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RedditOne day after the government reported the worst hemorrhaging of jobs in a month since 1974 -- with 533,000 jobs lost in November -- President-elect Barack Obama revealed aspects of his (hopefully sufficiently) ambitious plan for a stimulus package that would save or create a minimum of 2.5 million jobs while investing in our long-term infrastructure.
Obama's plan includes investments in bridges and roads, schools, sewer systems, mass transit and other public utilities. The New York Times reports that investments in green jobs might be to the tune of $100 billion over two years, "including jobs dedicated to creating alternative fuels, windmills and solar panels; building energy efficient appliances, or installing fuel-efficient heating or cooling systems."
There is speculation that the entire package will run anywhere from $400 billion to $1 trillion, and Democratic leadership wants the legislation ready for Obama's signature on Inauguration Day.
But the Washington Post writes that quick passage might not be in the cards. (Remember, during the Wall Street bailout, Senate Democrats couldn't even get the 60 votes needed to overcome a Republican filibuster and pass $56 billion in spending on infrastructure, unemployment, and aid to states struggling to meet Medicaid obligations. Our Bill Greider will lay out how to take on the vise of the filibuster in our next issue.)
"Under the timelines being discussed, the only way we can get something done is with the cooperation of Republicans," a senior Senate Democrat told the Post. "The dynamic hasn't changed."
While most Americans recognize the urgency of public spending to create jobs, rebuild our crumbling infrastructure, and repair our shredded social compact, too many Republicans are still spouting talking points that reflect the disastrous policies of the last eight years.
"Anyone who has talked to the American people knows that while they are hurting, they don't believe that more Washington spending is the answer," a spokesman for Minority Leader John Boehner told the Post.
And both Ben Stein (appearing on Larry King Live with me) and columnist George Will are spinning the fiction that the New Deal didn't lift us out of the Depression, the war did. (Columnist Bob Herbert observed earlier this year, "We appear to have forgotten the lessons of history. Time and again an economic boom has followed periods of sustained infrastructure improvement.)
Expect to hear more of this line of attack on public spending as conservatives fight tooth and nail to prevent a new New Deal. Here's a version of the argument in a recent Will op-ed: "The assumption is that the New Deal vanquished the Depression. Intelligent, informed people differ about why the Depression lasted so long. But people whose recipe for recovery today is another New Deal should remember that America's biggest industrial collapse occurred in 1937, eight years after the 1929 stock market crash and nearly five years into the New Deal. In 1939, after a decade of frantic federal spending -- President Herbert Hoover increased it more than 50 percent between 1929 and the inauguration of Franklin Roosevelt -- unemployment was 17.2 percent…. Unemployment declined when America began selling materials to nations engaged in a war America would soon join."
I asked economist and Nation contributor Dean Baker what he thought of Will's anti-New Deal assertion? "First, according to the Commerce Department's data, GDP fell by 26.6 percent from 1929 to 1933. It fell by 4.4 percent from 1937 to 1938," Baker said. "If we're just interested in one year drops, GDP fell by 8.6 percent in 1930, 6.5 percent in 1931, and 13.0 percent in 1932. So I'm not sure how 1937 gets to be the ‘biggest industrial collapse.' The unemployment rate did fall from a peak of more than 25 percent to just over 10 percent in 1936 because of New Deal policies. It rose again in 1937 and 1938 for the simple reason that Roosevelt tried to balance the budget. He raised taxes by more than 30 percent in 1937 and cut spending by more than 15 percent. This threw the economy back into a severe recession. The problem was not that Keynesianism failed, it was that it was not pursued with enough vigor. Also, the economy cannot tell the difference between orders generated by government programs of whatever stripe and foreign orders for military goods. The point is that both create demand."
Another key element to building a 21st century infrastructure might be a proposed National Infrastructure Bank. As Herbert recently wrote, "The smartest step when it comes to infrastructure would be for the new administration to follow through on the president-elect's campaign promise to create a national infrastructure bank that would not just raise money and invest in the nation's infrastructure, but would also bring a measure of coherence to the myriad projects that need to go forward."
Senator Obama was a cosponsor of the National Infrastructure Bank Act introduced by Senators Christopher Dodd and Chuck Hagel. Herbert explained that the bill "would create an infrastructure bank with a bipartisan board of directors and a chief executive to be appointed by the president and confirmed by the Senate. The board would streamline the process of reviewing and signing off on major infrastructure proposals. It would determine the value to the public of each project -- and its environmental impact. It would provide federal investment capital for approved projects and use that money to leverage private investment."
The bill was originally introduced the morning before the I-35W bridge in Minneapolis collapsed in August, 2007. Senator Dodd said of the bill, "The American Society of Engineers estimates that an investment of $1.6 trillion over five years is required just to bring our current infrastructure to an acceptable level. That translates into $320 billion a year – just to upgrade existing structures to serve the needs of our nation. This burden cannot be borne by the federal government alone…. Witnesses at the Banking Committee's hearings testified that the National Infrastructure Bank will allow the federal government to leverage up to $250 billion from the private sector."
Still, there will be continued arguments from Republicans that infrastructure spending isn't "a reliable catalyst for short-term growth." But the nation's governors, on the other hand, say that there are $136 billion worth of infrastructure projects that are ready to go when financing is secured. They estimate that for every $1 billion spent 40,000 jobs would be created. So conservatives can desperately cling to their failed philosophies, and maybe even hold the country hostage with a filibuster, but the people know better. As a Des Moines Register editorial put it: "The federal government has been pouring billions into rescuing banks, hoping the jolt trickles down. Creating jobs is a way of getting money to trickle up. Want Americans to spend? They need confidence they will have a paycheck to cover the bills."
As New Jersey Governor John Corzine said at a Center for American Progress panel on labor recently, "Much needs to be done, certainly at the macro level stimulating our economy. And I'm certainly in the camp that whatever big is, make it bigger."
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Katrina vanden Heuvel
Thoughts on politics, current affairs, riffs and reflections on what’s in the news and what’s not--but should be.
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I feel like Ms. Vanden Heuvel's question got a bit cut off. The question might be more aptly phrased as "to spend or not to spend...what?" Though I realize that the government to some extent does this anyway, it's probably better not to spend $ 1 trillion of whole cloth. Quite frankly, the trillion that we've already spent is a bit disturbing. I'll touch on the econ analysis in the next post, because even though my econ background is REALLY limited, some things seem to jump out.
Posted by Thrawn at 12/09/2008 @ 10:48am
<<First, according to the Commerce Department's data, GDP fell by 26.6 percent from 1929 to 1933. It fell by 4.4 percent from 1937 to 1938," Baker said. "If we're just interested in one year drops, GDP fell by 8.6 percent in 1930, 6.5 percent in 1931, and 13.0 percent in 1932. So I'm not sure how 1937 gets to be the ‘biggest industrial collapse.' The unemployment rate did fall from a peak of more than 25 percent to just over 10 percent in 1936 because of New Deal policies. It rose again in 1937 and 1938 for the simple reason that Roosevelt tried to balance the budget. He raised taxes by more than 30 percent in 1937 and cut spending by more than 15 percent. This threw the economy back into a severe recession.>>
Though I think this manages to deal specifically with Will's claim, I think it raises some interesting questions. Notice first of all that through 1938, the GDP kept decreasing. I'd be interested to see what happened between 1938, say, and 1945. Second, I think his point about recession is very interesting. Assuming FDR's policies were the cause, which of his two actions listed there caused the recession? It could have been cutting spending, but perhaps the tax increases played into it as well (i.e., by diminishing private spending, etc.). If anything, that's the kind of causal situation where (unless you prove one or the other specifically is the cause, or at least the major cause) can't adjudicate between conservative or liberal economics.
Posted by Thrawn at 12/09/2008 @ 10:54am
I'm sure all the programs that Obama has planned may not all come to fruition right away he will have to adjust accordingly I'm sure. There are some things that must be done to get this country working again, jobs need to be created I think as a prioritory!!! All I can say he has one hell of a challenge ahead of him, but I think he is more than equipped to do it over time. I don't think any of us who put in our two cents worth on here will ever know the enormity of the mess he has to try and correct.
Posted by Caj at 12/09/2008 @ 11:07am
war socialism. technically we are at war. even if we extricate ourselves from the hellholes in which we wallow, we need to maintain such policies in order to get out of this mess.
ah, the end of satano-aynrando economic ideology...
Posted by ibbleblibble at 12/09/2008 @ 11:24am
Posted by HAPPYLonghorn at 12/09/2008 @ 11:36am
It seems the Stock Market collapse hit HAPPY harder than we assumed...
this is his second straight month of ...babbling.
Posted by Mask at 12/09/2008 @ 12:11pm
If the senate republicans fillibuster Obama's proposals for inproving the economy, they had better have a damn good alternative for improving the ecomony. I think it would be political suicide by the republicans, in our economy and the emotional response of wallstreet to any talk of plans or bailouts. I bet just talk of Obama's plan will result in a wallstreet spike. The American people have basically rejected the failed economic policies of the republicans. Our economy needs a boost, if we can squirrel away 700billion for the banks, why not the same amount or more for a program that will actually create jobs and improve, infrastructure, and green our economy. I don't know if it will turn everything around. But if republicans try and stop it, their party will go the way of doodoo bird or wooly mammoth.
Posted by Extraneous at 12/09/2008 @ 12:35pm
My preference is to get our federal government back into its Constitutional boundries. Nothing more, nothing less.
Governments all over the planet are capitalizing on this [man made and calculated] financial "crisis" as a way to expand centralized power and, sadly, in the process erode individual liberty. From Jose Manuel Barroso to Rahm Emanuel, this taking advantage of crisis to push change on a fearful populace is a stated fact.
We expand government at our own peril. Yet the tone here is that we should give the federal government expanded power over commerce and freedom to save us?
What a shame.
Posted by freiheit1 at 12/09/2008 @ 12:36pm
Posted by Extraneous at 12/09/2008 @ 12:35pm
I couldn't disagree more.
Why do you think Wall Street would "spike" over just talk of Obama's plan? Do you think it might be because his plan puts all the risk of loss on the backs of the american taxpayer?
You say "if we can squirrel away 700billion for the banks, why not the same amount or more for a program that will actually create jobs and improve, infrastructure, and green our economy."
I am sorry that you have no idea of how ignorant of reality that statement is. Do you even know how money is created? Do you know the actual purpose of the Federal Reserve? You cannot possibly know and then write what you did.
Your statement is indicative to me how successful the government and financial systems have been in keeping us all duped. I find it sad you identify it as a partisan issue. God help us.
Posted by freiheit1 at 12/09/2008 @ 12:45pm
Posted by freiheit1 at 12/09/2008 @ 12:36pm
Huh? So what you are saying is damn the economic consequences, let the market regulate itself and everything will be fine as long as government takes a reduced role. Have you just awoken from a 2 year nap? One of the primary drivers of our current economic woes was the lack of regulation of the financial markets, unregulated lending practices etc. "taking advantage of a crisis" what do you mean? Other than trying to do something to avert greater calamity and our economy plunging into a depression, what advantage is being taken? The primary driver of the economy is consumer spending, if businesses can't get loans, they cant pay workers, without jobs, there is no consumer spending. What solution would you propose? Or do we just let the cyclical nature of a market economy run its course? In which case we may be in for a lenghty recession/depression.
Posted by Extraneous at 12/09/2008 @ 12:57pm
Posted by freiheit1 at 12/09/2008 @ 12:45pm
Well if I am so ingnorant, why don't you explain to me how things really work? Instead all you have to say is (paraphrasing)'your dumb' yet you offer nothing. I have been duped? How so, why don't you tell me what the truth really is? Or do you only have insults to respond with?
I really don't see it as a partisan issue, but the suggestion of the article, if you read it, is that Obama's stimulus plan may be met with republican filibuster, thus my comment.
Posted by Extraneous at 12/09/2008 @ 1:14pm
No Extraneous, what I am saying is I think you have no idea of the power play happening before our eyes.
Your contention that a "lack of requlation of financial markets, unregulated lending practices etc is a primary driver of our current economic woes" is simply not true.
Until you can explain to yourself, not to me, what you mean contending our government had $700B squirreled away for the banks, we have nothing to discuss.
I'd be willing to bet you can't accurately define the true role of the Federal Reserve. That's cool. That puts you comfortably in the majority!
Do you think that giving $700B of tax revenue to the banks is Constitutional?
To answer your question, YES! Let the market economy run its course for once. It will adjust and improve because of incentive. Government regulation and control is the CAUSE of booms and busts in our economy. Can't you see the dangers of politicians meddling in the economy? Oh, hey, I have to run and place my bid for the Illinois Senate seat vacancy. BRB!
Posted by freiheit1 at 12/09/2008 @ 1:30pm
Conversely, Kennedy, Reagan, and Bush understood that lowering taxes helps the enconomy. When each of these presidents cut taxes, revenues increased and jobs were created.
Posted by lvliberty1 at 12/09/2008 @ 1:23pm
I must be missing something. If Bush's tax cuts increased revenues and created jobs, why has the median income adjusted for inflation declined since 2001?
Posted by Extraneous at 12/09/2008 @ 1:36pm
I'd be willing to bet you can't accurately define the true role of the Federal Reserve.
Posted by freiheit1 at 12/09/2008 @ 1:30pm
To answer. the Federal Reserve's duties fall into four general areas:
conducting the nation's monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment,stable prices, and moderate long-term interest rates
supervising and regulating banking institutions to ensure the safety and soundness of the nation's banking and financial system and to protect the credit rights of consumers.
maintaining the stability of the financial system and containing systemic risk that may arise in financial markets
providing financial services to depository institutions, the U.S. government,and foreign official institutions, including playing a major role in operating the nation's payments system
Posted by Extraneous at 12/09/2008 @ 1:45pm
Simply not true...really then what caused the credit collapse? Government regulation and control is the CAUSE of booms and busts in our economy.
Posted by freiheit1 at 12/09/2008 @ 1:30pm
You really have nothing to say do you? Blanket statments that we are just supposed to believe. You make statments and insults but provide nothing to substantiate anything. All I can glean from your comments is that you pretend to know but really you are even more clueless than the rest of us.
Posted by Extraneous at 12/09/2008 @ 1:57pm
Red states have benefited tremendously (at the expense of blue states) from Republican military Keynesianism: trillions of borrowed dollars for bases and procurement. All the Democrats need do to break Repub filibusters is to start taking away those Pentagon dollars being disbursed in red states, as a warning that more (and justified) cuts in military pork are in the offing.
Posted by samcrossett at 12/09/2008 @ 2:02pm
Now, Extraneous, did you go to the Federal Reserve's Website for that? Very funny.
C'mon, let's go over to the FDA for the truth about vaccines next.
Then to whitehouse.gov because I want to know why we really invaded Iraq.
Seriously, man, I am not being very nice and I apologize. Just blame everything on Republicans and you'll do fine here. Sorry I even brought it up.
Posted by freiheit1 at 12/09/2008 @ 2:12pm
Happy-Montana has some of the worst roads in America,but people do more driving there.A poor economy does not benefit liberals or the environment.Did Rush tell you to post that nonsense?
Posted by i'm nobody at 12/09/2008 @ 2:19pm
Posted by lvliberty1 at 12/09/2008 @ 1:23pm
Other thread, but I'll mention it here too...
What's wrong with going back to ....Reaganism, LVLIB?
Top marginal rate in 1985-- 50% on incomes over $175,250. (adjust for inflation and call it 195K today)?
Posted by Mask at 12/09/2008 @ 2:32pm
"All I can glean from your comments is that you pretend to know but really you are even more clueless than the rest of us."
Fair enough. But aren't you just a little curious how Obama and McCain in the midst of a heated and historic campaign, can join hands and unite to send $700B (actually after the auto supplement and pork, $850B) to the Treasury without a plan. Son, that's several hundred billion more than we've wasted in Iraq, isn't it?
I think you should seek the truth. Start with learning how that $700B is created in the first place and who really benefits because I don't think you even ask yourself that question. Isn't it interesting to you that our taxes haven't increased despite the Billions "spent" by our federal government recently? How is that done? And is it in anyway tied to inflation? Actually, on that subject, look into if inflation isn't really a kind of hidden tax. That is an interesting thing to study.
Just open your eyes and question authority. I don't doubt I'm more clueless than you. Neither of us really knows the truth, do we? I'm crazy enough to believe what we are witnessing is the spawning of a world government based on fabian socialism. Won't happen overnight. But it'll happen.
Posted by freiheit1 at 12/09/2008 @ 2:38pm
Posted by samcrossett at 12/09/2008 @ 2:02pm | ignore this person | warn this person
good point. the red states consistantly suck money from the blue states through federal government spending.
Posted by ibbleblibble at 12/09/2008 @ 2:42pm
Posted by Extraneous at 12/09/2008 @ 1:45pm
Oh, before I forget, ponder the copy and paste in your 1:45pm post. Based on that mission statement of the Federal Reserve, do you think it is doing a very good job? I mean, on a scale of 1 to 10, 10 being an excellent job, where do you grade it?
While you're thinking about that, isn't it interesting that there's no record I can find, maybe you can, but I can't, quoting Congressional leadership ever once suggesting that the Federal Reserve System might need to go... Why do you think that is? Because of the great job it's doing?
Wake up bro.
Posted by freiheit1 at 12/09/2008 @ 2:48pm
Both the New Deal programs and World War II were a stimulus, because, they produced jobs and the disposable income for ordinary people to support the American Market. No " American" Jobs and no "American" Market. The purpose of "Free Trade" is to drive down wages around the world. The wages of ordinary workers support the world's economy. Low wages mean no market for goods and services. National economies can be regulated for the benefit of all their citizens, and the results of a national economic failure is limited to one country. With a globalized economy, the failure of one part of the system destroys the whole system.
Posted by P. J. Casey at 12/09/2008 @ 3:16pm
Both the New Deal programs and World War II were a stimulus, because, they produced jobs and the disposable income for ordinary people to support the American Market. No " American" Jobs and no "American" Market. The purpose of "Free Trade" is to drive down wages around the world. The wages of ordinary workers support the world's economy. Low wages mean no market for goods and services. National economies can be regulated for the benefit of all their citizens, and the results of a national economic failure is limited to one country. With a globalized economy, the failure of one part of the system destroys the whole system.
Posted by P. J. Casey at 12/09/2008 @ 3:16pm
Both the New Deal programs and World War II were a stimulus, because, they produced jobs and the disposable income for ordinary people to support the American Market. No " American" Jobs and no "American" Market. The purpose of "Free Trade" is to drive down wages around the world. The wages of ordinary workers support the world's economy. Low wages mean no market for goods and services. National economies can be regulated for the benefit of all their citizens, and the results of a national economic failure is limited to one country. With a globalized economy, the failure of one part of the system destroys the whole system.
Posted by P. J. Casey at 12/09/2008 @ 3:16pm
The purpose of "free trade" is to drive down wages around the world?
Really?
Posted by freiheit1 at 12/09/2008 @ 3:33pm
Now, Extraneous, did you go to the Federal Reserve's Website for that? Very funny.
Posted by freiheit1 at 12/09/2008 @ 2:12pm
Now your just having a hard time following you own questions. You wanted to know what the role of the federal reserve is, so I found it for ya. But you would rather not believe it because it comes from the government. I am sure you don't have a better source, I doubt you have any sources, you seem to just be just full of unsupportable oppinions. Thats fine, that is your right.
Would I go to the FDA for the truth about vaccines? Probably not. But I would go to their site to find out their mission statement and roles/reponsibilities. So before you tell me again to wake up or open my eyes, maybe you need to assess your information filter, not everything from the government is conspiracy, or lies. It is fine if you question the government, you should. But it seems that your personal information filter stops everything from the government which only biases your world view to the complete opposite side of the spectrum. The truth likely lies somewhere in the middle.
Posted by Extraneous at 12/09/2008 @ 3:34pm
Posted by lvliberty1 at 12/09/2008 @ 3:46pm
Two simple questions-
What was the top marginal income tax rate in 1985, Larry?
Was the economy good in 1985?
Posted by Mask at 12/09/2008 @ 4:42pm
LL wrote: "Conversely, Kennedy, Reagan, and Bush understood that lowering taxes helps the enconomy. When each of these presidents cut taxes, revenues increased and jobs were created."--Posted by lvliberty1 at 12/09/2008 @ 1:23pm
Extraneous asked LL: "I must be missing something. If Bush's tax cuts increased revenues and created jobs, why has the median income adjusted for inflation declined since 2001?"--Posted by Extraneous at 12/09/2008 @ 1:36pm |
Allow me to repeat Extraneous' question to you LL:
If Bush's tax cuts increased revenues and created jobs - why has the median income adjusted for inflation declined since 2001?
Posted by urmygyro at 12/09/2008 @ 7:04pm
well...
i think its time for some "war socialism" soon, or at least creeping war socialism.
we ARE in fact in a WAR, are we not? yet for 6 years now we've been livin' our lives and doin' our stuff...like nothing's wrong...
the mess has been brewing a lot longer than the current administration. at least clinton seemed to have a tap on the big bubble economy. who knows? another few years of THAT and who knows?
i hate to moralize (!!!lol!!!) but considering the fact that we have been involved in the 9/11 war for some time...does it not seem especially obscene that this administration asked so little sacrifice from the nation as a whole, and clung to class based, reverse robin hood, cronyist, irresponsible ideology so tenaciously?
i mean we all got our ideologies and other silly notions, but don't we still have our common sense?
these satano aynrando ideologues must have seen the world through some powerful ideological beer goggles...and so did we schmuks, if we were even concious.
and so many were not.
what a hollow victory to crow my prophetic prescience now! to herald a double bind triumph i never wanted to see, but knew i would...
but now the schmuks are screaming for a little "socialism", just like i said, and know what? we're gittin' some!
but thats not the point. the point is we are going to do what we have to haul our asses up by the bootstraps and if some ideologues want to call it socialism, let 'em. and yeah, sure...it will involve some "socialism", but so what?
the schmuks are begging for it and we need it.
we can call it "war socialism" until we get out of the middle east, eh?
LMAO!!!
Posted by ibbleblibble at 12/09/2008 @ 8:15pm
There you have it LL - you use the census bureau stats while admitting illegal immigrants are working more jobs - hello!
The world can seem rosy if we eliminate the have nots.
Let's do it like the education dept. does - don't count drop outs against school statistics! everyone's doing just fine!
Posted by urmygyro at 12/09/2008 @ 8:43pm
Posted by lvliberty1 at 12/09/2008 @ 5:30pm
You notice when LVLIB has to answer a question that would hurt his case, he declares it "irrelevant"?
Posted by Mask at 12/09/2008 @ 11:10pm
Is unemployment really 6%??? See a real poll with real Americans. A new poll everyday:
http://controversialpolling.blogspot.com/
Posted by jimmyvegasjimmy at 12/10/2008 @ 01:27am
It's not lost on me that Ben Stein, George Will, Limbaugh, and the Right Wing kool-aid crowd who post here are desperate for Obama to fail. With the backdrop of George W. Bush's miserable incompetance, success by Obama, would be a disaster for them.
They would rather have another Great Depression than Obama save the economy.
Posted by koroviev at 12/10/2008 @ 02:20am
You know it's voodoo when somebody tells you that spending $X will create Y jobs, without specifying how long those jobs will last. A day, ten years? Meaningless, and people who spout meaningless figures should not be relied on.
Posted by petelush at 12/10/2008 @ 08:27am
Posted by lvliberty1 at 12/10/2008 @ 01:54am
I KNOW he "cut it in stages"...at what stage were we in 1985?
What was the economy like in 1984-1985?
Nobody had actually GOTTEN the 38.5% rate (on incomes over 90,000) until 1987! And they didn't get the 28% rate (on incomes over $29,750) until 1988! (actually late in those years, given filing dates).
So why was the economy roaring along in the "Reagan Recovery" in 1983-1984-1985 (which it was)...if the tax rate was the "Marxist" rate of 50% on incomes over 175,250??!?!??
AT BEST, it should have still been "flat" or "slow growth"...according to conservative tax theory.
Next up? Why did the economy not tank in the 1990s under a 39.6% rate....but will if we got back to it??!?!???
LVLIB's answer?..."That's an irrelevant question!"
Posted by Mask at 12/10/2008 @ 09:17am
Simply stated, a large-scale fiscal stimulus will not work because:
1. It will take time, probably a month or two, to formulate a policy package acceptable to Congress.
2. Congress will take its time, another month or two lost, considering the package and add its own pork to any recommendations made by the President.
3. It will take more time after that for the Executive agencies to detail the approved legislation and prepare proposals for implementation, another month or two lost.
4. Whatever proposals are made must be coordinated at the state and local level, another month or two.
5. People have to be hired and put to work, another month or two.
6. The money appropriated is not spent all at once but spread out over time, not months but years before the effects are felt.
Anyone who thinks the fiscal packages such as those under discussion are actually going to have any significant effect on the economy in less than a year is dreaming. The economy will recover by itself long before any spending proposal discussed today has any effect.
But we and our children will be left with the debt and interest costs associated with this spending.
Conservatives would not object to this kind of government action to help the economy if we felt that it would actually help. We are not opposed to measures that are truly helpful. But there is no reason whatsoever to believe that spending for spending sake actually does any good, and plenty of reasons to believe it is harmful in the legacies it leaves in its wake.
Moreover, the notion that government spending creates jobs that would not be created anyway is crazy. A dollar spent is a dollar spent, whether by the private sector or the public. There is nothing special about government in this regard.
Posted by Englemann at 12/10/2008 @ 10:37am
Recent evidence suggests that cutting marginal tax rates does not increase tax revenue but decreases it. For example, consider the last major increase in marginal personal income tax rates (1993) and the last major cut in marginal tax rates (2001-2003). In 1993, the top federal marginal personal income tax rate was increased from 31% to 39.6%. The first year this tax increase was implemented tax revenues increased by 4% in real terms. In 1999 real federal personal income tax revenue had increased 64.2% above what it was in 1992 (seven years later) before the tax increase. Between 2000 and 2003 the top marginal federal income tax rate was reduced from 39.6% to 35%. In 2003 real tax revenue was 27.1% below what it was in 2000 before the tax cuts. In 2007 real federal personal income tax revenue was still 2.5% below what it was in 2000 (seven years later).
Another myth that is popular is that capital gains tax increases hurt economic growth. Top capital gains tax rates were at their lowest in our nation's history (12.5%) during the four worst years of the Great Depression from 1930-1933 when the economy contracted at an average rate of 7.4% a year. In 1934 the top capital gains tax rate was increased to 31.5% and again to 39% in 1936. From 1934-1936 the GDP expanded at an average rate of 10.9% per year. When the top capital gains tax rate was at its highest, in 1976 and 1977 (40%), the economy expanded at an average rate of 5% per year. By 1982 it was lowered to 20% and remained at that level through 1986. The economy grew at a respectable but hardly awe inspiring rate of 4.4% from 1982-1986. Under Bush it was lowered to its current rate of 15% in 2003. From 2003-2007 the GDP expanded at a rather mediocre rate of 2.8%.Tax cuts only stimulate the wallets of the wealthy.
Posted by MarkASadowski at 12/10/2008 @ 11:16am
Your article To Spend or Not To Spend is very interesting. Have you seen what the unimployment was in 1942-1945. How about full employment because of the WAR. I would like for you to tell everyone what you do with your money other than spend it. Even if you save or invest your money someone else is loaning it and then spending it. If you believe so much in Keynesianism, why not call up your best buddy Barrack and tell him to take over your business to insure its sucess? You ought to be lauding Bush for his policies instead of harping on him for doing what you librals have wanted all a long---expanded and expensive government. You got what you wanted--- remember NIXON, you hated him also---still don't know why.
Posted by trueconserv at 12/10/2008 @ 11:24am
You ought to be lauding Bush for his policies instead of harping on him for doing what you librals have wanted all a long---expanded and expensive government. You got.. Posted by trueconserv at 12/10/2008 @ 11:24am
You got to be kidding. Government channeling cash to plutocrats & profiteers isn't exactly the aim of true "librals". We squashed monarchy in this country long ago, but obsequious scabs like yourself need objects of worship.
Posted by Sorelish at 12/10/2008 @ 1:21pm
Both the Left and the Right have relied on Keynesianian theory, though liberals are more likely admit it.
As some others have pointed out, military spending IS government spending. If you believe government spending is always bad for the economy, then military spending is always bad. If you believe government spending is always good, then military spending's always good. If you believe it depends on the time and circumstance, well, then, I think this is the time, and this is the circumstance.
As a stimulant, public works works (sounds like I have the hiccups) better, as every state has infrastructure but not every state has defense plants. Unless you want to do what they did in the 1940s and turn every single factory into a munitions plant. Hey, if we're going to be a world empire anyway, we might as well get something out of it.
As far as taxes go, John Maynard Keynes did say tax cuts could be a stimulant (which is why conservatives are sometimes Keynesians), but also advocated tax hikes in times of inflation (which is why they're less likely to admit it.)
Posted by KJusko at 12/10/2008 @ 1:39pm
Quoth Englemann:
"Moreover, the notion that government spending creates jobs that would not be created anyway is crazy. A dollar spent is a dollar spent, whether by the private sector or the public."
Well, that's just the point, isn't it? The private sector isn't spending. Insufficiently regulated banks won't lend money to one another because their past unregulated actions mean they don't/can't trust one another to repay. They have less ability to lend to manufacturers or commercial or service businesses as a result. To that add unwillingness to lend for the same reason businesses are laying off workers -- they all expect the economy & demand for goods & services to keep shrinking, which the layoffs help to insure. The scale of all this is so large that the idea that "the market" will self-correct in a year is just fatuous.
When markets really were unregulated in the 19th and early 20th centuries, business cycles caused depressions, not recessions. Short depressions lasted maybe 3 years, others much longer. The idea that it's government regulation that causes boom & bust is idiotic.
While G. F. Will is wrong that the New Deal had no benefits in ameliorating the Great Depression, it was World War II that broke its back. I wonder if he really wants that solution, though: 25% or more of working aged men conscripted, unlimited government spending on "total war," private consumption tightly constrained by rationing = forced savings, partly offset by high inflation but still creating "pent up demand" unleashed after the war?
The immediate post-war years, in which a successful industrial policy accomplished the conversion of war industries, bear thinking about. We need a new industrial policy to revive U.S. production with sustainability conversion.
Posted by Fudu at 12/10/2008 @ 3:41pm
The best economic stimulus plan the government could ever implement would involve dismantling itself.
Governments cannot invest. They can only steal money from the private sector through taxes and inflation.
Government dominates nearly two-thirds of the economy and as a result we are poorer and less free for it.
The financial crises would end overnight if we repealed legal tender laws and allowed gold, silver, and other precious metals to be used as money rather than the dollar, a fiat currency subjected to constant debasement through inflation by the Federal Reserve and spent by the federal government.
The growth of Leviathan is the single most significant factor in our previous and current economic problems.
The mass media would have every American believe we live in a free market economy but those who know better know we live in a centrally planned economy with a central bank, the Fed, engaged in currency debasement, and big business and big government using each other to control, manipulate, and profit from the poorest of Americans.
What most people ignore or discount are the socialist and fascist elements of our economy and our culture.
More than 100 years ago, America was a freer and more prosperous nation but the growth of government with the explosive increase in taxes, laws, rules, regulations, and statutes have reigned in our potential economic growth and well-being.
If our "leaders" who are really "rulers" wanted to do what was best for the average American and the nation they would...
(1) end military intervention in foreign countries, close more than 700 military bases, and bring our troops home to defend America.
(2) shrink the size of the federal government by 75%.
(3) end the fed.
(4) get out of the way.
Posted by ADW123 at 12/10/2008 @ 3:56pm
The "conservatives" who think that "liberals" just want government to be "big," as if the size itself is what matters, are a hoot. The point is caring about what government does, and wanting it to do those things it does better than private, for-profit businesses, and to meet social needs that markets in their nature as systems cannot meet (basically anything where universality is desirable), as well as the need to regulate against the flaws of unrestrained markets.
Of course many of us social democratic leftists would also like to see a much larger private but not-for-profit sector, including cooperatives as they've existed historically and legal-institutional forms that don't as yet exist, and social accountability reforms in the legal-institutional character of for-profit corporations, which is not ordained by the gods or God or Nature, but created by human law (i.e. government).
No government, no market.
Posted by Fudu at 12/10/2008 @ 4:03pm
To spend... or not to spend...
...that is NOT the question.
Whether it is nobler in the minds of economists, or not...;^)
Doing nothing... 'fiddling while Rome burns'... will crush the working class... and keep Americans fighting Americans... which most of us agree has to stop.
After giving a trillion dollars to the very people who sanctioned 'cooked bookery' on a monumentous scale... people who, incidently... made personal fortunes based upon these 'money games'...
Why can't we see that we are cementing into place the very problems that created this predicament. We have created 'incentives' that the system with which we live must respond to... and can only be regarded as a 'reward' for thievery and mismanagement.
As to 'infrastructure'...
What would be considered the infrastructure of the Economy itself? It's not buildings and hi-ways, or bridges and traffic control... for these are the infrustructure of government and civics.
It is the foundation and building blocks of our economy that are under siege... for is anyone actually discussing HOW we should best appropriate funding towards a much more secure economic future?
It is businesses... successful... large and small.
And what is it that makes a business successful, you might ask? Is it a sense of entitlement, or a tax break, or family connections, or lobbyist 'pressures'...?
Hmmmm... if so... the competitive spirit has departed the body politic... and fouled the clear waters of competitive entrepreneurship.
Effective spending must stimulate the infrastructure of our economy... 'dead on'... and then, it can also be seen as an investment... not just in our future... but one that returns both by advancing free enterprise and creating an authentic tax base from which to bolster our far sighted civility.
Posted by ttr at 12/10/2008 @ 5:02pm
First I'd like to second MarkASadowski's anaylsis. Second, there has been some talk about the recession of 1937. So, I wanted to illuminate the discussion.
In 1936, all the main economic indicators had regained the levels of the late 1920s, except for unemployment, which remained high. In FDR's Jan 1936 budget message, the president asserted that a balanced budget was now in sight. In his Jan 1937 budget message, FDR reported "Industrial production, factory payrolls, and farm prices have steadily risen. These gains make it possible to reduce for the fiscal year 1938 many expenditures of the Federal government which the depression made necessary." So, in 1937 FDR proceeded to reduce fiscal expenditures. Also, you have to remember that in Jan 1936 Congress overrode FDR's second veto concerning a bonus for veteran's in the form of bonds. On June 15 1936, payment of $1.7B was made to veterans. FDR urged veterans to retain the bonds(the vets chose to spend them instead). Of them, $1.4B had been cashed and spent by the end of 1936 leading to a upsurge in automobile production and residential housing, effectively a huge stimulus. Now, with the termination of this artificial prop in 1937, the simultaneous reduction in Federal spending, and the introduction of social security taxes, consumer demand fell off considerably, the economy contracted, and then voila FDR changed his fiscal thinking: in the words of Secretary Morgenthau, "the early New Dealers from Roosevelt were looking forward to a balanced budget...But in the course of time new theories, based in part on the reasoning of John Marynard Keynes..had come into vogue." Indeed on April 14 1938 he called for an antideflation program of $3B for public works.
Posted by hdthoreau at 12/10/2008 @ 8:00pm
In addition, a key point to consider is the importance of countercyclical fiscal policies, taxing during booms and spending during recessions/depressions. But as many posters(Mask et al) have noted directly and indirectly, the market is hardly moral and does not produce just, fair, or efficient outcomes necessarily. Point in fact, the highest paid hedge fund manager in 2006 made an amount equivalent to what 80,000 New York City school teachers will make for the next 3 years combined. It is an astounding injustice, in particular given what we now know about what these hedge fund managers were doing. Indeed for markets to function adequately, they need to be thoroughly regulated. I think many of us can agree that it is the job of a robust tax code(w/ higher marginal tax rates and more tax brackets) to mitigate egregious income inequality.
Posted by hdthoreau at 12/10/2008 @ 8:46pm
ERA - hey ERA - hey ERA - TODAY
Posted by bradberger at 12/12/2008 @ 1:35pm