simple: Think NASA/Apollo and aerospace, Darpa and the internet, Manhattan project and nuclear applicatiohns
September 16th, 2010 at 9:50 am
inessence, that’s a really good point and it’s one that I don’t think is explored enough. Without a doubt, there is a large percentage of this country that will spend anything they get, because they need to. But I think there is another very large portion (I’m in it, to be sure) that any increase in income is going straight into savings, in part because of the uncertainty of what I think the future will be, but also in part because, well, there is nothing I really want or need that I don’t already have.
September 16th, 2010 at 10:07 am
“The alternative is to do little or nothing, and suffer through another lost decade, with an economy that is anemic at best. In a Democracy, the electorate has other options.”
Nice straw man, Barry. Clearly there are many other alternatives and what the outcomes would be are all unknown.
I am in favor of many of your proposals, but first and foremost I would propose rational talk about what the problem is with our economy: way too much debt everywhere and gimmicks all over the place to hide the problems we’ve built up over a long period of time. We have massively screwed up incentive structures in the political and corporate sphere that have led to these problems. I see nothing in your proposals that addresses this. Also, the unfortunate side effect of having an over leveraged economy is pathetic economic growth until we get back to normal leverage levels. That sucks, but nothing can change that. I prefer rational talk to “happy” talk.
I definitely don’t think that raising the age for social security is remotely rational. Who out there wants to hire someone who is 65? Means testing for social security and medicare makes a hell of a lot more sense.
~~~
BR: That’s the alternative to ANY stimulus — not mine
September 16th, 2010 at 10:09 am
My house isn’t under water. Where’s my free meal?
September 16th, 2010 at 10:11 am
How to pay for most of it, decrease the size of goverment by withdrawing troups from most countries in the world. Defence budget (aka Attack budget) could easily be cut in half while still having the strongest military in the world.
September 16th, 2010 at 10:11 am
Barry, the gall to not only have great ideas, but the answers on how to pay for them. Just when are you going to run for public office? Dang we need ya.
September 16th, 2010 at 10:18 am
the “Attack Budget” — LOL
September 16th, 2010 at 10:21 am
A year ago, I would have though some of these ideas had merit and it would be valuable to flesh them out.
Today, I’m completely convinced that the government is incapable of doing anything competently on a large scale. If they are successful, it is front page news because it is so rare.
I honestly don’t want them to do anything. Just stop. They’ll just mess it up. Let the invisible hand work.
I know I’m asking for the impossible, but I can dream.
September 16th, 2010 at 10:23 am
Except, as I posted ad nauseum, I expect them to fix the financial markets and stop manipulating them.
September 16th, 2010 at 10:25 am
@ dead hobo,
What made you belive that the government was capable of doing anything competently on a large scale just a year ago? You were a believer in hope? 8 years of GWB ruined any belief I had in government.
September 16th, 2010 at 10:26 am
I don’t agree with all these spending ideas. But one thing I emphatically agree with is the notion that any new spending should be accompanied by a specific and highly credible proposal for how to pay for it. Not some vague assertion that “it’s paid for” without any details; or a suggestion that we can just eliminate “waste, fraud and abuse”.
Absent a specific and credible proposal for how to pay for it, there should be no new spending.
If we had done this a year and a half ago, the first “stimulus” (i.e., debt-creation) bill never would have passed. But then, if we had had an honest debate about long term costs and benefits of “stimulus”, Pelosi might still be Speaker next year.
September 16th, 2010 at 10:27 am
How do we pay for it?
With fiat dollars, of course.
Why do so few see the inherent fallacy of fiat money and its distribution to those already at the top of the food chain?
There is nothing — N.O.T.H.I.N.G. — constraining us but our willingness to accept a system that is based on nothing, yet which enslaves us.
Fiat money makes organized religion look legit.
September 16th, 2010 at 10:30 am
Vision(s) of the future?
An aquaintance passed on a recent dreamscape he experienced (and his perception of what it meant).
I am not in the business of interpretation of dreamscapes…So, with that said:
‘Your mileage may vary…’
” Last night my dreams contained the following:
1 – In a large boardroom I was seated at a table with some past business associates. At the table next to us was a group of politicians. They were whispering, conniving, making sure we couldn’t hear one word that was spoken.
2 – Next I was in a barn (strange as it sounds – you know how wacky dreams can be) with some strangers. We were struggling to climb an iceberg so we could escape from the barn.
3 – Then I was in an open field. Rays of sun were shining through dark storm clouds overhead. Wild horses were racing around the field. I fired off a couple of shots into the sky from my revolver. It felt wonderful to be alive.
4 – I was walking down a dark, gloomy street wearing the black wool trench-coat that I haven’t worn since I retired from my business in 2006.
I woke up thinking about these vivid images and before they were lost, I decided to try and interpret them. Here’s what I came up with:
Our politicians have destroyed our country and every plan they come up with is a plan to make things worse, they have created challenges we may not overcome, threatened our freedom, and forced many people out of retirement and back to work where there is none to be found.”
September 16th, 2010 at 10:34 am
dh:
The “invisible hand” wears an iron glove, and it will crush you. If anything has been learned over the past 30-40 years, it’s that.
DL:
We’ve been on “stimulus” since Nixon defaulted. Reagan proved the worthlessness of fiat scrip (if deficits don’t matter, then their quantity and how that borrowed “money” is distributed should not matter, either).
Our choices have been, and remain, inflate or default. “Stimulus” is simply another word for inflation.
September 16th, 2010 at 10:36 am
“Fiat money makes organized religion look legit.
you’d make my man Christopher Hitchens proud:-)!!
September 16th, 2010 at 10:36 am
300 Economists to Warn Politicians: Grave Danger Ahead.
Spur Jobs Before Deficit Reduction
Cut Deficit Right — Only After Economy Recovers
Economists to Challenge Deficit Commission Priorities While Outlining
Plan for Growth, Real Deficit Reduction, and Long-Term Investment.
Washington, DC: On a press call Thursday at 11am, over 300 economists and policy experts will warn political leaders of “a grave danger” that the still-fragile economic recovery will be undercut by austerity economics of the kind being pushed by conservative politicians and by the Deficit Commission.
The statement signed by 300 economists will be released on a press call conducted by authors and signers. It urges the President and Congress to “redouble efforts to create jobs” through investment in infrastructure, sending aid to the states, and creating public service jobs.
In addition to warning that premature deficit reduction will cripple growth, the statement also warns that some conservative deficit reduction proposals would undermine important programs like Social Security, while failing to reduce deficits. The economists outline a plan for reviving growth and jobs, effective deficit reduction after the recovery, and investment in infrastructure, green technology and long term economic productivity and job creation.
Date/Time: 11 am Eastern time, Thursday, September 16
Call In Info: 800-895-0198 code: Jobs
September 16th, 2010 at 10:37 am
thetruthseeker:
Seek some truth in this: Wasteful state and local spending and graft dwarfs that of the Federal Government.
September 16th, 2010 at 10:38 am
Poor Hitchens.
September 16th, 2010 at 10:40 am
“A lot of good ideas, but before we can do new ideas, we have to admit the old ideas were a total failure”
Absolutely BR, we need to get you and Pimco up on Capitol Hill. Anybody with access to someone that can get these guy’s up on the Hill? Somebody has to be able to get an audience with those that can get something done. Do the “banksters” have security at every entrance?
September 16th, 2010 at 10:40 am
super_trooper Says:
September 16th, 2010 at 10:25 am
@ dead hobo,
What made you belive that the government was capable of doing anything competently on a large scale just a year ago? You were a believer in hope? 8 years of GWB ruined any belief I had in government.
reply:
———–
My personal journey has caused me to realize that the people who run government and those who are in positions of influence are frequently stupid, conflicted, in way over their heads, sell ‘looking busy’ as doing something’, happy to spend OPM, lie habitually, their actions have unintended consequences much worse than the problem they tried and failed to fix. Most people have terrible idea, they implement them poorly if given the opportunity, they never admit their errors, and the next round of fixed are designed to fix the last round of fixes, and they don’t work either. And everything costs unimaginable amounts of money, all borrowed. And everyone in power acts like borrowed money is free money.
At one point not too many years ago I was as naive as many who now post here. BR could easily dredge up some old posts that could thoroughly humiliate me. I believed that nobody could be as stupid as current events have proven they really are. I have grown.
September 16th, 2010 at 10:43 am
Petey Wheatstraw @ 10:34
“Stimulus is simply another word for inflation”
. . . . . . . .
In the long run, I think you’ll be right. But Japan has shown us just how long “the long run” can be.
September 16th, 2010 at 10:45 am
nice as usual
couple thots
1)you need these bullets and possibly QE because finance is broken. they are patches, not healing.
2) we are probably running out of bullets.
your making them all self finance is accepting that? but be careful. user fees sounds fair, But if you charge for what was free, not much different than a tax.
Make your job creating fiscal bullets count. there may not be many left. Projects we need, and I like your payroll cut. Maybe an even more targeted german style. If they are really big job producers, maybe you can add to deficit. And hope the immediate jobs cranks some quick tax revenue.
Or you could fix finance?
September 16th, 2010 at 10:46 am
I like Barry’s idea #3, i.e., Corporate Tax-Free Repatriation
However, Obama will hate it.
Obama will want to make those evil corporations “pay their fair share”.
September 16th, 2010 at 10:51 am
Change social security so that it functions for the individual. If you pay in a dollar, that dollar is kept in an account in your name. Your entire working life. Paying into a big pot, with no names on the dollars is a guarantee that the money will be wasted over time.
Pass a balanced budget amendment similar to Germany’s. I believe it finally kicks in in 2016. Even if a balanced budget amendment was rejected in the Federalist Papers, in that long ago time people were discussing theory. Now we have the cold hard fact of federal government excess on a yearly, ongoing basis.
People who are employed by taxpayers should have the same kinds of pensions that the private sector has. Simply obvious, and demographically sound.
…I will leave the great taxpayer funded stimulus ideas to those who can guarantee results and not a new massive burden on today’s children. Have at it Barry. PayGo sounds so reasonable, doesn’t it?
September 16th, 2010 at 11:01 am
What TSElliot said.
And Ahab.
Dude, I am annointing you an Honorary Curmudgeon.
September 16th, 2010 at 11:07 am
I like the list. But aren’t your previous posts recommending letting housing market stabilize on own?
on #5 – morgtage write down.
I stop paying mortgage, let the weeds grow, break a few windows – and get a bunch of debt forgiven because my house is worth less than I paid.
Does everyone get to do this? Or just those that jacked up prices in the first place due to aggressive borrowing/buying?
Back to the moral argument – how do I teach my kids to be responsible – when their friends irresponsible (in my opinion) parents overreached, bought too much house, bought the boat and hummer, and now are forgiven their sins.
This isn’t a bible story – this is real life.
September 16th, 2010 at 11:11 am
1) One Year Payroll Tax Holiday:
To short – the companies I am familiar with never hire anyone thinking of them as being there only one year, unless it’s the service industries.
2) Capital Investment 1 year 100% Deduction:
Again too short. It brings forward some investment but without a longer term perspective it boils down to a timing difference.
3) Corporate Tax-Free Repatriation:
OK
4) Pure Science R&D Program for Alternative Energy:
Great, if domestically focused. The industrial revolution only happened with cheap fuel inputs.
5) Mortgage Principal Write Down Plan: John Hussman advocates a slightly different plan that has a mortgage appreciation sharing arrangement (b/w Mortgage holder and citizen) that I think is better aligned with individual incentives.
6) Electrical Grid Refurbishment:
Great. This needed to be done yesterday.
7) Airports, Ports, Roads, Bridges, Tunnels:
Yes – if carefully done. Japan has build more bridges to nowhere than anyone else and it has not helped. Selecting the proper projects that will produce a long term ROI is the trick.
8) A Civilian Conservation Corp program for young adults. A strict one year hitch (no long term Gov employees) to hire 1,000,000 18 to 35 year olds (or anyone really) at $30,000. Total cost $30,000,000. A fraction of TARP. Projects should not interfere with what a private sector company could do. Projects could include: Building better border securities facilities in the Southwest. Working in New Orleans and the Gulf Coast to help rebuilt communities. A nationwide National Park beautification project (tree planting,hiking trail projects and the like).
If the candidates are on unemployment rolls now the cos is the diff b/w $30,000 and unemployment insurance. Estimate $15 billion net-net, paid for by Defense procurement reductions.
9) 10 year Venture capital tax 0% rate. Not on existing securities – a new category in the tax code (Yes I know t is bloated all ready) Encourage business formation domestically. Conditioned on 95% of full time employees paying income taxes to the US Gov.
Paid for by; Elimination of mortgage interest deduction above $500,000.
Thanks for the blog. This particular type of web query could be highly useful to our governing elite.
September 16th, 2010 at 11:12 am
Even with the payroll tax holiday it will still be cheaper to hire workers in Asia instead.
September 16th, 2010 at 11:12 am
Barry – perhaps add dams to #7? Thought I read a study a few years back that the dam infrastructure around the US was in worse shape than bridges. Scary thought.
Totally with you on the electrical grid – that’s gotta be a no-brainer, even for our brainless leaders.
September 16th, 2010 at 11:18 am
Barry, what you are forgetting is that years of expansion and over leverage have to run its course. Nothing but time will help.
Just have to wait for another innovation that is going to spur economic growth.
September 16th, 2010 at 11:22 am
Barry,
Let me just tell you, raising the retirement age is a crap idea. Just forget that. People live and die like they always do. You can’t affect that with the wave of some magical economic wand. While people live they work to support themselves and their families. They pay into social security their whole lives, some die before they collect their benefits. Raising the retirement means you will just be cheating more people out of retirement income.
Ok so you say everything has to be paid for some way. I agree Let’s start with Goldman and CitiBank, JP Morgan Chase, and the rest. Tax those greedy scum sucking bastards to within an inch of their profit margins. Then you can raise their retirment age. Leave the rest of us hard working americans alone.
September 16th, 2010 at 11:25 am
“Back to the moral argument – how do I teach my kids to be responsible – when their friends irresponsible (in my opinion) parents overreached, bought too much house, bought the boat and hummer, and now are forgiven their sins.”
Not everybody did this gordo, you can’t put everyone in a camp of highly immoral speculators. The thing to teach kids going forward is how to be on the lookout of suspect central bankers and their policy intiatives. Follow the money , it does not end with the parents. The sins go much deeper in the chain of power.
September 16th, 2010 at 11:26 am
BnT:
Haven’t heard from you in a while. How ya’ been?
The German model of relatively restrained, socially aware capitalism seems to work fairly well (until it doesn’t, but for now, they look pretty stable by comparison to the US). Their involvement with the Euro could either sink them or net them, in terms of European hegemony, what they failed to achieve militarily in the ’30s and 40’s (I hope they don’t ever try to remilitarize).
Other than that, we would need to define exactly what a “dollar” is. If the answer is “fiat”, then we burden our kids with nothing (reserve status being the trump card, when push comes to shove).
BTW: I used to be MA, but the ghost in the internets tubes machine won’t let him comment for some insurmountable technical reason.
September 16th, 2010 at 11:29 am
I don’t care if the life expectancy has increased framatically or in any other fashion either. That is supposed to be one of the benefits of living in our so called greatest nation on earth. Rich people live longer in this country, they can afford health care to keep them undead a long time. That’s where your life expectancy increase is coming from.
So which is it, The Greatest Nation on Earth or just a Big Lie?
September 16th, 2010 at 11:32 am
The principal reduction idea is kicking the can down the road another decade. It’s also inherently unfair to the “clean hands” home owners who didn’t binge away their future. If this was done it would reward bad behavior in a manner the general public is not going to accept.
If principal reduction plans are put forward, at least have some form of equity sharing agreement. If your rate is unrefinanceable at 6.0% for any number of reasons, your present value is $100k and you owe $150k, compel the banks to re-write the loan at current market 4.5%. Sure beats a foreclosure where the MBS investor could get back even less, eh? Second, take the $50k that was overborrowed and create an equity share agreement: you sell at $100k, the $50k is forgiven. You sell as $125k, the $25k goes to the bank. You sell at $175k, $50k goes to the bank, you get the rest.
We’ve seen what extend and pretend does. A balloon work out system wouldn’t.
My .02c
Soylent Green Is People.
September 16th, 2010 at 11:35 am
Hey Petey,
Got banned from here for calling Barry a fathead. So I quit visiting. Been great. Barry apparently let me log on, and I just happened to hear about his ideas on the site I normally visit. (Bunch of us old TBP farts over there, and mostly just kids acting up with no teacher to police us…)
BinT
September 16th, 2010 at 11:37 am
the usa is going the way of the collapse of the ussr more so than the uk of 100 years ago.
our oligarchs in nyc and dc are raping the treasury and stip mining the land and labor. we will most likely end up with a split up country in due time. luckily i think it will go peacefully like the ussr broke into many countries.
our states are already set up nicely and a constitutional convention would achieve this peacefully
barry’s ideas are nice if the oligarchs gave a shit. they don’t. only putin was able to stop the raping by cracking heads. barry you are too nice maybe to see what is really going on. though i believe you are intelligent enough to face the music.
read jekyll island. fills in a lot of gaps.
September 16th, 2010 at 11:41 am
Regarding item #1 and the SS retirement age versus life expectancy. The argument is that the life expectancy has dramaticallyincreased. I’ve seen arguments by Paul Krugman and Ezra Klein that claim this characteriztion is slightly misleading. If I recall the statistics cited in Krugman’s blog, in 1950 if a person reached age 65 his/her life expectancy was 14.4 years. Today if a person reaches 65 the life expectancy is 18.8 years. Just comparing the values of life expectancy from birth is presumably skewed by a reduction in infant mortality then vs. now.
As far as paying for #1 I liked a suggestion made by a Bloomberg guest last week (I believe he was on Tom Keane – I don’t remember the name). His suggestion was to impose a gasoline tax and use that to fund the employer’s SS contribution. That’s probably good policy, but one that will never fly with the politicians.
September 16th, 2010 at 11:44 am
BR:
“1) One Year Payroll Tax Holiday: Want to increase job creation and reduce unemployment? Tax it less. A 12 month employer FICA holiday will encourage job creation.”
Won’t work.
This is FAILED supply-side economics. The problem is the lack of DEMAND. Why would any employer hire more employees without the demand to support it ? This idea is backwards, as is supply-side theory. We are a DEMAND economy with 73% of the national economy derived from Consumer Spending.
~
“How to pay for it: Raising both the retirement age and the cap on FICA contributions.”
* Yes, let’s have those coal miners working underground until they’re 70. Spending too much time Summering in the Hamptons has resulted in you being out of touch.
* The FICA cap should have been lifted long ago.
September 16th, 2010 at 11:46 am
BR:
“The SS retirement age was originally set at ~life expectancy. That lifespan has increased framatically since SS was founded. Its time to recognize that reality.”
Wow. I’m surprised you’ve fallen for this canard.
* Increases in life expectancy are almost entirely due to decreases in infant mortality. People who live to retirement age only live about two years longer than they did when Social Security was first enacted. Men live about one year longer, women about three years longer.
* The fact that Social Security beneficiaries tend to live SLIGHTLY longer today than they did in 1935 is much more true of rich beneficiaries than poor beneficiaries.
September 16th, 2010 at 11:52 am
Your suggestions make sense in a vacuum. Unfortunately this is the real world and at the end of the day all this Gov’t intervention will make a few people wealthy and help a few irresponsible folks. It will all start out with the best intentions but like we saw with the Big Dig in Boston greed eventually takes over. Shortcuts for profits…Favors for political gains etc. Debt forgiveness of any sort should only be handled between lender an borrower. We don’t need any “acts of Congress”. There is a system in place. This country needs to stop changing the rules at halftime. We need to get away from political backstops.
BR- you can site example such as NASA/Apollo and aerospace, Darpa and the internet, Manhattan project and nuclear applicatiohns…but the world have been just fine w/o a lot of these Gov’t sponsored programs. Eventually the private sector would have figured it out…without the unintended consequences.
September 16th, 2010 at 11:53 am
BR
Very thoughtful list. Unfortunately, not much of this, or comparable, is likely to be put in place. Unlike the DC haters, I do not blame government for this – they are after all just giving us what we want. Short term fixes and sound bites are what the public demands and it is what they get. We will not have a better Congress until we get a better electorate who demands honest solutions to the very serious issues that have been facing the US for decades. These issues really have not changed since 1973 or so, just become larger and more threatening with neglect.
btw – WordPress log-in is very challenging, to not finctional, in Firefox.
September 16th, 2010 at 12:06 pm
coupling items 4, 6, & 7 on your list with the events leading up to those of Aug-Dec 2008 one deduces that in the QTD Ellison has the roles of government and corporations reversed. Item 4 will have virtually no stimulative effect in the short run (2-5 years). Items 2 & 3 are pure give-aways with virtually no stimulative implications for the economy, though they will help boost stock prices. (Item 2 affects investment timing, not its level; item 3 is a prescription for long term, very lucrative, taxpayer funded capital export.) Item 1 is stimulative with one hand while being contractive with the other, though it may speed up slightly–& temporarily–the catch-up of employment to output–w/ corresponding subsequent layoffs. Item 5 inspires the Q “Why haven’t private parties done this already?” They haven’t due to the Gordian knot of securitization interests, which the proposal does not address. Thumbs up on 6 & 7, down on the rest for reasons cited.
September 16th, 2010 at 12:11 pm
[...] Seven ideas for stimulus. (Big Picture) [...]
September 16th, 2010 at 12:12 pm
robertso2020:
I can’t think of an instance where it can be shown that the private sector has ever done anything cheaper, faster, or better than a well-run government program (at least under the now defunct Constitutional government. Our current Corporatist government — run by the Captains of Industry and Banking — hasn’t done much but loot the Treasury).
For example, please tell me exactly how the contractors “managing” our two wars provide any savings or efficiency over using the highly trained and competent governmental resources (our freekin’ military) we already have and pay for.
September 16th, 2010 at 12:24 pm
BR says: The SS retirement age was originally set at ~life expectancy.
That lifespan has increased framatically since SS was founded.
Its time to recognize that reality.
_____________________________
All large systems are self leveling on a long enough time scale. Given how expensive we are making healthcare for everyone involved, I expect that the age trend will start to reverse course at some point, when old folks can’t afford to go to the doctors to take care of what ails them.
Alternate Cynical Viewpoint – will modifying the retirement age matter much if the fund is bankrupted in 10 years anyway?
September 16th, 2010 at 12:34 pm
“before we can do new ideas, we have to admit the old ideas were a total failure”
Seneca – thats just not PC .. but that issue is a big one .. the kids need to work – but the system means the aged need to work also – ie no real cash storeage anymore .. machines do more and more … stuck in the middle with you .. until there is just no energy for it all to work anymore and we resolve to what has always worked – but in a PC way
September 16th, 2010 at 12:44 pm
[...] Economic Stimulus? Try These 7 Ideas (The Big Picture) [...]
September 16th, 2010 at 12:47 pm
Until there is a significant improvement in the quality of financial decisions (as well as other kinds) in this country, no money should be spent on anything.
There is a heavy dose of imbecility influencing the thought processes and decision-making among those who have the authority to exercise power over resources and their disposition.
Some idiot (or group of idiots) at PG&E received permission to raise rates to fix a pipeline and chose instead to defer the maintenance/upgrade. I wonder what they did with money…
We spend money so foolishly and so obscenely in this society that nothing we do can turn this around. We must first NOT do. Take Katie Couric as an example, CBS News dedicates a significant amount of resources to paying her for something that she does not do well. In addition, why was she a ‘hot property’? Because she emerged from The Today- a context which she did not create- she filled a slot, a role already developed by Jane Pauley. What has she ever done that merits the kind of pay she receives? The people making the decision to pay her a gazillion dollars are morons. Why not invest in the organization? In the teams, in the reporting. The ‘star’ quality is in most cases the result of projection on to the object. BTW, I haven’t any pointed personal animus against KC, or any other in her circumstances. Rather, me cago en la mentalidad que produce esa clase de compensación.
We are in the straits we are in because collectively we’re a bunch of assholes. So first things first. Stop being assholes.
September 16th, 2010 at 12:53 pm
BR: I LOVE your plan. I think it could easily get bipartisan support if it got a vote without pork added. It would have been much better than the previous stimulus plan that successfully stimulated government jobs at ridiculous costs.
September 16th, 2010 at 1:06 pm
Re point 3 repatriation.
Why would a firm (MSFT) with nearly $37 billion in cash and short-term securities on its balance sheet choose to borrow (to pay a dividend)? Because much of that stash is held overseas, and Microsoft would have to pay taxes on the money if it were repatriated, Bloomberg noted
http://latimesblogs.latimes.com/money_co/2010/09/microsoft-stock-rally-dividend-buyback-borrow-bonds.html
Your tax proposal may have plenty of support from investors (who want the corps to distribute their cash hordes) and policymakers (who are at least listening to ideas like taxing retained earnings (which i think is kind of nuts) to encourage the corps to disgorge their cash to stimulate the economy ).
MSFT would borrow USD from bond investors to distribute (effectively) some portion of the overseas cash horde to shareholders as dividends.
But the underlying cash remains overseas. To the extent that new bondholders are overseas investors, I suppose it net repatriates cash via dividends to US equity investors, but not all of that dividended cash would end up back in the USA.
Seems to me a repatriation tax holiday is a reasonable price for the US to pay at the moment to tap into the corps cash savings accounts. From a macro perspective we need corporate savings to be spent, here, and soon. Obviously we have to pay something for that.
Or not, if all the large corps with huge cash positions follow MSFTs lead a good chunck of the offshore cash will end up back in the US
September 16th, 2010 at 1:39 pm
“The principal reduction idea is kicking the can down the road another decade. It’s also inherently unfair to the “clean hands” home owners who didn’t binge away their future. If this was done it would reward bad behavior in a manner the general public is not going to accept.”
Actually it will prevent the problem from lingering another decade, it will also help the “clean hands”, and it will help the general public when they see the market finally return to it’s normal function. The general public did not revolt on bad bank behavior and it will not revolt on mortgage restructuring.
September 16th, 2010 at 1:43 pm
Not a short term fix but could boost manufacturing/R&D in many areas long term : shorten copyright and patent years.
September 16th, 2010 at 1:54 pm
For a big bang stimulus, Investment and Recovery plan then not only spending (stimulus) will need to be considered but also curbing spending (wasteful projects, earmarks and “just because” programs), reducing budgets (specifically DOD, State Dept), reforming (replacing) the income tax system and capture lost revenue from those evading taxes. Economic recovery will come on the back of job creation, primed by stimulus, but we need to build in structural sustainability so we do not wind up in the same place (kicking the can down the road) within a few years.
A: Establish a balance budget rule (constitutional amendment to give it the biggest teeth)
B: Replace the income tax with a consumption tax (e.g. fairtax.org)
C: Ensure all the revenue is collected — stop the Billions in tax evasion
D: Dept by Dept review for budget reductions (DOD back to 2000 budget, adjust for inflation; State Dept – cut out most if not all spend on foreign aid – US is broke, can not afford off shore spend); Focus on national defense NOT worldwide policing.
E: DHS — not practical to eliminate, however a review of redundancy and excess should be performed, likely could reduce budget by 20% (Certainly move the FBI white collar investigators over to focus on fraudsters and banksters).
#1 – payroll tax: Eliminate the cap on contributions, with an alternate formula to capture folks that try to game the system by taking income as capital gains, carry interest or other in kind compensation (revenue collection)
#2 accelerated depreciation – um may help short term, however business with demand will invest in capex anyway; probably be more like the cash for clunkers or home buyer credit by pulling demand forward at the expense of future spend (budget neutral as the investment would be written off anyway over time)
#3 Just force repatriation in the tax code by mandating a declaration of total income, put an end to hording cash offshore (if you are going to benefit by being a us corporation, then this is societal cost of doing so). Multinational corps that build capacity outside the US to access other markets (FINE), but put an import tax on any items coming back to the US market from any offshore corporation.
#4 yes — pay for it with redirecting a portion of DOD and State Dept budget NOT a gas tax
#5 no — sounds good on first blush, but other posters have discussed the downside
#6 yes – tax on use — need thought on where the funds go and how to execute on a Nation Wide Grid consortium for research, coordination and execution.
#7 yes on infrastructure projects — pay for with a gas tax and fees on commercial use (for roads and bridges)
Ports and Airports – use tax to contain the burden on those that use these resources
NEW program
#8 — Moonshot like program to build a Nationwide infrastructure based on hydrogen fuel for transportation and incentive for auto manufacturing of hydrogen based vehicles – Clean alternative fuel; Reduce dependency on foreign oil and the mass export of dollars to oil producing countries.
September 16th, 2010 at 2:03 pm
All you guys against #1 have got to be kidding me. THE BIGGEST PROBLEM WE ARE FACING AS A NATION IS WAGE DEFLATION.
September 16th, 2010 at 2:13 pm
I like your list for the most part BR. The tax holiday is a good concept, but should be expanded to the no tax on the first $100K of earnings and this subsidy decreases exponentially over three years. Infrastructure investments are also productive to absorb all those building industry people who are too old to retrain – perhaps weight infrastructure employment incentives for those aged over 45.
I think we haven’t spent enough attention on going against Keynes and consider using tax policy to encourage businesses and individuals to do what they should be doing anyway and gets the government out of the decision making process. For example we could tax carbon heavily. This would allow business to invest in the best way to move away from carbon and make investment in new technology, ditto for consumers. This gives people free choice and gets the government out of micromanaging what kind of light bulbs we might buy. In other words tax what we don’t want and give breaks for what we do want. Of course there is that program trading problem we could fix with a transaction tax (sacrilege I know). Use the money to subsidize the payroll tax cut above. Tax cuts for the uber-wealthy are NOT congruent with this philosophy. More possibilities become evident if we spend some effort thinking along these lines.
There are only a few real options for real estate and all are painful: 1) Foreclose and auction to drive prices to their true value, 2) inflate the debts away, 3) increase wages through payroll tax cuts so debtors can pay their mortgages. Everything else is just voodoo economics.
September 16th, 2010 at 2:19 pm
Tea party darling Christine O’Donnell isn’t supportive of an self-directed stimulus…
http://www.aolnews.com/surge-desk/article/tea-party-backed-christine-odonnells-war-on-masturbation/19620021
September 16th, 2010 at 2:24 pm
All this corporate tax-brake and small business support to stimulate the economy is pure BS. The only thing that will get them to hire more people or increase their investments are more customers. Any other brakes they get are simply a transfer of money from government accounts to businesses bank accounts. A payrole tax holiday year for employees would have a lot more stimulatory effect than one for employers. Even more effective would be a cold turkey $2/hour increase in the minimum wage (without wasting money on any of these idiotic “compensations” to businesses). Yes they would be forced to increase prices to compensate for the increased expense – but right now we are fighting deflation not inflation, so that would be a good thing. It would give a boast to consumption – the only driver of economic growth. To fill that increased demand the businesses would be forced to invest and hire more people. The economy is always and only about consumption – the remaining 30% of the GDP are driven by consumption not drivers of consumption.
September 16th, 2010 at 2:56 pm
getting thru a few more posts (in & out of hacking on a fixer-upper commercial building next door *)
signed in (again) to say Thanks to super trooper .. I too played by the rules of Monopoly and “Wheres my Bailout” how about a Thank you for playing by the rules ??
* another pet-peav .. we don’t even recycle buildings in this country anymore – more $ incentives to build new and abandon old in place … can’t hit submit without backing down on this statement – its the imbalance of payback involving labor and super efficent big box stores … gotta go .. gotta get real in 3D (why I don’t know)
September 16th, 2010 at 3:25 pm
It isn’t simple: U.S. Government funded research has poor ROI compared to private or even communist government funded research. A result of politicians in charge of purse strings?
NASA did truly wonderful scientific and engineering things. All could have been done at a fraction of the cost (e.g, USSR).
September 16th, 2010 at 3:43 pm
The TVA, Hoover Dam, REA and other huge public works projects of the Great Depression had a huge multiplier effect. Much of rural America was not electrified in 1930.
Ya gotta be able to sell the “value added” justification for a huge national public works undertaking. You need the “vision thing,” not make-work for 10 million.
Complete the following sentences:
1. After this monumental 20-year undertaking, the United States will provide its citizens with the greatest _____________ on earth.
2. The $3 Trillion investment in our ____________ infrastructure will immediately yield a __% dividend, by enormously enhancing our ability to ___________________.
September 16th, 2010 at 4:13 pm
Barry, sorry, but I read everything which was included in the commentary. I’m not anti-everything, just more warmed over pablum being served the peasantry. I would agree that we can’t get something for nothing, but I didn’t see any revenue being generated from the capitalists in this nation of capitalists.
How about we include a transaction tax on stock trades? Trading is not investing, as any halfwit knows. Nobody in the business has yet been able to explain how it differs from buying and selling beany-babies or, for high velocity trading, buying lottery tickets. We might want to consider a similar fee for currency transfers.
What about a policy which prevents corporations from paying bonuses to CEOs for laying off mass quantities of staff above a specified threshold which could take into account normal employee churn? The policy could be enforced by fees and taxes on corporations which decide to reward their CEOs and executives anyway.
See, I’ve got some ideas on how to reduce the deficit by increasing revenue, just as you do. I’m not against the concepts per se, only that the bill was being laid at the average voter’s door yet again. Incidentally, I’m also aware that corporations do benefit disproportionately from investment in infrastructure. The damage to our interstates comes disproportionately from business’s trucks, not from individual’s automobiles. The courts are clogged with business law suits against one another, not from individuals suing businesses. Those are issues that no one wants to discuss on how we are to fund them when corporations contribute less to the national weal with every passing year. Even our bloated defense budget protects business investments more than any individual in this nation.
I applaud your courage in publishing my comment, even though I know you did it to stick me. Some websites would not have done it under any circumstance.
~~~
BR: I don’t disagree with any of your suggestions.
(Looks like I found my running mate!)
September 16th, 2010 at 4:43 pm
Some clarification of Japan’s Stimuli:
1) Japan tightened monetary policy at the beginning of their crisis, thus mitigating some of the effects of the stimulus.
2) Japan’s fiscal stimulus policy was not consistent. It was sporadic in nature, undersized and spread out overtime.
3) They didn’t spend all that was publicly announced because some of it required matching prefecture/local spending which didn’t exist, so the money was never spent.
4) I don’t remember the exact numbers, but Japan was already spending over twice what the US spends on public works projects even before their crisis occurred so there weren’t that many remaining beneficial projects to invest in. So it devolved into many bridges to nowhere. Their infrastructure was simply in way better condition than ours is in now when our respective crises occurred.
5) Despite all this, their economy improved and was growing at about 2.5% (IIRC) by the mid 1990′s before the govt decided the various stimuli had done their job and decided to concentrate on the deficit and passed an increase in the consumption tax. The economy tanked.
There’s a lot more to it than just saying Japan tried stimulus and it didn’t work, ergo all stimuli won’t work (and vice versa). The key is in execution. I don’t have much faith in us passing that execution part, though.
I agree with much of the above steps proposed by BR but would like to see govt/private R&D in scalable alternative energy/energy efficiency improvement technologies at the individual level. For example, affordable solar/wind/geothermal energy technologies which can be installed in individual homes whereby the consumer could sell back excess energy into the grid. I think this would provide incentives for conservation at the individual level, provide a controllable additional income source and possibly spur commerical investment in large-scale alternative energy technologies if the consumer excess started to bite into utility profit levels. I don’t have any knowledge in this area, though, and don’t know if such technologies could lead, in the near future, to any appreciable levels of income at the individual level, or affect utility bottom lines at the aggregate level.
Re: Social Security. This is more of a long-term fiscal change than near-term stimulative idea but what if we created portable retirement accounts for each citizen that for each dollar up to x-level you invested, the federal govt and your employer would match? Would this decrease govt debt obligations in the long-run? This would have to be a go-forward approach. It would have to be managed in some way to prevent for-profit financial companies from using the massive inflows as some kind of fee-generating monster and screw over the participants. I would also like to see some kind of requirement that some percentage go into “safe” fixed-income instruments, but other than that, the participants could invest how they liked. The reason for this is that I fear that if you let people invest everything as they want, you’ll end up with a sizable enough portion that will speculate their retirement funds into oblivion and then lobby Congress to create some new kind of program to bail their ass out that we’ll all be on the hook for. Obviously, I don’t have all the details worked out, it’s just something that’s been bouncing around in my head for a long time. Sorry for the long post.
September 16th, 2010 at 4:48 pm
A couple of modest proposals to pick up some pocket change that has fallen into the couch – get out of foreign entanglements loosens up $200 to $300B per year. Add to that thought, lets close half of our 700 foreign bases. Second, start reducing our foreign oil dependency which is about $400B per year. Either tax it for its true cost (see point one) or make a giant leap to all electric over the next 25 years. Lead, or get out of the way.
September 16th, 2010 at 5:02 pm
Where do I sign? I’m all in. Of course, it makes far too much sense for the party of “No Cojones” and the party of “Just Say No to Everything” to embrace these ideas. When the greatest incentive that our elected officials seem to have is to keep their own jobs or take someone else’s job rather than to actually fix the economy, it’s hard to see how these policies could be realized given the status quo on The Hill.
September 16th, 2010 at 5:21 pm
[...] As chatter ramps up about new stimulus plans, FusionIQ CEO Barry Ritholtz has his own ideas for what he would do if given $1T to stimulate the economy. “Some folks believe the [...]
September 16th, 2010 at 6:03 pm
and the post makes it to CNBC.com
http://www.cnbc.com/id/39214633
September 16th, 2010 at 6:18 pm
On #1…
If the tax benefits go to businesses, truthfully what real incentive is there for them to hire more rather than boost productivity and cash reserves? It seems that businesses hire more based on perceived demand rather than reduced costs. While I’m sure many would hire, I’m sure far, far more would just add the reduced costs to their bottom line. Good for investors, not necessarily good for the average worker. I would love to hear a solid, convincing argument as to why this wouldn’t be true.
September 16th, 2010 at 6:37 pm
“Tea party darling Christine O’Donnell isn’t supportive of an self-directed stimulus…”
When a reporter asked her whether the invisible hand of the marketplace should do the job instead, she told him to wash out his mouth with soap.
September 16th, 2010 at 7:00 pm
1) One Year Payroll Tax Holiday:
not sure it will help much. jobs problem is based more on demand which is caused by the lack of jobs.
sort of hard to fix this with a tax cut to business. maybe a tax cut to individuals. funded by your suggestions
How to pay for it: Raising both the retirement age and the cap on FICA contributions.
Plus eliminate the credit for foreign labor for work done in the US
2) Capital Investment 1 year 100% Deduction: The administration has already proposed a variation on this. It was an effective tax credit when done in 2004-05, but the drawback was it encouraged CapEx over new hiring. The idea of the payroll tax holiday is that it prevents that drawback.
How to pay for it: Via gains from the Corporate Tax-Free Repatriation (#3) or maybe a tax on trades?
3) Corporate Tax-Free Repatriation: US corporations are sitting on trillions of dollars of cash in their overseas divisions. A one year tax holiday to bring that back to the US. It can be structured in tiers (0%, 5%, 10%). The goal should be to bring to the US a trillion plus in overseas profits.
How to pay for it: Its free; These are overseas revenues that are untaxed by the US.
didn’t we try this before? and it didn’t work at all. very little if any jobs got created by that plan why would this be different?
4) Pure Science R&D Program for Alternative Energy: Gains in the basic science of solar energy conversion, battery storage, alternative biofuels, etc has been incremental. The private sector does not patience for multi-year or basic science R&D. encourage state, local and Federal agencies to particpate with grants etc.
How to pay for it: Via a Pigouvian tax on gasoline, phased in over 5 or 10 years.
cool idea!!!! but work has to be done in the US
6) Electrical Grid Refurbishment: This is both an economic and national security issue: The electrical grid is an unreliable mishmash of public and private ownership, vulnerable to both blackouts and cyber-attacks. It needs to be upgraded yesterday.
How to pay for it: A one cent per kilowatt hour grid tax.
great idea! same as #4
7) Airports, Ports, Roads, Bridges, Tunnels: The US was one of the first nations to build out a massive interstate highway system. We love big construction projects, but we seem to dislike the maintenance. Most of the transportation grid in the US is falling apart, in need of a massive repair. Many US airports look like they are from 3rd world countries.
How to pay for it: Usage tolls on roads, ports, bridges, landing slots.
also great idea! not so sure about tolls. unless they are limited till the projects are paid off
i would also think of going to mars. lots of R&D, lots of new technology.
September 16th, 2010 at 8:57 pm
Sad to say, the conflicts, both sincere, self-serving and political, will prevent the implementation of most of these. Especially those involving increasing taxes or fees. We still hope to have a solution in 30 minutes, for free, no pain, and keep it simple yet comprehensive.
Several good ideas above. In housing, I think we should modify those where the circumstances are such that a modification will work. Otherwise, a few days ago I advocated a silent second and others above advocated equity sharing. Same thing really. Let’s do that. Otherwise, let it go.
Tax holidays, waiving FICO for new employees and such are right now pushing a string. There is no visibility for longer term growth in demand. Until there is people are only going to hire those they know they need right now.
Incentives for R&D – good idea if developed and implemented here. Outsorce design to India and build it in Vietnam – bad.
Let me suggest something different. The first obligation of the federal government is to protect the citizenry. Let’s put more people on the borders, chasing down drug dealers, scammers, fraudsters, tax cheats, medicare and disability cheats, etc. In the good old days (3 years ago?) we could afford to have 100,000s of leeches sucking off of the body politic. Now we cannot. Let’s stop the bleeding. The cost? Maybe nothing considering the savings.
Let’s particularly focus on bleeding which goes overseas. Bleeding that is internal in a sense does not leave the system. Oversees it is gone. That takes us into the realm of addressing fair trade, foreign aid (including foreign bases), subsidy of drug R&D for the world and energy independence.
Ultimately we get back to some of the same places but perhaps coming from the viewpoint of protecting the citizenry and our country will enable folks to pull together. Otherwise they won’t. Are we not under attack, economically? Shouldn’t we recognize that?
September 16th, 2010 at 9:10 pm
#1 Hit Social Security. Worst possible idea. Last thing needed is a multi-billion dollar hit to the Social Security fund. Last thing most working Americans – especially those near retirement – need is a permanent hit to their individual SS accounts and a consequent permanent reduction in their retirement benefits. What were you thinking?
Raise the cap? No, remove the cap and make income from all sources subject to FICA. Then lower the rate for everybody. Maintains SS trust fund in the black in perpetuity.
#6 Renew Utility Grid. Best idea. While you are at it, underground all utilities to save billions in future damage to above-ground utilities from storms, earthquakes, etc.
September 16th, 2010 at 10:22 pm
It’s great to see economists take initiative and come up with plans to fix the mess that we’re in. Phil from philstockworld.com is much like that. He’s told me of quite a few good plans to help bail America out of the hole we’re in. Unfortunately the bills that arrive in legislature get held up and we get nowhere. Regardless, it’s great to see people coming up with great, detailed ideas to help this country out.
September 16th, 2010 at 11:06 pm
many are suggesting pull funds from the MIC .. seriously next to building buildings for the butter here in the USA – the MIC is the next biggest driver of the economy domestically .. and close foreign bases (your on your own) – sure lets see if WW3 can get started on cue for 12/21/2012 .. just go cold turkey on it all – can hardly wait – and watch shovel ready pull a rabbit outta the hat
Rocky & Bullwinkle “Goof Gas Attack”
http://www.youtube.com/watch?v=0okytU6LpEc
and saw up there somewhere – a “brake” stops a vehicle – or bends steel
the other “gimme a break, Dave” – “one break, coming up”
Van Halen – “Unchained” (studio version)
September 16th, 2010 at 11:48 pm
During the 1930s, stimulus money was primarily spent on domestic products and services. In the present global economy, much of our taxpayer stimulus money is helping to build the economies of foreign nations. That does not mean that Keynesian economics is dead, but it surely effects its’ impact.
September 17th, 2010 at 12:15 am
#Jim67545 Says: … The first obligation of the federal government is to protect the citizenry. Let’s put more people on the borders, chasing down drug dealers, scammers, fraudsters, tax cheats, medicare and disability cheats, etc. In the good old days (3 years ago?) we could afford to have 100,000s of leeches sucking off of the body politic. Now we cannot. Let’s stop the bleeding …
Are we not under attack, economically?
— Reply
Good post, good ideas to add to many from above
Yes, we are under attack, both from external sovereigns, internal oligarchs and MNCs with profit motives placed before country/societal value. The internal enemies are more insidious, we should target the perpetrators as economic terrorists and unleash the heavy handed powers of the Patriot Act and RICO laws on them. The best way to win the economic war is to remove the cash from the enemies of the economy — unfortunately the elites control the game, the gov’t and the troops (at least for the time being) so we can all suggest great ideas, but to see them come to fruition is lost in hope. Perhaps when enough “Of the People” band together real change can be effected, the tea party is a leading indicator of a sea change.
@Greg0658 Says: yes indeed pull funds from the MIC, redirect the assets to other programs and projects suggested above to invest in US based activities. No one is suggesting eliminating DoD spend, but prioritizing on national security, border protection and anti-terror (directed at USA) objectives.
September 17th, 2010 at 12:18 am
This should have been tried in Jan 09.
BUT THEY KNEW BETTER.
September 17th, 2010 at 7:16 am
[...] Well, it prodded companies to increase their Capex spending over hiring. That is why I suggested marrying this tax credit with a Payroll tax holiday so as to not nudge companies away from job [...]
September 17th, 2010 at 9:19 am
Someday Soon by Firefall
Enterprise NX-01 commissioned in 2151 commanded by Captain Jonathan Archer
Enterprise NCC-1701 commanded by Captain James T Kirk
Enterprise NCC-1701-B (an Excelsior-class upgrade Starfleet vessel) commanded by Captain John Harriman
I guess the MIC could do without its 110% funding for some time and pull thru a-ok … but on this thread of ideas to move forward .. I would like to see a new vision .. maybe the creators will come back and usher in a new reality once we show them this 8000 year affair with this cash for benefits system was a baby step http://www.metrolyrics.com/on-the-road-to-kingdom-come-lyrics-harry-chapin.html
mornin dj @ WOLD
http://www.youtube.com/watch?v=QVh6aOwY08g&p=09C14928C548188C&playnext=1&index=16
September 17th, 2010 at 10:33 am
I thought I would pose the following for consideration:
Would you or a business owners/managers that you know hire a new employee if it “cost them nothing”?
Here is a plan to create 2 million jobs over the next 3 months.
It is a very simple, efficient and quick/timely solution: Give each employer a single $45,000 tax credit available to each firm (not per new employee) to offset wages of net new employees added to payroll (no hiring/firing gaming) and kept filled for 18 months (net additions to payroll).
The $5,000 current Obama proposal if far too low to induce employers to take on the financial and time risk of hiring new employees (low wage or high wage) in these uncertain times (we are facing a confidence crisis). A significantly larger amount will surely make this decision easier and also promotes higher paying jobs as well. What is the impact of middle America going back to work, paying income taxes, paying into social security, making mortgage payments, buying consumer goods….?
Too expensive? Assuming 2 million employers participate, The cost: $90 billion. Well, for 2 million jobs, that is a bargain ($45,000/employee). There’s a good chance that some employers might hire more than one employee-making it a better bargain. So let’s compare this to the 3 million (if to be believed) jobs “created or saved” claimed by the $500 billion spent by the American Recover & Reinvestment Act of 2009 (is that really $167,000/job?)-I won’t even digress as to the worthiness of some of the projects. Plus, how much does it save in unemployment programs. Further, I saw a statistic on US Businesses that in 2004 there were 5,885,784 employer; and 1,262,22 employer with 10 or more employees. Based on these statics, I am wondering if my estimated cost of $90 billion is high as this would assume nearly a third of all employer to participate?
Why does this plan work?
1. It removes the fear and uncertainty for employers – yes they will hire (get an employee or two for free, who wouldn’t?) to add to the production line, administrative staff, sales force, etc. (let employers allocate to most productive area to create strong business).
2. It places the dollars and decision-making in the hands of most efficient allocators of capital – private business
3. It helps the engine of our economy – small businesses
4. Designed to create (not “create/save”) real new jobs – private sector jobs
5. Newly employed (with some certainty of employment) become better consumers – propelling growth again
6. It gives our export businesses (especially smaller ones) a competitive labor/pricing advantage
7. Politically, it can get done. The Republicans could not stand in the way of promoting private business and it give the Democrats some recognition of be pro-business (but this should be done on it’s economic, not political merits).
Maybe we could fund this plan with the unspent stimulus plan.
Keys to success:
1. Get dollars directly to private business (making it efficient)
2. Make it sufficiently large enough to have substantial impact (geared to totally offsetting the cost of hiring one or more new employee-a no-brainer, making it effective)
3. It is simple to implement and easy to track (making it believable)
It seems others have proposed similar strategies (including John Bishop-Cornell, Alan Blinder-Princeton, Tim Bartik-Upjohn). I am trying to figure out why this is getting little to no traction.
September 17th, 2010 at 12:32 pm
I was hoping someone can answer this simple question.
Why is it that the United States doesn’t go back to it’s trade policies of the 19th century and used tariffs to keep out manufactured products that can be produced in the U.S.?
Restricting European finished products was how the United States initially built up it’s powerful economy.
Is it because finance runs this country and such a policy is not profitable to wall street interests?
I rarely see trade and immigration policy discussed when concern about American unemployment is the subject matter. It’s always tax cuts. One would think that the wealthy had suffered enough over the past 30 years and that it was time for relief on their whopping tax rates of 15% on their dividends and capital gains.
Odd that during the go go 1950′s and 1960′s the tax rates were much higher and the American economy still survived.
I think you write well Mr Ritholtz and are also quite interesting to listen to. Since you are quite intelligent, I would enjoy reading your opinion about why tariffs were good for the United States for 140 years (1790 – 1930) and bad after that.
September 17th, 2010 at 12:38 pm
Payroll tax holiday: My book, FREE MONEY recommended this way back in 1996. If you’d like to see Ten Reasons to Eliminate FICA, click the link.
After you read it, ask yourself not only why we don’t eliminate FICA, but why after eliminating it, we ever should bring it back.
Rodger Malcolm Mitchell
September 17th, 2010 at 12:42 pm
Also, you said, “The time to reduce the government’s economic deficit and footprint is during a robust expansion, not during (or just after) a contractions.” Please explain, using historical data, why it ever is “time to reduce the government’s economic deficit and footprint,” other than you simply don’t like the words “deficit” and “big government.”
Rodger Malcolm Mitchell
September 17th, 2010 at 12:45 pm
I think your trying to answer the wrong question. Stimulus spending doesn’t work, never has worked, and never will work. Try these ideas. Reduce regulator burdens. I was looking at a company today that makes a really cool electronic toy and at the top of the website there is
” we would like to assure you our Snap Circuits® products meet American Society for Testing and Materials toy requirements (ASTM963), Standard Consumer Safety Specification (16CFR), and International Standards for Toys & Children’s Products (EN71)”
and a link to the certificates of compliance. How do you start a business and find out all the requirements you need to meet.
I have a friend who wanted to start a small restaurant. He had no idea about anything other than food, his first employees would need to be a lawyer and an accountant, he stayed in the navy instead.
If the engine of the economy ain’t runnin so good, try spraying a little gumout in the carb.
Another game changer would be open borders. Pre 1950s style, Ellis island unlimited immigration. We have a demographic problem coming, too many retirees and not enough workers, and a lot of people who want an opportunity. I would say 120 months (10 years) of paying income taxes and you get citizenship. welcome anyone who wants the real American dream.
The last idea is to reduce the deficit, people are worried about future taxes and inflation. It may be foolish but the perception is real. The government owns about a third of the acreage of the country. Sell it. Use the proceeds to pay down the debt.
No costs, just pure opportunity for the people who want to be successful.
September 17th, 2010 at 2:23 pm
All items except #3 seem reasonable. Giving tax breaks to the trillionares make little moral sense. How’s about giving BIG tax incentives to companies that keep jobs in the good ole USA?
September 17th, 2010 at 3:51 pm
Berry, you must be thinking we have or can get a working congress. It doesn’t matter how good your ideas are they will get mangled into laws that will do more harm than good again. You could give these clowns a nice Kobe steak and tell them exactly how to cook it and you’d get back the worst looking chicken nugget you’ve ever seen.
Your trying to figure out whats best for the country, the few good people in congress are will only vote for things that are good for the country AND good for their district, most are just trying do what will get themselves reelected and the worst, well, you know who they are.
~~~
BR: See the Nascar idea
September 17th, 2010 at 4:16 pm
Bernie638,
You said, “Stimulus spending doesn’t work, never has worked, and never will work.”
I’m not sure why you believe that, but it is absolutely incorrect. Every recession and every depression in U.S. history has been cured by federal deficit spending. Today’s recovery is slow, but we would be in a depression by now, were it not for stimulus spending.
Way back on April 9, 2008, I wrote to the Chicago Tribune predicting the stimulus would be too little, too late. You can read the letter here . Tentative little steps have given us a tentative little recovery.
Had the stimulus been immediate, and about 10 times greater, we quickly would have recovered from the recession or avoided it altogether. Just think of the costs of this ongoing recession compared with the cost of a properly sized stimulus. This is a classic example of the ounce of prevention being worth a pound of cure.
Rodger Malcolm Mitchell
September 17th, 2010 at 4:29 pm
Here is a popular myth simply begging to be addressed:
Bernie638 said, “The last idea is to reduce the deficit, people are worried about future taxes and inflation. It may be foolish but the perception is real. The government owns about a third of the acreage of the country. Sell it. Use the proceeds to pay down the debt.
The so-called “deficit” is the net amount of money the federal government has added to the economy this year. The so-called “debt” is the net amount added since the beginning of the nation. Bernie 638 apparently believes that by reducing the money supply, we somehow stimulate GDP growth. There is zero data to support that myth.
Further, were the government sell federal lands, where would the money come from to pay for it? Sure, we could sell it to China, but that would that cause a major uproar. We could sell it to U.S. citizens, but where would the money come from to pay for it? From the U.S. economy. Buying land from the U.S. government would be identical to paying federal taxes. In both cases, money would come out of the economy and go to the government, where it disappears.
I urge commenters to learn about monetary sovereignty.
Rodger Malcolm Mitchell
September 17th, 2010 at 6:07 pm
You are correct about deficit vs debt, I made a few stupid errors in that comment. I think I have a very basic understanding of monetary sovereignty, in addition to this blog I’ve been reading TPC, its been well covered there.
However I said people are worried about it, it may be foolish but that perception is enough to push a lot of politicians out of office. It matters. People are saving their money in anticipation of future taxes and electing politicians that will cut who knows what in order to satisfy them. It matters.
Stimulus will not work, businesses say the biggest problem is lack of customers. My brother in law works at a plant thats in a 9 week shutdown because they have no orders.
Buying land is not identical to paying taxes, I get something for the money. Significantly raise immigration and sell land, that will put a lot of people to work building new housing and reduce the housing oversupply while reducing the government debt. I don’t care who buys it, open auctions are good.
You want renewable energy and a better grid? Get rid of environmental impact studies and the other silly laws that prevent them. This is from NPR http://www.npr.org/templates/story/story.php?storyId=129128750
“The other challenge, Bottorff says, is California’s complex permitting process. Since many solar and wind projects cover hundreds of acres in environmentally sensitive areas, developers must navigate local, state and federal agencies for permission to build.
“I would probably describe it as painful, tortuous and highly complicated,” says Michael Picker, the governor’s senior adviser for renewable energy facilities. “The reality is that each one of the projects that we permit this year will immediately become the largest in the world.”"
Same thing for companies looking to build transmission lines, wind farms, nuclear plants, hydro. There is regulatory gridlock that will prevent any amount money from actually building anything. Like in the NPR story the plant is running out of time to get federal stimulus dollars. More money isn’t going to help.
Who do you want to pay to do the basic research? Who decides what to research? How much more spending on Fusion or room temperature superconductors before its ok to say they will exist only in science fiction.
Which airports, bridges, roads and tunnels get money? Who decides? Every tax increase is sold under the idea that we need to improve our infrastructure, but before you know it the money is spent on something else and the infrastructure gets worse. The states are broke and they are not sovereigns, where did the money go that was suppose to fix the roads? This has been a problem for 30 years, and you think this time will be different?
If the last stimulus was poorly executed, what makes you believe the next would be any better? Which congress rules your country?
September 17th, 2010 at 9:38 pm
Barry those are great ideas. All you naysayers care to explain how austerity is working for the Greeks and Irish.
As to the Government we are the government which seemed to work fine in the beginning of the last century we had a prosperous Middle Class and successfully fought two World Wars. Now we mired in the Middle East and still haven’t restored New Orleans. Welcome to Reagan’s Third World creation.
Furthermore don’t be concerned about paying for these things according to Mosler and others
“Federal taxes function to regulate demand, and not to fund expenditures,”
Read Molser’s book “The 7 Deadly Innocent Frauds of Economic Policy” it’s free at his web site and recommended by William Black, Marshall Auerback and James Galbraith who wrote the forward
About Warren Mosler
Warren Mosler is running as an Independent. His populist economic message features: 1) a full payroll tax (FICA) holiday so that people working for a living can afford to buy the goods and services they produce. 2) $500 per capita Federal revenue distribution for the states 3) An $8/hr federally funded job to anyone willing and able to work to facilitate the transition from unemployment to private sector employment. He has also pledged never to vote for cuts in Social Security payments or benefits. Warren is a native of Manchester, Conn., where his father worked in a small insurance office and his mother was a night-shift nurse. After graduating from the University of Connecticut (BA Economics, 1971), and working on financial trading desks in NYC and Chicago, Warren started his current investment firm in 1982. For the last twenty years, Warren has also been involved in the academic community, publishing numerous journal articles, and giving conference presentations around the globe. Mosler’s new book “The 7 Deadly Innocent Frauds of Economic Policy” is a non-technical guide to the actual workings of the monetary system and exposes the most commonly held misconceptions. He also founded Mosler Automotive, which builds the Mosler MT900, the world’s top performance car that also gets 30 mpg at 55 mph.
Learn more at http://www.moslerforsenate.com
September 17th, 2010 at 11:16 pm
GPLamb,
“So let’s compare this to the 3 million (if to be believed) jobs ‘created or saved’ claimed by the $500 billion spent by the American Recover & Reinvestment Act of 2009 (is that really $167,000/job?)”
Eh, no.
That includes all the infrastructure built, such as roads, bridges, sewer systems, etc., as well as all the materials, supplies, and subcontracting purchased.
September 17th, 2010 at 11:19 pm
Bernie638,
“Stimulus spending doesn’t work, never has worked, and never will work.”
Wrong, wrong, wrong.
* FDR’s New Deal worked like a charm.
The national economy had recovered by 1936, with GDP having risen to +13% and the Unemployment Rate having fallen to 9%, from -13% GDP and a 25% Unemployment Rate in 1932.
* Before the stimulus bill was enacted last year, the GDP in the 4TH QTR of ’08 was -6.8%. After the stimulus bill was enacted, 1ST QTR ’09: -4.9% > 2ND QTR ’09: -0.7% > 3RD QTR ’09: +1.6% > 4TH QTR ’09: +5.0%.
The almost 750,000 a month job losses during the previous administration prior to the stimulus was initially replaced by an average of almost 200,000 a month job gains.
That’s a reversal approaching a million jobs a month.
The stimulus worked like a charm. It was just too small.
September 18th, 2010 at 12:38 am
Some of the smartest people in the country, who are experts at economics and the economics of a recession in particular, were advising the president. They put together a chart for him to show on national television of what the stimulus would accomplish. It showed what unemployment would be if we did nothing and what it will be with the stimulus. Unemployment went significantly higher than the do nothing graph!
Now you want to tell me that the stimulus didn’t make things worse?
Oh, thats right, these brilliant people know how the awesome stimulus works, they just didn’t know how bad things were? They can accurately predict all the different future effects of a stimulus, but can’t accurately describe the present!
Lets use Occam’s razor.
September 18th, 2010 at 2:07 am
The ideas are all great .. but do these people (regulators and politicians) have any interest in doing the right thing.
The only thing that appears paramount in their minds is that banks should be made whole at any cost and house prices have to be propped up. Generally keep people deluded and hope it all turns around at the end. Else would they advocate curing debt with more debt?
That said, a few questions here ..
Regarding Mortgage Principal Write Down Plan, while that is the only route for the housing market to recover without acknowledging the losses (better still would be to allow actual market to play out and get the house prices to a level where buyers with ability to pay and borrow come in), how does this help if it was a NINJA loan or if the housing market takes a dip and you are still underwater or you are unable to keep up with the mortgage in future.
Regarding Capital Investment 1 year 100% Deduction, would it do something like cash for clunkers where again you defer the problem by 1 year and bring in people who would have invested anyway and draw demand forward.
Regarding Corporate Tax-Free Repatriation, in addition to this would it not be better to tax jobs that are moved abroad and use the cash to train americans for new jobs since the skill set that is moving out will no longer be required all that much!
September 18th, 2010 at 1:32 pm
Bernie638.
“Now you want to tell me that the stimulus didn’t make things worse?”
Only if you think an almost one million jobs a month reversal and a reversal of GDP from negative to positive is “worse”.
~
“Oh, thats right, these brilliant people know how the awesome stimulus works, they just didn’t know how bad things were?”
Indeed.
You are aware that even the experts, as those at the private-sector NBER (which is the official arbiter of when recessions begin and end), do not know until well afterward when these events occur ?
September 18th, 2010 at 2:38 pm
GDP = private consumption + gross investment + government spending + (exports − imports)
If government spending goes up faster than the other terms go down then GDP still goes up. That doesn’t mean anyone is better off. Fidel Castro can nationalize a country, double government spending (GDP goes up) and make the population worse off all at the same time.
The number of unemployed went significantly higher than the do nothing option, and you call that a success?
The road just outside my house go some stimulus. It was a decent road, the kind you never notice. It wasn’t new, the lines were a little faded, but there were no cracks or potholes. It was an unremarkable road. 50 million stimulus dollars later its resurfaced, has nice bright new lines and a fancy stimulus sign. There are a lot of other roads that are still in bad shape, but congress has no clue which roads need work, they just spent the money and got little value from it. Now you would give them more money to “fix the infrastructure”? Useless!
Cut federal taxes, let the states raise taxes. The states cannot print their own money and they are bankrupt! Sell the federal land and let the states collect the property taxes on it. The states know better what the infrastructure needs are, DC has no clue. I don’t expect them to.
I vote for federal politicians based on their positions on war, and foreign policy. I vote in county elections based on the policy for roads, and services.
September 18th, 2010 at 7:47 pm
Bernie638,
“The number of unemployed went significantly higher than the do nothing option…”
The independent non-partisan Congressional Budget Office disagrees with you. They state that Unemployment was reduced by 2%.
~
“and you call that a success?”
Yep.
~
“Cut federal taxes”
Cutting federal income tax rates has never stimulated the national economy, never created a net increase in the American workforce, and never increased federal income tax revenues.
September 19th, 2010 at 12:54 am
Don’t care much for 1 & 2…am skeptical it would change anything.
Don’t know enough about 3 to understand the implications of your changes, and am uncomfortable with all corporate tax evasion (legal or otherwise).
#4 basic research funding is probably always a government function. Less clear is how to keep results as a comparative advantage for trade purposes.
#5 – would like to see a quicker resolution – but realize this may be as good as it gets.
#6 – Alternate solution. Define reliability standards and fine/jail power utility ceos who fail to meet them? Find some way to allow them to increase their prices to fund improvements and without giving that bunch a big raise for doing nothing. Folks, there are no real standards for power reliability. You’ll always miss the target if there never was one. And if you only knew how close some of these power company CEOs are to the Wall Street Boys (gambling) – you’d be very afraid. Jail em. That would work.
7. We’re in triage now. There’s no money left, and even if we had it – we may not have the wisdom to spend it wisely..particularly if oil depletion demands we shed unsustainable routes. We need to think carefully before spending any money on this sector.
Alternate suggestions:
1. Government freezes expenditures, starts a 5 yr process to phase out all ineffective activities.
2. Government immediately raises income tax rates to fully fund current expenditures, and to at least make modest progress on public debt.
3. Pass new bankruptcy laws to allow those mired in debt a new start. From that moment on – these individuals/states/ cities/counties are barred from credit and must attend “credit AA”. All defaulted pensions worked out through benefit caps or worse. But no more kick the can.
4. Allow housing to drop, phase out the GSE’s, pass a national homestead act, pass a national property exclusion law. No mortgage interest deduction.
5. Close most foreign military bases, shrink the military budget, wind down wars. Make sure next war comes instantly with a draft and a war tax.
6. We are currently losing a generation of college students due to this economy and excessive university costs. How about setting aside some funds for competitive grants to completely cover the expenses of our best students? Then put salary caps on university staff (especially administrators) , and drag college costs down to equivalent 1950 levels.
7. Muzzle Wall Street and the banks so they can’t trigger something like this again.
8. Find a way to fix the rail system – our insurance policy. Hire as many unemployed as you can to get this done quickly.
9. Develop real emergency plans for the country. Figure out what must happen – then set about to make it happen. Things like – how do you evacuate NY in 24 hrs? Use the army of unemployed to speed things.
10. Unemployment insurance gets extended indefinitely and for everyone without a job, but all benefit recipients are subject to callup for labor or specific training. Employers contact the government outlining their needs, and the government works to match the unemployed with those needs winking, cajoling, training as required to get the unemployed back into the workplace. Doing the hard dirty work to place people. After x number of weeks where the unemployed have tried to place themselves – the government then takes over.
Recognize losses, clean it up – move on.
http://www.theatlantic.com/magazine/archive/2010/10/the-least-we-can-do/8228/
September 19th, 2010 at 10:41 am
Bernie638 posts this formula:
GDP = private consumption + gross investment + government spending + (exports − imports)
Winston posts here what I was thinking when I read this but didn’t want to bother with @ the time:
http://www.ritholtz.com/blog/2010/09/who-gets-what-tax-cuts/#comment-403867
ie gov spending can be negative if borrowed and not from a checkbook with a + value
September 19th, 2010 at 1:12 pm
subscriptionblocker @ 12:54am this morn .. just read it .. humm .. the hairs are tingling