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Stimulate Me!
STIMULATE ME!....We have a long, hard recession ahead of us, and monetary policy has already done about as much for us as it can. That means we need fiscal stimulus and plenty of it. But what kind? Mark Zandi from Moody's Economy.com provides the answer and EPI makes it into a chart for your consideration. Basically, they suggest that the money is best spent (a) on low and middle income workers who will actually buy things with it, (b) infrastructure, because the recession is likely to be long and infrastructure projects take a while to get up and running, and (c) aid to states, who would otherwise have to cut back spending and thus blunt the effect of the stimulus package. Works for me.
Of the top 4 options, the first two are too small in absolute magnitude to make a difference given the size of the crisis, and the second two act too slowly to make a difference now.
The best solution is the payroll tax holiday. The U.S. should implement it in the next month.
We have a long, hard recession ahead of us...
What's the usual stated difference between a recession and a depression?
Is there some reason you're afraid to use the "D" word?
money is best spent (a) on low and middle income workers who will actually buy things with it
No true American worker would want to partake in such a islamofascist-Marxist-Communist redistribution of wealth. We'd all rather starve and die happy knowing the billionairs still have enough to eat.
Agreed. That is a pretty useful graphic, especially when we have to fight Republican policies.
If the recession is a long one ( I don't use jerry's distinction of duration to distinguish R from D, but rather the size of the dip ) there is plenty of time for the effects to arrive. If we make infrastructure spending that is targeted for our energy future (rail, better electrical grid, solar thermal, insulation etc.), then the inevitable commodity price spike that will limit the recovery can be pushed back as well. I'll vote for that, and aid to states who will soon be laying of teachers, police and firefighters otherwise.
I was sailing effortlessly through the list of "temporary" measures when suddenly I ran up against a brick wall. The first four seem almost elementary; the next five are only slightly more problematical, but the next FOUR are pure ANATHEMA!!
For openers, it seems hasty and illogical to take ANY PERMANENT actions in this extreme situation; but making the dividend, capital gains and Bush tax cuts PERMANENT is nothing more than once again patronizing and serving those least in need of anything.
Ultimately, it is axiomatic that capital gains taxes will need to be raised at least to pre-Bush levels; after all, in the pre-1960 period they were as high as 70% at the top marginal level. And since corporations are currently paying only an infinitesimal portion of all income taxes, that too needs redress in favor of the people.
As a person who grew up in the Great Depression and spent WWII in a blue uniform I am constantly appalled at the post-modern notion that any advanced society can be supported without some level of SHARED SACRIFICE.
Transfer a trillion dollars to low income workers and there will be no recession. Transfer a trillion dollars to corrupt bankers and there will be a long recession. Treasury and upper middle class pundits prefer to transfer the trillion to Wall St.
Notice how Hon. Sen. McCain's ideas all seem to cost more than the benefits that would accrue (albeit they would accrue to the right people, from his point of view; county first!)
The only people benefiting from the Payroll Tax Holiday will be the makers of cheap decorations and the designers of expensive shoes. I'm agin it.
But I'm not the first to observe that helping people who actually need help is somehow class warfare, AKA socialism.
Never mind that that people will take their food stamps to a privately-sector supermarket and buy food, which through the magic of the marketplace makes a profit for the supermarket's shareholders. That takes too long. The investing class needs their money NOW.
Man, that's an ugly chart.
The problem with the economy is clearly on the demand side, which the top four options deal with.
The GOP is still stuck on the supply side, which justifies lower taxes on investment and on the wealthy. I'm not saying that a supply-side problem is impossible, but it's just not the case now.
It's hard to believe, but McCain is still calling for cuts in federal spending. I guess he's determined to be another Hoover.
"(b) infrastructure, because the recession is likely to be long and infrastructure projects take a while to get up and running,"
But not infrastructure projects like Prop. 1A, because (among other things) it would take too long.
Kevin,
What the chart shows is not really all that helpful as it demonstrates the effect of a program on the "overall economy". That has been the rather misleading focus of the last 8 years.
What is really needed is something that shows how these would affect workers vs. corporations etc in the short/immediate term; without assuming some magical trickle-down economic effect, which is really unproven.
Must be my imagination, but the 4-5 Republican options at the bottom sure do suck compared to the Democratic options at the top.
Could we please start calling this "Demand-side economics"? That is what it is, and it distinguises it both from conservative supply-siders as well as Marxists and other 20th century style socialisms that were also supply-side, caring more about who owns the means of production than about who is ultimately rewarding production.
Do I read this correctly? For every dollar invested in Bush economic policies--reducing capital gains, reducing taxes on corporations, making the Bush tax cuts permanent, accelerating depreciation-- the American economy gets LESS than a dollar in return?
Sometimes, even now, even after eight years of this crap, I am astonished by Republican douchbaggery.
reboot: What the chart shows is not really all that helpful as it demonstrates the effect of a program on the "overall economy" ... What is really needed is something that shows how these would affect workers vs. corporations etc
The chart is very helpful, because the measures that most improve the "overall economy" are also the most egalitarian ones.
Why argue about which is more important, when there is no tradeoff required?
PTate in MN: Do I read this correctly?
Not only do you read it correctly, but there is nothing new or surprising in it. While EPI's chart is a helpful reminder, the fiscal stimulus effect of various options has been well understood for a long time. Nor is it another economic "theory" that's suitable fodder for ideological debates - it's been empirically verified by decades of research.
Thus, support Prop 1a, which has a large project already well planned. It is exactly the kind of project Obama will be looking to support.
Obviously, EPI = a bunch of DFH socialists.
Nothing to see here. Move along and let's make those tax cuts permanent.
Seriously, Kevin. How can you possibly say no on 1a when you have this in front of you? Yes, ballot propositions have some flaws usually, but the project is a good one. And that email that "persuaded" you has been taken apart by other bloggers today.
The graph should have been in color.
You know, red for GOP proposals, blue for Dem. ones.
Actually, the "spending on infrastructure will come too late to help" argument is not entirely true. Some infrastructure spending falls into this category. However, recessions cause belt tightening for states and other governmental units that cannot run deficits. They actually DELAY infrastructure projects or take projects all ready to go OFF the TABLE or slow down the rate of work. These projects CAN be implemented in a SHORT time window if the Feds provide revenue to states and local governments that otherwise would be cutting back.
The Economic Policy Institute has identified a large number of infrastructure projects that could be implemented as a short term stimulus.
http://www.epi.org/webfeatures/viewpoints/20081024_jb_testimony.pdf
There's likely to be some extra employment from Thanksgiving on through the new year, so it might be possible to not put as much into the top two items.
Better is to have a temporary payroll tax holiday and spend on infrastructure which will employ the kinds of people who don't get those extra holiday jobs.
Put America to work!
Only then, if there's still weaknesses in the economy the top two UI and Food Stamps should kick in.
Agree on payroll tax holiday. Immediate demand stimulus. Goes to middle class. see her