Why the Stimulus is Needed, Part II
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I'm going to say this as simply as possible. There is a great deal of confusion out there about the stimulus. Let's clear it up.
The United States Economy is Broken down into four sectors. Personal Consumption Expenditures, Gross Private Investment, Net Exports and Government Spending.
The chart above represents personal consumption expenditures. The orange line shows the year over year change. Notice it has been decreasing since July 2007 and has been posting declines 7 of the last 8 months.
Above is a graph of the percentage change from preceding quarters in personal consumption expenditures. It is inflation adjusted. Notice that for the last two quarters, personal consumption expenditures have decreased.
Above is a chart for the percentage change real in gross private domestic investment from the preceding quarter. This number has been weak for 8 of the last 11 quarters. In other words, investment has been decreasing for some time.
The US is a net importer. That means we don't have any exports.
That leaves government spending to pull us out of the hole. It's that simple.
Given the charts above in personal consumption expenditures and gross private domestic investment, what do you think the chances are of the consumer spending again (in the face of massive losses from the housing and stock market and with the massive increase in lay-offs over the last year) or business investing again? In other words, this isn't that complicated.
Read Part I of "Why the Stimulus Is Needed" here.
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And another thing, Do you really think that repugs are sitting around talking about how to destroy America? It is sillly ,silly, silly. That kind of talk does nothing to move anyone forward.
A national sales tax could pay for everything. A tiny tax on each and every stock market transaction could pay for the stimulus package. Every put, every call, every buy, every sell, could require a tenth of one percent tax that goes to the feds to pay for the stimulus. That would be trillions each year.
remember the bridge that fell down up north and the infrastructure failures down south during katrina? Everything that is old and crumbling must be fixed. who could be against that? What, do you want to drive over a bridge that is collapsed because you didn't want to spend the money? Who thinks like that?
7000 dollar waste baskets are OK but roads and bridges are just too expensive. Are you kidding?
To those who think that stimulus equals pork. Grow up.
Here's why the stimulus is needed. Florida's economy is in the tank. Small businesses are folding everyday. Tallahassee is cutting and has cut thousands of teachers jobs, schools are on the chopping block to be closed and consolidated with larger schools. Which is leading to over crowded classrooms once again. I don't know if anyone realizes, but Florida is around 48th out of 50 states in education. That is ridiculous and due to guess who? Another Bush. Florida needs that money to put our construction workers back to work, to put decent and well paid teachers back in the classroom, cops back on the streets - does any one realize that deputies and cops are cherry picking what crimes to look into due to lack of resources? My small business is hanging on by a thread because people who actually are still working aren't spending money. Guess what REpubs...if our business goes under, there go 6 employees with a total of about 18 mouths just left hungry due to obstructionism, and I won't be happy.
The stimulus will not work. It will not solve the problem. It will only delay the inveitable. Anybody who thinks that we will be saved should also pray to God because that is about the same thing. Talk into the air and hope some super being will hear you. Hahahaha. The stimulus is as much garbage as what caused the stimulus to be needed. It is interesting to note that the real problem IE: the difference between housing prices and what they are really worth is not being discussed at all. This is the real problem at the root of the crisis. Basically nobody wants to get caught holding the bag and taking the loss. Believe me, someone will be taking the loss. The real question is who and when. We are really in a mini-depression at this point but no one wants to see it. This is no longer a recession. The so called stimulus will only prop up wastefull and degenerate state governments who will not make cutbacks but instead will now rely on federal welfare to make up for their stupidity. What a bunch of dunces!
The government does not have the cash to bail anyone out so to speak. They can only borrow money and then they will need a bailout. None of this will really work. It will stop some of the bleeding for a while but not for long.
>>None of this will really work. It will stop some of the bleeding for a while but not for long.
I would put it more this way, It will give a transfusion to the bleeding economy without fixing the arterial bleeding.
I would say, though that about 25% of it will work, while the other 75% will cause more problems as written.
The most effective way to stimulate spending is to give every employee a pay raise.
It is unusual for people who had received a pay raise to save the money.
The question is how to raise the pay of employees when business is
tanking. Cutting corporate taxes would only enrich the corporation and
perhaps, management. This has to be done on condition that the money saved
would be distributed to employees in the form of a pay raise.
Let's skip collecting income taxs for one year. Than everybody would be a winner. The government spends what it wants to, not based on taxes collected. The government won't even miss it.
I saw Senator Kyl on TV trumpeting the GOP successes in rebuttal to Mr. Obama’s indictment of the tired old failed polices of yesteryear. He stated that no one is saying the tax cuts of 2003 were not beneficial. Mr. Kyl, like most of the GOP, fails to understand what the word sustainability means. A house of cards is a beautiful thing when the wind is not blowing. Add a Northerly wind to a room containing a house of cards and you are left with a mess to clean up. This is what many are missing in Mr. Obama’s words at the inauguration and since he took office.
Republican’s like to talk about their children’s future and their grandchildren’s future. Their theory is...if I can open the floodgates on the moment that is now and pad my coffers, I take care of the next generation. Those who are most in position to receive a drenching from an opening of the floodgates are those closest to the gates. Positioning in the now is everything in any economy. If you are rich now, then an opening of the gates of prosperity via tax cuts is certain to benefit. But if you are struggling now, you are left to hope that when those who were drenched start to shake the excess off -- you might get wet too -- trickle down or lean forward to catch the misty spray of prosperity...on the wind.
Kyl is a bought and paid for stooge who would rather stroke his ego then do anything for the working man. He's a perfect example of why we need to continue to educate everyone around us as to why this next election needs to send the majority of Rethugs home packing... For good.
Excellent post.
If anybody needs a good reason to work against this repubican obstructionist disaster, take a look at this:
http://timeswampland.files.wordpress.com/2009/02/joblosses26091.gif
In the words of Thelma on Good Times -- Right On!
Mr. Obama said no quick-fix and jobs. He implied transformation -- in terms of addressing large problems that continue to loom for a young nation. Some of which have loomed for decades, such as energy independence, ecological peril, educational negligence, workforce depletion through educational negligence, and the slipping of aggregate intelligence, due again...to educational negligence.
As it relates to the future for children, no spending is more important than spending that insures they have a healthy environment in which to take advantage of an educational system...ready, willing, and able to help them be the best that they can be, to manifest the best in themselves and thereby benefit society. For young adults, no spending is more important than spending that allows access to higher education. (White collar jobs are being lost but not at the same rate as unskilled labor. The market is all about value and if you have no skills it is going to be increasingly difficult to access the market. The Republicans see anyone who cannot currently access the market as either non-existent or a vote to manipulate through wedge issues...all the while real life goes slipping.)
The Republicans say that any instance of struggle is your fault and your responsibility. They say this in all cases that does not reward their true and limited constituency. It’s all about money and ain’t a damned thing funny...so the song goes. Money as life, life as money, is all the GOP knows.
Isn't it sick how, to have a good economy, we have to spend more? Spend more and use credit. Credit that helped us into this mess that we are experiencing now. And now that we have no money and no credit, we are forced to suffer.
Isn't it curious that so few could bring suffering to so many? Wall Street (New York, London, Paris, Moscow, Beijing, et. al.) has shown the deep, systemic, structural flaws at the end of the capitalist rainbow. Those flaws showed themselves at the end of The British Empire and are now manifesting themselves in The American Empire. This is the cyclical epidemic of every capitalist system.
Capitalism is good. The wrong kind of capitalism is bad. There should be limits on everything. Including capitalism.
Isn't it time for change? The same failed people who brought us to this brink are now in charge of managing the recovery. Why is that? How much do they stand to make while the rest are impoverished?
Capitalism is not a holy grail. We should stop treating it as so.
More community development.
More infrastructure upgrades and/or redesign.
More investment in scientific research towards solving systemic challenges.
More nurturing of small business as part of community development.
More family outreach to assist in addressing familial dysfunction as societal disease.
More heart in government, and less cruel and sterile, by-the-numbers calculations.
More access to proactive health maintenance, thereby reducing need for reactive care.
Inspire the people and they will do more than die for the state, they will live for the state, strengthen the state, and protect it at all costs.
More ethics and transparency in government to bolster trust in government and diminish pessimism.
More honesty and fairness in business practice.
The business must profit but markup of 200% or selling a product of no value thru glitzy ad campaigns that dupe is unsustainable tilting of the prosperity table in the direction of manipulators, shysters, and those who have digested the information by which the system can be cheated (Madoff). The consumer does not want to fail. But the supplier builds an incline and then pours water on that surface and lowers the temperature to freezing, thereby creating the slipperiest of slopes, the quickest of treadmills, that find you running in the same old place if not backwards.
More money for veterans to transition from warrior back to contributing healthy citizen.
Get off the high horse of Party and get on the ground with the people. Together we stand, divided we remain.
Your quote:
Inspire the people and they will do more than die for the state, they will live for the state, strengthen the state, and protect it at all costs.
My quote (and what most people forget):
The People are The State.
Missing in the stimulus package is A Human Investment Tax Credit Program. It could generate up to 6 million jobs as well as 4 million small businesses.
A jobs tax credit was once law for a year and generated more jobs in less time than any previous bill in our history.
The entire group of incentives are part of a 2009 Report. Two versions can be downloaded without charge at aesopinstitute.org
The full Report includes a post-Keynesian economic analysis.
The short version outlines what can be done and how Congress might consider doing it.
Looking at those charts frighten me. Even if I squint my eyes I can't make out a cup or a handle. I want my mommy.
Yes, we need it but the stimulus will only address the first problem below. A complete long-term fix will require a restructuring of our culture and economy in the "Small Is Beautiful " way.
That will only happen if we have a complete collapse, so I hope Obama can muddle through.
1. economy needs cash flow to avoid flat-lining
2. default of derivatives might sink the globe -- I am most worried about derivatives. This is an immediate threat and could throw us all the way back to barter.
3. the energy policy we have is like burning money - need to go with solar, etc
4. no manufacturing base left -- consumption sends money out of the country
5. our medical system burns a lot of money - Its like paying another income tax.
Somehow, we need to be able to save money as a nation.
Exhibit A:
"That leaves government spending to pull us out of the hole. It's that simple."
Exhibit B:
"Somehow, we need to be able to save money as a nation."
Exhibit A makes Exhibit B impossible. The Fed prints, regulates and LOANS WITH INTEREST our currency (currently next to worthless if not less) to the US gov't. There is NO WAY we, as a nation, can pay this debt back to the privately owned Fed as a nation that produces less than it consumes. We will only produce more and more debt. The only way we can change this is to nationalize the banking system and back our currency with some material. This won't happen because this was all contrived since the early 20th century and every bit of it planned.
We really need deficit the spending stimulus. We need people to get out, spend money, and keep Starbucks afloat so that those baristas have jobs.
But that is just for now, and maybe twice more. We can't do this annually forever. That is what got us here. The Bush admin did massive deficit spending every year but they bought the wrong stuff. The money evaporated. On paper, residential housing rose from $11T to about $22T but we did not build a new country.
We need to get the right stuff, stuff that will keep on providing use - bikes and streetcars instead of Yukons.
Wars, med system, financial system, planned obsolescence -- Without even thinking in terms of numbers or dollars all these represent the transfer of value away from any long term use.
We have a real problem in econ-speak about terms like waste or saving. The concept of entropy is useful here.
I might add that the price of oil has come down because its price went into hyper bubble mode. The world became flooded with supply with the price so high for so long.
Oil is now too cheap for many sources of oil and sooner or later we will burn through the excess. If government keeps hyperinflating the currency, we will be in a world of hurt when oil becomes somewhat scarce again. The price of oil will go ballistic along with the price of food introducing a world of hurt.
The government needs to be smart with the money it spends.
Oil is irrelavent VERY soon. By year's end we will see a fully capable highway safe electric car for the consumer which would be capable of traveling 250 miles on a single charge. Oil supplies will soar over the next 2-3 years and during that time a steady decline in demand as the cars are produced and bought up by the public. Bye Bye OPEC.
Gold is over $900 per ounce and silver is over $13 an ounce.
FDR had the luxury of deflation, and even more importantly he had the luxury of deflation in food prices.
We do not have the luxury of deflation, and prices at the grocery store are in serious danger of going completely ballistic. Commodities have come down hard but not grocery prices. THis is a very dangerous situation.
We had best be very careful how this stimulus is spent as massive government spending and bailouts is extremely inflationary.
Most importantly the stimulus better make damn sure that people have enough to eat. If government is smart a big chunk of this stimulus better go to the social safety net or the population might throw this government out like France did during their revolution. It could get very ugly the way the government is throwing money around not worrying about the value of the dollar.
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