The Cellar - Michael Steele

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Originally Posted by Beestie (Post 533987)

Then I guess I disagree with Moody's and "other economists" whoever they might be.

Almost every one I've seen on TV talking about the stimulus. I don't remember who they all are.

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You said yourself that job creation is the number one priority in the recovery action plan. Then you go on to provide a reasonable scenario which would lead to that result - an increase in consumption by the Federal Government. We are on the same page in that regard.

Increasing the amount given to the needy doesn't accomplish much of anything since their consumption levels are pretty much fixed to begin with. In theory, if you are needy then the social program you are already on fills the gap such that you are no longer needy. If that is NOT correct then the social program needs to be restructured. However, that has nothing to do with government intervention in the economy in order to stimulate it.

So basically we can compare the economic effect of one stimulus dollar given to needy Joe and one stimulus dollar spent on a crumbling bridge.

Needy Joe takes his extra dollar and goes to Walmart and buys something he either needs or wants. Chances are the product he buys is imported so $0.10 stays in the economy and the other $0.90 exits the economy.

Bridges-R-Us takes the dollar, hires Needy Joe and improves a bridge. So what does that do for us? First it takes Needy Joe off of food stamps which frees up dollars for other needy folk. It also creates taxable income which creates tax revenue for the state and fed - a return on investment if you will. It improves local infrastructure which makes everyone who uses the bridge more productive and maybe even makes nearby property values increase since the area is now more accesible and attractive. It also reduces maintenance costs for the bridge which allows the municipality to allocate more of its funds to more important things.

All that vs a dime for Walmart coupled with an increase in the trade imbalance with our foreign import/export partner countries.

I think you would have to look pretty hard to find an economist who can construct a scenario whereby a dollar given directly to Needy Joe does more for the economy than a dollar allocated to an increase in government consumption. I would be even more surprised to learn that Moody's hired one.

Well I believe they extended a lot of those to benefits so they would be able to help all the NEW needy people who are losing their jobs. (And who says they all shop at WallMart? :eek: ) And I agree with you that there should be more actual infrastructure spending. I think there is way too much in the way of tax cuts. As for the spending part, I think we need that, when unemployment is rising so quickly. It is in the double digits in some states, and bordering double digits in many others. So while yes, we need to be creating jobs, very quickly, the truth is, it will take time for a lot of that money to actually get out there. So in the meantime, helping people with food stamps and extended unemployment and health care benefits is direly needed.

Here you go:
http://endtheecho.wordpress.com/2008...mulus-package/
Extending unemployment insurance and expanding food stamps are the most effective ways to prime the economy’s pump. A $1 increase in UI benefits generates an estimated $1.64 in near-term GDP; increasing food stamp payments by $1 boosts GDP by $1.73 (see table). People who receive these benefits are very hard-pressed and will spend any financial aid they receive within a few weeks. These programs are also already operating, and a benefit increase can be quickly delivered to recipients.

The benefit of extending unemployment insurance goes beyond simply providing financial aid for the jobless, to more broadly shoring up household confidence. Nothing is more psychologically debilitating, even to those still employed, than watching unemployed friends and relatives lose benefits.