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09/11/2011

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TANSTAAFL

Becker gets it right. The Obama Administration's current economic stimulus proposal is a short-term Band-Aid that amounts to doing something for the sake of being able to claim that something is being done. After the blowout Obama deficits of the last three years, no sentient person can buy this scam.

Mitchell Khong

Becker's arguments are on the mark, but the title of his blog post is misleading. This would be the THIRD stimulus act (the second during the Obama administration) for the current economy. The first was during the last year of the Bush administration and it took the form of tax refunds.

The proposed stimulus will likely be (if it passes Congress) a third failure even if it is a political success and saves a few jobs in the Obama administration.

Mogden

Obama is a dingbat whose only strategy is to waste money in ever increasing quantities.

Jack

"In an economy with a very slow recovery, extending unemployment benefits tailored to long-term unemployment may be sensible, although it is not an easy call."

......... not too "tough" though if one considers the downsides to the unemployed individual and further chilling effect on a comatose economy.

........ as for some?? "not looking hard enough for a job???" When there are dozens, or hundreds of applicants per real or rumored job? So what? If ONE doesn't "try hard enough" (like knee-capping his competitors??) the job gets filled anyway as dozens of others trudge home disappointed at not winning the lottery that day.

"This recovery has been so slow in good part because small and large businesses are reluctant to hire workers for the long term and to invest in durable physical capital since they are concerned over the uncertainty and level of the long-term taxing, regulatory, and fiscal situation of the United States."

........... Ha! WERE there roaring D E M A N D all of those petty issues would be ignored.

Here in AK Shell wants to drill extremely promising oil deposits in the Chukchi Sea..... but drilling under the ice FAR from clean up and support facilities that SHOULD have been in place in the Gulf, thus there is lots of regs, lot's of uncertainties, and I suppose even considerable uncertainty as to whether today's "curious" will be there once they do drill. But we know there is strong, inelastic demand, and Shell, USGS and others are fairly certain of a large supply of oil........ thus billions are being invested over years of planning. Demand is the driver and just now and for some time in the future the US economy just doesn't have it.

Jack

Tanns; Indeed a "Band-aid" isn't much when bleeding from an artery........ but umm........ what do you suggest?

As you mull your choices try to consider some 20 million families coming up on T-Day and Christmas with no job, unemployment extensions running out, and for many next to NO job prospects for them in this economy, and quite a long time until we transition to the "next" economy, and those trained for a false housing boom, or a vanishing "middle management" are trained for the "new thing" or manage to "retire" partially vested? nothing? and SS? or disability?

Also remember Keynes admonition that "in the long run we're all dead".

Jack

Mogden? Perhaps you or Boehner have some bright suggestions to lay on us? Thnx! We're a good bit short of great ideas.

Jack

Mitch -- "Failures?" It IS possible to spend lots of Fed money and NOT gin up economic activity, but it's not likely.

Some expenditures do give us lower "economic multipliers" and one of the worst is military spending "over there". You can see that even though its ungodly expensive to fly oil for Abrams tanks from Texas to Iraq that no one is getting rich when the plane arrives with its own tanks empty and must be refueled for the trip home.

From and economic standpoint Obama is hitting most of the notes. The progressive benefit of cutting payroll taxes immediately puts spendables in the hands of the consumers MOST likely to "go shopping". It is the same for putting construction folk to work. Even were it "make work" projects the dollars would quickly cycle through the economy and keep some pizza shop open, a home unforeclosed, and one less car repo'd or turned back to the "Smart Lease" outfit.

But it's not "make work", we've some $2 trillion of work that needs to be done -- what better time to do it? It being unwise to "go short" on America, we'll eventually come out of this Mess and be far better off with infrastructure repairs and upgrades in our asset column than a pile of cancelled unemployment checks.

But! I, as I'm sure the President is, open to viable ideas. Got any?

rjs

i've never been too hot on tax cuts as a job-creating stimulus; the theory is that as consumers spend, the increase in demand causes companies to ramp up production & hire more workers...although that might have been the case at one time, i dont think it works too well in our global economy...think about the first stimulus, where everyone was getting that extra $15 dollars each paycheck; typically, most of that weekly stipend was spent at walmart, & hence mostly employed the chinese...

Mogden

- let the corrupt banks fail
- let the governments that have sold themselves to the public unions fail
- declare victory, including in World War 2, and bring the troops home from all foreign nations tomorrow
- delete the corporate and personal income tax and replace with a VAT

That'll do for a start.

TANSTAAFL

What do I suggest? For starters, disband the EPA and unleash the engine of American free enterprise to create jobs for all.

Cal

Mogden: How will bank failures affect investor confidence in the financial markets as a whole and the economy at large? Is the risk of a bank run really what the banks need at this stage? How will the surplus labour from a large influx of former bank employees and veterans affect current unemployment rates? Who will represent the interests of the workers without effective unions? Could a VAT that is high enough to even finance all public goods instead stifle consumption?

NEH

Teabaggers of the World Unite! Your chances of destroying the Economy of the United States and World has never been greater!

Ahh... The joys of irrationality and unrestrained zeal... ;)

Mogden

Cal:
- how will rewarding incompetence and failure to the extent that the nation teeters on the edge of bankruptcy affect said confidence?
- why do you think taxpayers should overpay greatly for services?
- why is it better to suppress consumption than productive work?

NEH

Mogden, So we must descend into the depths of an Economic Abyss in order to save ourselves Economically? Sounds like the doctor who said, "Well, the patient died, but we did cure the disease".

Whew... more solutions like this and we are undone... ;)

Tom in Houston

Prof. Becker says: "This recovery has been so slow in good part because small and large businesses are reluctant to hire workers for the long term and to invest in durable physical capital since they are concerned over the uncertainty and level of the long-term taxing, regulatory, and fiscal situation of the United States." That's absurd. The recovery is slow because demand is low. Demand is low because consumers are afraid to spend because they might have less money or no job in the near future. Stimulate. Stimulate. Stimulate. Yes, adding to the already large deficit is bad. Chemotherapy is bad too. But cancer is worse. So when we have cancer, we do chemotherapy. We can fix the deficit without making the patient sicker when GDP is up and unemployment is down.

TANSTAAFL

Chemotherapy is an inapt analogy. Dr. Obama has prescribed nearly 3 years of ineffective economic policy that has yet to provide even symptomatic relief. At best, his policies are not chemotherapy, but snake oil. At worst, Obama is giving the patient prolonged overdoses of chemotherapy at toxic levels that promise no recovery whatsoever.

Retta M

Borrow money, distribute it to consumers, consumers are happy, they spend, producers are happy, they hire more people, politicians are happy that they fixed the economy, basically everyone is happy.

…Yet, it took 2-3 millenia for humanity to figure out this moronic delusional shortcut to prosperity. Amazing! Stimulous no stimulous was the choice and heck humanity always got it wrong. They always chose the misery of non-stimulus. It was just sitting in front of our noses and we failed to notice. Worse actually. Nobody even tried it even by accident and thus this perpetual motion machine of wealth was just sitting there undiscovered. But wait! Here come American voters and after 2-3 millenia they discover … tada!!! Stimulus!!!!

And why really wait until we are in a recession to do it? Why not do it during normal times and get 6,8,10% growth? Bad for the environment?

Dumb Americans think they have discovered the fountain of youth…, a moronically simple central planning trick that has apparently eluded past civilizations for centuries.

I guess the CHANGE didn’t work as HOPED. Did it? Quick do something, anything! Anything but the traditional uniquely successful but humanly unnatural American principle of self-determination and self-reliance.

Jack

rjs "employing the Chinese?" Current howling and mythology may make it seem like that, but what do we buy from China? $500 billion out of a $14 trillion economy? 4%? Consider your own spending patterns, or look around the house....... how much is "Chinese" or any other import?

Instead? Why are we, the highly mechanized, 5% of the world's population running a trade deficit with the world? IF..... we "have the best H/C" perhaps we should be exporting it for the benefit of the other 95%. And Ha! in the process learn how to curb costs and do a lot better job of distributing "best medicine" to ourselves.

Walmart, Starbucks, Buick and others take their expertise offshore and "compete" well, are we doing our best at developing our exports? Seems for the most part we build, say, a car for our huge market and let others buy it if they want. By contrast the Japanese gained their market share by designing their cars to suit our huge market and that of other nations, thus Toyota becomes the largest car maker.

I saw this in person once. I was at the bicycle "Expo" in the early 70's during a bike boom. At the time the big names were Raleigh from the UK, Gitane and Peugeot from France. The Japanese were just breaking in. Coming from the steep terrain of Alaska we discussed wider "touring gears" to cope. The Peugeot guy responded with "These are racing bicycles, if they get their legs in shape these gears are fine".

Yah sure....... at a nearby booth a Japanese engineer in halting English asked US what we wanted. You know the rest, they soon had wide 10 speed gearing, better shifters, and today wide 21 speeds are the std and the French and British market share is token.

Shimano spent so much on developing "investment casting" that they nearly lost the company. Campagnolo, at the time made the best racing stuff, but costly as it's cast aluminum that is then machined, all those little screw holes etc. Investment casting produces parts polished and ready to assemble. Shimano now dominates the market by large margins.

Over those years the Brits and others lost the head start they had in bikes, motorcycles and sport/luxury cars. Are we doing the same?

Jack

I left out Schwinn that had a near monopoly in the US after smaller companies disappeared. They became bankrupt during the boom in "ten speeds" and later, the mountain bike boom. The name exists today but it's a very different company that basically imports.

femmes seules

...interesting to read the comments. I would like to see more details about this topic. I'm going to keep coming back here.

NEH

Jack, Schwinn? That used to be a veritable Chicago Company. As we say in Chicago, "Schwinn Bicycles? Today, they're just made in China by the Butterfly Bicycle Co. with a "Schwinn" Label stuck on". The same could be said for Huffy out of Dayton as well...

As for the Brit's, Sturmey Archer didn't keep pace with the new gearing systems and when they finished with Tea Time it was too late... ;)

Ahh... the Race to the Bottom continues...

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NEH

NEH, Veritable? You did mean "Venerable" didn't you? You must be a graduate of Mrs. Malaprop's School of Elocution and Rhetoric. ;)

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