Rachel Maddow gets it. Economists and Republicans don't.
I watched Prof. Jeffrey Sachs on Rachel Maddow's show the other day. She asked whether the fiscal stimulus would work. "No" he said emphatically, it would not. "No one has the tools....to fix this......the fiscal hole will cripple us for the long-term."
She tentatively mentioned 'the multiplier.' He brushed this aside with a counsel of despair. "We might have a few more jobs in the short-term but a massive deficit in the long-term..."
Scant consolation for 13 million unemployed and underemployed Americans. Their lives could be transformed by this fiscal stimulus.
And anyway, as Keynes once noted, in the long term we're all dead.
Sachs's analysis is overwhelmingly shared by mainstream economists. And by Republicans. These have been whipping voters into a frenzy with talk of 'generational theft.' Future generations, they argue, will be paying for this fiscal stimulus for decades to come. That is simply not true, as I will show below.
Meantime, these points are truly rich coming from the Republicans. Readers no doubt know that during the Bush-Cheney years the US national debt doubled from $5,700bn in 2001 to $10,700bn today. Others may recollect that Mr. Cheney said in 2001: "Reagan proved that deficits don't matter."
So let's not hear any more from Republicans about deficits mattering or about 'generational theft.'
But to get back to history. The fiscal stimulus of the 1930's was positive -- both in the US and the UK. It dramatically lowered unemployment after 1933.
Second, it is simply wrong to suggest that the fiscal stimulus 'will cripple us long-term.' It will not. The fiscal stimulus will pay for itself. Here's how.
At times of high unemployment tax cuts may be saved and not spent into the economy. But when the government invests the bulk of $789 billion in real, productive economic activity - it always gets its money back - plus some.
It works like this. Government invests in labor-intensive programs e.g. $40 billion in energy efficiency and renewable energy programs, including $2.9 billion to weatherize modest-income homes. $27 billion for highway and bridge construction and repair and $11.5 billion for mass transit and rail projects; $4.6 billion for the Army Corps of Engineers; $5 billion for public housing improvements; $6.4 billion for clean and drinking water projects.
The energy efficiency/transportation/public housing programs hire American workers - some highly skilled, some not so skilled. These programs also purchase materials - from factories. Some foreign, but mostly American.
Next, something called 'the multiplier' kicks in. It's the ABC of economic science and works like this.
The workers get pay checks. They use the income to pay taxes - direct to the US government. So immediately the government can use these tax revenues to fix the budget. Then workers purchase goods and services - boosting the economy. Companies hire more workers to deal with demand for materials from stimulus-sponsored programs. More employed workers equals more taxpayers.
Ever-rising tax revenues drop into the Treasury's coffers.
Because government spending is financed by bank money or credit, income increases. Eventually savings are generated to match the original stimulus expenditure - so there is no 'crowding out' by government. But savings too can find a way back to the US Treasury, because savers could end up investing in US Treasury bonds.
If workers or factories spend money on goods made in China - then some will leak out to China. But experience shows that investment in public works tends to be local investment. By weatherizing the homes of the poor, strengthening flood defenses, growing forests to act as pollution 'sinks' and subsidizing organic farming - investment stays at home.
But investing in this kind of economic activity is not the only revenue source for the US government.
A massive improvement to the budget will be in savings made in unemployment payments.
I looked up the Congressional Budget Office's estimates for expenditure on unemployment compensation and food stamps for the years 2009 - 2015. Their estimates are optimistic. The Congressional Budget Office thinks unemployment is going to decline after 2009. Nevertheless, even under its conservative estimates expenditures on unemployment compensation and food stamps rise to a massive $818 billion between now and 2015.
If the numbers of unemployed people were cut, and if Americans had enough income not to rely on food stamps - Congress would make massive savings to the budget. If we add those savings to the tax revenue generated thanks to the 'multiplier effect' - the outlook is positively rosy for a surplus on the budget as the economy recovers.
So lets not have any more talk of the 'crippling effects' of the American Recovery and Reinvestment Act of 2009.
If there is a complaint it's the one the non-economist Rachel Maddow made to Prof. Sachs. The fiscal stimulus is just not big enough. $789 billion will not be enough to fill the $2 trillion collapse in output since the crisis started.
So, it's more strength to your elbow President Obama. And Congress, get ready for phase two of the fiscal stimulus.
And the American people and the rightwing talk show hosts get ready -- there is going to be a phase two, if not also a phase three.
Everyone needs change,Everybody can change
We've been living in a pumped up lie of an economy. Consume and consume more! We must make things and find some where to stuff them! Here; create a false economic boom and stuff more goods in there. We'll make more!
We're running out of money? No problem. It's fake money, we'll just print more! It creates inflation? No problem. We'll stop publishing the M3 inflation indication report, force the Saudis to buy Treasuries with their profits and force the Chinese to do the same. We can't show the consumer how much we're devaluing their dollar, it will hurt consumption!
The consumers have spent all their savings hording stuff? No problem, we'll create credit and they can consume more stuff. We'll tell them they'll die if their credit scores go down.
The consumers have run out of credit? No problem, we'll just drop interest rates and they use their houses to buy stuff.
The house of cards is collapsing? No problem, we'll just devalue the currency by whatever it takes as a short term political fix. Who cares about inflation or long term stabilization? We must at all costs maintain this impossible economic pace!!
The real answer is to get rid of fractional reserve banking. Get rid of banking for profit, which means get rid of the Federal Reserve.
www.endthefed.us
www.themoneymasters.com
Why bore you with my words, I will let Tomas Edison do it “If our nation can issue a dollar bond, it can issue a dollar bill” and Thomas Jefferson “The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution.” and Andrew Jackson “The bold effort the present bank had made to control the Government, the distress it had produced are but premonitions of the fate that awaits the American people should they be deluded into a perpetuation of this institution (Second Bank of the United States) or the establishment of another like it (which we did and is called the Federal Reserve) and Abraham Lincoln “The money power preys upon the nation in times of peace and conspires against it in times of adversity
So let’s give the other side a chance:
Mayer Amshel Rothschild
“Let me issue and control a nations money and I care not who writes the laws”..
"The few who understand the system, will either be so interested from it's profits or so dependant on it's favors, that there will be no opposition from that class." -- Rothschild Brothers of London, 1863
"The Federal Reserve banks are one of the most corrupt institutions the world has ever seen. There is not a man within the sound of my voice who does not know that this nation is run by the International bankers -- Congressman Louis T. McFadden (Rep. Pa)
"Some people think the Federal Reserve Banks are the United States government's institutions. They are not government institutions. They are private credit monopolies which prey upon the people of the United States for the benefit of themselves and their foreign swindlers" -- Congressional Record 12595-12603 -- Louis T. McFadden, Chairman of the Committee on Banking and Currency (12 years) June 10, 1932
"I have never seen more Senators express discontent with their jobs....I think the major cause is that, deep down in our hearts, we have been accomplices in doing something terrible and unforgiveable to our wonderful country. Deep down in our heart, we know that we have given our children a legacy of bankruptcy. We have defrauded our country to get ourselves elected." -- John Danforth (R-Mo)
Always works.
Who would dare contest that?
The stimulus will indeed help, and even if it doesn't right the US economy, at least we'll be getting some badly needed infrastructure improvements out of it. The author - and most others writing about economic matters - should have a more realistic understanding of just how bad the global economic crisis is before writing such irresponsible articles.
> collapse in output since the crisis started.
What about the multiplier that is the basis of your whole post?
It sounds mighty fine to poke fun at the Republican Congress for their misuse of our tax dollars, I know. But you folks were screaming then. What, its your turn now? So, you didn't really mean it then, did you? It was merely your hatred of the Republicans, and had nothing to do with any fiscal concerns!
Semper fi
Keep up your hateful cynicism and obstruction. You'll be the ones with egg on your face come election time.
You'll be pretty much EXTINCT soon, you bloated dinosaurs.
Oregondemo, you're guilty of a similar issue. Your comment about Mr. Obama--that "he's a winner and he's brilliant"--is as powerful an argument as the asinine Republican mantra that "this stimulus just won't work." Both comments are as meaningless as the political party groupies that spout them.
Thank you for further polarizing this country with comments as mature and with as much substance as the comments of your opponents.
Can we continue playing the losing game Bush started by flipping the teams and calling it change? My, my--apparently the power of logos holds true steadfast: "Yes we can."
Unfortunately the GOP would not allow the high income tax levels to go back to what they were in the Clinton years so Obama will have no choice but let the Bush tax cuts expire on their own. The GOP senators in California are current proof of how detrimental they are to the future when they not only blocked their governor's bill but deposed one of their own who supported the measure.
We are the largest debtor nation in the world... 30 years ago we were the largest creditor. That's why this is different. Others can decide it's not worth buying our debt anymore, that there are better investments. China has already balked at the idea. Once this happens, the only answer is to print more money, driving the dollar value into the tank.
I suggest all of you listen to Peter Schiff for long term analysis. He was right about the housing market causing the problem it did. And it wasn't based on a guess, he had sound reasoning. He wasn't the only one either. I suggest we listen to those who have been right.
A lot of people argue "oh the rich are taxed too much" bs... try making the kind of money you make in the states somewhere else... you owe something back to an economy that made you that ridiculously wealthy...
that said, I'm glad people are in Washington who actually know what they're doing... or at least write policy with the whole country in mind... rather than just the few billionaires who donate to their campaigns.
Semper fi
if the idea didn't come from her, then it is a bad idea.
I applaud President Obama's effort to try bipartisanship, but neither side semed willing to bend and the votes showed that as almost all Democrats voted for the stimulus and all Republicans voted against the stimulus.
The final version of the Economic Recovery act has cut proposed spending by over $100 billion over the previous version, just to accommodate Republicans and gain their votes. The act also increased tax cuts for the wealthy in spite of ample experience that this doesn't do much to help the economy. These compromises were made to include Republicans in solving our common problems, yet, only three voted with Democrats to pass the act. Republicans remain obstructionist.
Democrats would be well-advised to use the political power they currently have to fix the massive problems caused by years of Republican hegemony, and not to dilute their cure with Republican snake oil. Collaboration is a two-way street, and Republicans have shown deceit in working toward effective solutions.
In California' legislature, six Republicans are paralyzing the state budget with their stubborn ideology instead of pragmatic governance.
(and the Dem. Party) fail and are not thinking about America or the World, just themselves...
He can only ask Congress for "passible" amounts of money and we voters Know it! Consider:
a.) If you have wealth now, this is much more of an intellectual debate, and there are "good" deals
out there, for those with ready credit & cash...
b.) If you don't have a job and or money in the bank, this is YOUR FAMILIES ECONOMIC SURVIVAL!
YOU (and your Family) will NOT be part of the middle class an longer...
4. Obama should go directly to the people and threaten Congress with a new Constitutional
amendment that will be passed by the people instead of the lawmakers that will not only provide
for the National Debt but also reduce the pay, retirement and benefits of Congress and their staff.
This will light a fire under them to come up with a plan ASAP.