Saturday, February 07, 2009

How Republicans view the stimulus package

Source.

32 comments:

  1. is that an acorn?

    ACORNish "community revitalization" set to receive ~$4.5 billion. they should call it "upward disincentivization."

    weapons grade pork/payback.

    not as bad as an invasion based on trumped up lies and the death of 5,000 Americans, 4.5 million refugees, and 200,000 dead Iraqis. but sick nonetheless.

    our budget deficit is a drop in the bucket compared to our deficit in leadership.

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  2. The Republicans have an ulterior motive. Their party leader - Limbaugh - actually voiced it. They want Obama to fail. They want the economy to really suck in 2012 so that they have a shot of getting back into office.

    But ultimately they don't have any ideas. The entirety of their economic policy is tax cuts, and when that doesn't work, then more tax cuts. I could train a parrot to be a Republican by teaching it to say "tax cut".

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  3. Jack, don't be foolish. Tax cuts work. That's what a "stimulus" basically is anyway, just giving us back the money we paid to the government.

    Doesn't it make sense to then make that permanent, if it really helps things out? This whole bailout is such a waste. It NEEDS to fail so that all the junk gets cleared out, that's how capitalism works. The bad ideas and bad methods need to fail so that better, more efficient ones can rise from the ashes.

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  4. "The bad ideas and bad methods need to fail so that better, more efficient ones can rise from the ashes."

    That's very logical, but shouldn't that have applied to the banks who've already received bailouts ... and who rather than lend the money out as were the terms of the agreement, are hording it to make their balance sheets look better (and to pay out bonuses)?

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  5. Lance said...
    "who rather than lend the money out as were the terms of the agreement"

    That wasn't a term of their agreement. It's something politicians started demanding after the fact.

    Banks only make money when they lend money, so it's in their interest to lend as long as they will be paid back.

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  6. Its funny to see Republicans decry a trillion dollar sending bill as pork and waste when they had nary a peep for the trillion wasted so far on wars in Iraq and Afghanistan. Its also funny that they continue to spout the same nonsense economic arguments that have been used for 8 years and led to this mess. Partisan Republicans are blind and deaf when it comes to evidence disproving their ideology. But hey, that's why you keep losing elections and the democratic party is extending its control of both houses of congress and th white house. Unfortunately a significant number of democratic politicians have remained spineless in trying to push through the agenda voters clearly want, while republicans remain committed obstructionism and ideology at all costs. Hopefully 2010 will give them the seats in the Senate and the balls to make the large systemic changes we need.

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  7. "That's very logical, but shouldn't that have applied to the banks who've already received bailouts ... and who rather than lend the money out as were the terms of the agreement, are hording it to make their balance sheets look better (and to pay out bonuses)?"

    Remember when you used to tell us that banks were carefully screening applicants to make sure that even those who took various toxic mortgages were fully qualified to make the payments even in a worst case scenario?

    I thought that was pretty amusing.

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  8. Anon 12:09, ask yourself whether those relatively few people defaulting could logically have caused the financial problems occuring ... without people pulling their capital out of banks based on the hystery propogated by the BHs and others who believed themselves to have an interest to see things go as they have. Of course not. It was those few loans that went bad, it was the hysteria that followed. And the BHs must take at least partial credit for having fomented the hystery. Of course though there is justice in this world. It's come back to hit em in the a$$ with tougher credit requirements and shrinking downpayment portfolios.

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  9. As a stimulus, tax cuts don't really work all that well. In today's market, many people will hoard cash, which doesn't do squat to get things going again. Actually, many will pay down debt - on a personal level this may well be a good idea, but this too doesn't stimulate the economy.

    If you spend it on a road or a bridge, you are letting out contracts. This causes people to get hired - they get paid, and then they spend the money for their expenses.

    Economists talk in terms of a multiplier. For every dollar that you put out there, there is a multiplier that they use to describe the effect upon the economy in terms of how good a job it does to stimulate the economy. Some have estimated what these values are for various types of government action:

    http://www.econbrowser.com/archives/2008/10/pocketfull_of_m.html

    For example, at the bottom end, "Making the Bush tax cuts permanent" only ranks 0.30. Meaning that if the government gives up a dollar of taxes, we only get 30 cents worth of stimulus.

    On the other end of things, infrastructure spending has a multiplier of 1.59. Nearly 5 times the stimulative effect of the Bush tax cuts. The key though is that the infrastructure has to be for stuff that is actually worthwhile and needed and not just make-work.

    Other things are inbetween, and some like food stamps or increasing unemployment benefits are even higher.

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  10. Jack,

    Out of curiousity, how does increasing food stamps or unemployment stimulate the economy. Aren't these meant as a substitute for something which people would have to get elsewhere anyways to survive ... i.e., either earn it (which is good since it produces something) or get it from their family/friends (which is essentially neutral since it's just a transfer of purchasing power from one person to another.) I believe both of these are in the stimulus package. You have to ask "why" if it's supposed to be a stimulus package. I'm starting to think we've been robbed both from the right (Bush giving our money to Wall Street) and from the left (Obama giving our money to his constituency.)

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  11. Not sure exactly, but I believe it goes like this. Folks who are in a position that they need food stamps or unemployment insurance aren't in a position to hoard cash. Whatever you give them, they will spend. Mostly at local stores for things like groceries or gas, so the grocery store needs to buy more supplies from their supplier, and if there is enough additional business, they might hire some more people.

    I guess to me infrastructure seems to be a more intuitive way of explaining it, and if you make sure that you only fund projects that make sense, then all of us get the benefit of it when the project is done.

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  12. Lance, people receiving food stamps and unemployment will be able to spend more money on non-necessities, and they'll spend it right away, look up "velocity of money" to understand why this is important. I know republicans hate the idea of helping out those in need, but it is good for everyone, including rich republicans.

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  13. Infinity8Ball, "It NEEDS to fail" or you WANT it to fail? If it succeeds your whole world view would be shattered. Maybe "the bad ideas and bad methods" that need to fail are republican tax cut policies. Ever thought about why after Clinton's massive 93 tax hike the economy went on a tear while after Bush's massive tax cuts the economy had a weak recovery ending in the worst financial crisis in generations? Maybe taxes aren't the end-all be-all explanation of the economy that tax-cut obsessed republicans want it to be.

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  14. I am amazed reading all these posts. Look how many times all of you said "Republican" or "Democrat". The animosity from one part to the next is dumfounding..and until we get over that and agree to work together to solve our common problems, we'll continue to lose our economic and political power in the world. Political power is all that matters anymore....how sad.

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  15. "If you spend it on a road or a bridge, you are letting out contracts. This causes people to get hired - they get paid, and then they spend the money for their expenses."

    This didnt work in Japan. I lived there for 10 years. They have entire highways that they just stopped building when they ran out of money! Concrete to nowhere, with nothing around it! They have airports that closed because nobody used them.....they have highways that have maybe 3 or 4 cars drive on the entire day!

    Their economy tanked anyway, and real estate dropped for 14 years straight.

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  16. oh I just wanted to say Im a liberal, but pumping money into roads is a bad idea if we just look at our neighbors. Learn from mistakes, dont just make them again.

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  17. "Anon 12:09, ask yourself whether those relatively few people defaulting"

    Relatively few compared to what you idiot?

    Foreclosures are setting records left and right.

    What is sad isn't that you are an idiot, what is said is that you are too proud to just admit you don't have a clue what you are talking about. Everyone here knows you are full of crap, but you seem to think denying it helps somehow.

    If you want to be taken seriously you need to own up to your mistakes and crappy advice.

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  18. Jack, I understand how money multiplication works, but you need SAVINGS to have anything to loan in the first place! A tax cut helps people to save cash, to pay down their debt, which will, in turn, re-capitalize the very banks that we're bailing out. Their whole premise was to teeter on the edge of bankruptcy for as long as possible to make as much profit as possible because of fractional lending.

    However if we now set a safety net in place to ENCOURAGE that kind of risky and foolish lending, then we'll only find ourselves in this place again not too long from now.

    The key isn't to borrow more money so we can 'recover.' That only pushes the timeline back further until we have to repay our debt AGAIN. This is where Greenspan screwed up so bad, he beat the last bubble by making a BIGGER one.

    And Miguel,

    I don't think the Republicans have acted like Republicans for years. They tossed out fiscal responsibility early on and it's a shame. Democrats are worse IMHO, but they're both wrotten. It's time for a true third party to rise from these old corrupt institutions.

    Oh, and you're right, tax cuts aren't the end all even in your examples. Don't forget 9/11!

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  19. Anonymous said "Look how many times all of you said "Republican" or "Democrat". The animosity from one part to the next is dumfounding..and until we get over that and agree to work together to solve our common problems, we'll continue to lose our economic and political power"

    Thats the same idiotic meme that's repeated over and over in the meadia. "We need to work together. we need to be bipartisan". No, we don't. The republican party has bad ideas on the economy and pretty much every other issue. Even on basic science issues like global warming and fucking evolution. When a group's ideas are completely wrong, you don't compromise with them. And even when democrats attempt to compromise it fails because to republicans compromise means "do everything we want". As Obama said, there was an election and the voters rejected the failed supply side, tax cut, deregulation ideas of the last 8 years. It doesn't work.

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  20. Um, for those who are saying "Japan wasted money on unused road and airports and it didn't fix their economic problems", you're completely missing the point. We aren't planning to build roads to nowhere or unused airports. The stimulus infrastructure spending is going to things we desperately need. We've underinvested in our roads and bridges, our electrical power grid, sewage systems, network infrastructure, mass transite and many other areas for decades. This is spending we need and spending which will improve our economic efficiency for the long run. So please stop peddling the nonsense about Japan and roads to nowhere. It doesn't apply.

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  21. "The stimulus infrastructure spending is going to things we desperately need. We've underinvested in our roads and bridges, our electrical power grid, sewage systems, network infrastructure, mass transite and many other areas for decades."

    Doesnt matter, it doesnt bring in positive cashflow to the US. It just adds to our deficit. Unless the US is planning on renting out the roads to foreign nations, then it would probably make sense to spend money on them.

    Yeah I know it gets money into the unskilled uneducated construction workers hands....which gets them more pocket money to spend, but them buying a sony tv or a toyota car doesn't really help our deficit either does it?

    You only get out of a financial hole with positive cashflow, not borrowing more to fix your own backyard.

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  22. CORNish "community revitalization" set to receive ~$4.5 billion.

    So funny how monomaniacal right-wingers are. Like cocker spaniels: "What's that? ACORN? ACORN! ACORN! ACORN!"

    Every bit as bad as the "9/11 Truthers". Can't even put together a coherent narrative as to what the "scandal" is, but it *must* be something.

    "White House Post Office!"
    "Whitewater!!!"

    It's quite entertaining.

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  23. "Yeah I know it gets money into the unskilled uneducated construction workers hands....which gets them more pocket money to spend, but them buying a sony tv or a toyota car doesn't really help our deficit either does it?"

    In the short run of course it doesn't help decrease the deficit but that's not the point. In the current economic situation we need to replace the dramatic falloff in private consumption demand with government spending. There have been cataclysmic shocks to the financial sector reinforcing a cyclical downturn. Now how we spend the money, on thing we need, CAN reduce the deficit and bring positive cash flow into the country. The biggest advantage the US has is structural, both in term of physical infrastructure, economic institutions, educational institutions and regulatory frameworks. This is what makes the nation highly productive and low-risk. Improvement in these ares improve productivity and our competitive advantage. If you think having better roads, better rail transportation, better network infrastructure and better education isn't going to make us a wealthier nation then we disagree on a fundamental level.

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  24. Anonymous said...
    "Doesnt matter, it doesnt bring in positive cashflow to the US. It just adds to our deficit. Unless the US is planning on renting out the roads to foreign nations, then it would probably make sense to spend money on them."

    Wow. This comment is so wrong in so many ways. Mercantilism was discredited by Adam Smith back in 1776, and yet people—such as Anonymous 6:55 AM—still continue to believe in it.

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  25. "Wow. This comment is so wrong in so many ways."

    Tell that to Japan. Worst decision they ever made was to spend billions on repaving roads and highways....but I guess it will work here though, cause we are America!!!

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  26. Anonymous said...
    "Tell that to Japan. Worst decision they ever made was to spend billions on repaving roads and highways....but I guess it will work here though, cause we are America!!!"

    I wasn't talking about the stimulus plan. I was referring to your "positive cashflow" comment.

    Actually Japan is a perfect example of the failure of Mercantilism. Mercantilism is the believe that a nation's wealth comes from exporting more than it imports. Japan has had a "positive cashflow" for decades, but it didn't prevent Japan from having a "Lost Decade" of economic stagnation.

    Economic growth doesn't come from positive cashflow. It comes from creating new products and services, improving old products and services, and becoming more efficient at making and delivering products and services. Trade is simply one way of achieving this, through specialization.

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  27. James, I would do some more reading on the "lost decade", cause it wasnt mercantilism that caused it. It was over valued properties and over valued stocks....just like here.

    And their solution to fix the problem was repaving roads....just like here.

    And the repaving of the roads is what made things worse and caused it to last 14 years.

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  28. I was in the process of respoding again to Anonymous 3:09pm, but your comments are just so simplistic and wrong that I gave up. But if this is the level of thought for a reader of a relatively sophisticated econ blog, god help us all.

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  29. Yea kahner, there's a whole "conservative" cottage industry for spreading misinformation about the economy and it's tiring trying to fight it all the time. Keynes must die!

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  30. Anonymous said...
    James, I would do some more reading on the "lost decade", cause it wasnt mercantilism that caused it. It was over valued properties and over valued stocks....just like here.

    I didn't say mercantilism caused it. I said it didn't prevent it.

    Your original comment was that "You only get out of a financial hole with positive cashflow." That's a mercantilist belief. But "positive cashflow" did Japan little good.

    The problem with mercantilism is that is raises the cost of living, because you're trying to export a lot while importing little. It's far better for countries to export what they're best at producing, and import what foreigners are best at producing. That way, global production becomes more and more efficient, and the cost of living goes down over time.

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  31. After much research I've found the following websites cover everything about the "Making-Home-Affordable" plan and mortgage information in general. If your loan is held by Freddie or Fannie, you might qualify for a refi or loan mod.

    First, find out if your loan is held by Fannie or Freddie. Contact them here to find out. They give you the phone number to call Fannie and Freddie directly to see if your loan is held by one:
    http://www.financialstability.gov.

    For an idea whether you even qualify, even if your loan is held by Fannie or Freddie, you can calculate your eligibility here:
    http://www.making-home-affordable.com

    I’d also call HUD. I don’t have their number but you go to:
    http://www.hud.gov

    And last but not least is MortgageBreakDown, in my opinion one of the best new mortgage sites for independant information available. Easy to read, navigate and contains solid information:
    http://www.mortgagebreakdown

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  32. The Bailout plans havent worked so far. Just look at Crysler they have already filed chapter 11; even with the billions of dollars they have been given. We could have no given it to them and let them go bank rupt and this would save tax payers thousands of dollars. Obama has no plan to "change" our nation. He has been in office for more than 100 days now and look at all the "change" he has given us. The change he has given us is the change in our wallets from paying these insane taxes.

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