The Stimulus Package

Toothpaste · Sep 10, 2009

Okay I know I am stepping into something here, well . . . I assume I will be but I am hoping that maybe I am not. But here it goes anyway. I am interested in this Stimulus Package that people bring up all the time. I understand superficially what it is, but I have several questions about it.

Has it contributed further to the current economic decline in the States?

Has it helped at all?

Are the problems people have with it based on projected outcomes or is there a tangible negative result that you guys are dealing with right now?

Is the negative response to it more of a moral outrage at the idea that the government would pay out so much to the very people who drove the country into the ground?

And does anyone actually agree with the idea (I usually just see it mentioned in a negative fashion)?

These are all sincere questions, I really just don't know enough about it and I hear people using it in their arguments all the time. Mods, if for some reason you think I'm waving the red cape in front of the bull, feel free to lock this thread or delete it. But I truly am curious (and for the record I seriously do not know how I feel about the package myself, I am a fan of larger government, but it doesn't mean I approve either of giving so much money to people who have proven themselves irresponsible in the past . . . I am actually on the fence at present about this one, hence my posting this thread in the first place).

Don · Sep 10, 2009

It's a great idea, if you ignore the second side of the equation. When you factor in all the issues, it's revealed as nothing more than a shell game.

Here's one view:

Certainly we can expect that when the government spends a trillion dollars this will provide a positive statistical boost to GDP, if for no other reason that government spending makes up a significant portion of GDP. Where, however, does the state get the money to spend? Ah, as Hamlet might say, there's the rub. There are only three ways the government can obtain funds to throw at all their shovel-ready projects and all three leave in their wake negative economic consequences.

Or try this.

Economist Robert Higgs compares a "stimulus package" to getting water out of the deep end of the swimming pool and dumping in the shallow end — all with the expectation that the water level will rise. As he emphasizes, economists should never tire of asking where the money for stimulus is going to come from. Mankind has yet to invent a machine to create it out of nothing: it's either taxing, inflating, or going into debt that has to be paid later (and crowds out capital creation now). There is no other way.

Toothpaste · Sep 10, 2009

Thanks for the links Don!

But unfortunately this creates another question for me, has the Stimulus Package been passed? I was under the impression it had been, but now I'm a bit confused with people questioning where the money will come from. Or is it a matter of it has been passed, the money has been doled out by the government, and people are asking who exactly is going to repay the gov? (also is the Stimulus Package a gift or a loan? - feels a bit now like I'm on Judge Judy

)

Don · Sep 10, 2009

Some of the money's been doled out, most hasn't, at least last time I looked. The links are more to point out that wherever it came from, whichever of the three sources they use, it's mostly "dipping from one end of the pool and pouring it in the other end."

Both the articles are pre or during the stimulus payout. I'll find the recent thread where we discussed the "Cash for Clunkers" program, which was a fine example of the "benefits" of one of the stimulus programs financed by the package.

robeiae · Sep 10, 2009

It's been passed. Some of the spending won't occur until way down the road--more than a year--some of it has occurred, and some of it may never occur. The monies come from the U.S. treasury, so barring real available funds, it's money that adds to the deficit. Of course, revenues are down.

But to be clear, the Stimulus Package is not ALL spending on given projects. Some of its parts include tax breaks and incentives, and the extension of things like unemployment insurance.

Of course, it's still likely that not a single member of Congress has actually read the whole thing.

Don · Sep 10, 2009

Okay, here's a thread about how Cash for Clunkers was basically an attempt to recreate the housing bubble that was created to recover from the Dot-Com bubble, which... ad infinitum. Oh, and how cool is it that they now have an appliance bubble in the works as well!

And here's a slightly earlier thread that basically predicts the issues discussed in the bubbles thread.

Most of what the stimulus is doing is along the same lines, although as rob pointed out, there may be a gem or two among all the dreck.

dclary · Sep 10, 2009

They are repaving the road up to Glacier Point in Yosemite with stimulus money. That's the only evidence I've seen that any of the dollars were spent.

robeiae · Sep 10, 2009

The deluxe frisbee football field is almost complete.

dclary · Sep 10, 2009

I'm pretty sure the guy bidding on my ebay auction is paying for it with stimulus dollars.

Lost World · Sep 11, 2009

Toothpaste said:
Has it contributed further to the current economic decline in the States?

Has it helped at all?

It's passage has effectively quadrupled the national debt. Let that be your answer.

I've also seen a few of the public works projects created by the stimulus in action. (I love the signs they post in the work zones, with the flag quartered with three other symbols, all inside of a big O. How monomaniacal!) This is wonderful and all, but they're strictly union jobs. Personally, I have nothing against unions and union people need jobs as much as any group; however, what about the 85% or so of the American workforce who aren't in unions? Answer: let 'em piss up a rope, for they're not controlled by Oz's major campaign contributors, the union bosses.

SPMiller · Sep 11, 2009

Might have helped. Might not. We don't know enough about our economic system to know for certain either way.

But think of the backlash if the Congress had done nothing, and things had gone really sour.

Don · Sep 11, 2009

SPMiller said:
Might have helped. Might not. We don't know enough about our economic system to know for certain either way.

But think of the backlash if the Congress had done nothing, and things had gone really sour.

Maybe you think we don't know enough about our economic system to know for certain either way, but there are plenty of people who called the collapse of the housing market, the oncoming recession / depression, called the "impact" of programs like Cash for Clunkers, and threw down a bullshit flag months ago when TPTB first started saying they could see the light at the end of the tunnel.

Just because Krugman and the other apologists for JMK are perplexed, it doesn't mean that everybody is.

The conditions for things going really sour were built up over the last couple of decades, and no matter what Congress does, the piper must be paid. Blowing more bubbles to keep the house of cards from falling just delays the inevitable. All the malinvestment will have to be cleared before things start looking better, and that's not going to happen as long as more malinvestment is being encouraged.

SPMiller · Sep 11, 2009

Don said:
Maybe you think we don't know enough about our economic system to know for certain either way, but there are plenty of people who called the collapse of the housing market, the oncoming recession / depression, called the "impact" of programs like Cash for Clunkers, and threw down a bullshit flag months ago when TPTB first started saying they could see the light at the end of the tunnel.

Just because Krugman and the other apologists for JMK are perplexed, it doesn't mean that everybody is.

The conditions for things going really sour were built up over the last couple of decades, and no matter what Congress does, the piper must be paid. Blowing more bubbles to keep the house of cards from falling just delays the inevitable. All the malinvestment will have to be cleared before things start looking better, and that's not going to happen as long as more malinvestment is being encouraged.

Pfff. There are always naysayers and doom-and-gloomers for everything, and naturally, they're sometimes right. You're going to have to make a stronger argument.

Don · Sep 11, 2009

Well, Ludwig von Mises wrote a series of articles from 1919 to 1923 that explained business cycle theory, and used that theory to predict German hyperinflation and the crash of 1929. Since then, other Austrian economists have had any number of hits, including several who "eerily" saw the current recession coming years ago, and the other points I raised in the earlier post.

You'd think it strange that mainstream economists don't care for Austrian economics, until you find that it argues that fiat money and "managing" interest rates are primary causes of the boom and bust business cycle that politicians claim they can manage.

I'd say a record of fairly accurate predictions over more than 80 years would be worth paying some attention to. Of course, I don't have a vested interest in claiming that the economy can be "managed."

Romantic Heretic · Sep 11, 2009

Okay, here's a metaphor.

Your house has had a bad fire. Several rooms have been severely damaged and the rest smell of smoke and are full of ash.

What do you do?

Do you sit there, hope the house doesn't fall down and pray some 'invisible hand' fixes things?

Or do you get to work, clean the place up and start rebuilding the parts of it damaged knowing that you're going to need money to do all this work and that money has to be borrowed?

I'll opt for the latter.

Don · Sep 11, 2009

I agree 100%, RH. But I'd hire contractors that had actually built something, not ones that sat around and pontificated about building all the time. :ROFL:

William Haskins · Sep 11, 2009

WASHINGTON, Sept 10 (Reuters) - As billions of dollars from the economic stimulus plan pour through the U.S. economy, members of Congress, the administration and regulatory agencies are increasingly worried about the risks of fraud.

Earl Devaney told Congress on Thursday the Recovery Accountability and Transparency Board he chairs is investigating those who may have misappropriated stimulus money.

His board has "forwarded more than 100 matters to various IGs (inspector generals to ensure heightened scrutiny of specific procurements that board staff has identified as potentially problematic.

"We've got about nine cases in various U.S. attorneys offices," he added. "I know from talking to them that they're very interested in sending some very loud signals early."

http://www.reuters.com/article/marketsNews/idUSN1029818020090910

Don · Sep 11, 2009

So does that mean that the contractors are gonna charge me $3.4 billion to rebuild my 3-bedroom 2-bath house after that bad fire? :ROFL:

The Stimulus Package

Toothpaste

THE RECKLESS RESCUE is out now!

Don

All Living is Local

Toothpaste

THE RECKLESS RESCUE is out now!

Don

All Living is Local

robeiae

Touch and go

Don

All Living is Local

dclary

Unabashed Mercenary

robeiae

Touch and go

dclary

Unabashed Mercenary

Lost World

He'll NEVER fit in!

SPMiller

Prodigiously Hanged

Don

All Living is Local

SPMiller

Prodigiously Hanged

Don

All Living is Local

Romantic Heretic

uncoerced

Don

All Living is Local

William Haskins

poet

Don

All Living is Local