So by "line position" you are referring to someone who gets paid a lot to do very little actual work?
That's an interesting skewing of the velocity of money argument. Unfortunately, the dead weight loss associated with such an expenditure more than outweighs the spending those road workers generate. I didn't say not to do any work, but make work is another issue. I have no problem with anyone who does honest work. But those construction workers could start small businesses. Now THAT would be a real contribution to GDP.
You'd think people would learn from FDR's mistakes. For a decade, he used inefficient govt. money to hire people at govt. works project type jobs and unemployment and the economy remained stagnant (at best). It wasn't until WW II and the govt. buying goods from the private sector in huge numbers that turned things around. The flaw in your thinking is that it costs govt. $200K to pay a worker $100K to generate $25K in revenue (the taxes the employee pays). I am probably being generous at $200K - it might be $300K or more. You also have to consider that govt. is spending at massive deficit levels. In order to do so, it has to borrow. There's only so much money to be leant and when you're talking about govt. sucking up > $1T per year of that, there's not much left for the private sector to borrow.
Which, by itself, proves nothing, since one can easily argue it would have been worse without those projects. So, gov't buying stuff from the private sector for war works, buying stuff in peacetime doesn't work. Not sure I see why that should be. I'm not sure that's a flaw, or that it has to do with my thinking. If it costs $200K to pay a worker $100K, where does that extra $100k go? To government workers, presumably, who would otherwise be unemployed. So it generates $50K in tax revenue, since the gummint worker also pays tax. Anyway, the point is not to generate tax revenue, is it? If that was the point we could just raise tax rates. No offense, but I think you are just pulling numbers out of your, um, hat. You've got it completely backwards. The government is spending at massive levels because the private sector isn't, and the private sector isn't because there is no money for it to borrow. barfo
The evidence suggests the opposite. The depression was longer and deeper than any bad economic times in our history. Govt. buying from the private sector, period. The private sector is and was way more efficient at putting the capital to use. To a bunch of middlemen who already have jobs. Secure ones at that. Higher tax rates gave us weaker economic growth and lowered govt. revenues. See Reagan's tax cuts and how revenues increased. JFK wanted tax cuts for the same reasons. LOL I've yet to see govt. do anything that's inexpensive and efficient. I see it in small businesses and large businesses all the time. Google "credit crunch" and get back to me on this looloo
And therefore whatever was done to try to stop it was wrong? That doesn't follow logically. Yeah, that's sort of irrelevant to the point I was making. You brought up the higher tax revenue. I don't see how you can think this is an adequate comeback. The credit crunch started last Sept. The stimulus spending started well after that. How you can blame the stimulus package for the credit crunch is really quite puzzling. barfo
I'm curious where you are getting this. The reason I ask is because I have read about several economists saying that "people", with the White House being part of them, are under the impression that the private sector isn't lending. However, the private sector is indeed lending, but at a more responsible and sustainable level. Some people and the White House are seeing this lending level at less than it was during the irresponsible times, and think that lending isn't happening and that we need to increase the lending. I know I am small peanuts, and insignificant, but I am able to get lending. But, from what I have experienced, the banks are being much more careful and responsible than they were a few years ago. This doesn't seem like a terrible thing.
Putting out fire with gasoline doesn't make sense. Follow that. Why keep on doing what isn't working? The govt. needs money to spend. It can get it from three sources: taxation/fees, selling things like national parks, or borrowing. What part of the govt. has been borrowing way too much at the cost of money to lend to the private sector is hard to figure out? True under Bush, which is a big factor in his own lack of popularity among even Republicans. http://www.mcclatchydc.com/227/story/64003.html http://en.wikipedia.org/wiki/Crowding_out_(economics)
Sometimes a fire doesn't go out immediately when you spray water on it. Does that mean using water is necessarily a bad idea? How about making an argument instead of citing wikipedia articles? There is probably a wikipedia article on projectile diarrhea, but that doesn't mean it caused the economic crisis. barfo
Of course, it is not all-or-nothing. I shouldn't have stated it in such black-and-white terms. Of course, there is still lending going on, but as you say it is at a lower level than before. And that means less things get funded, which means less jobs, which means less consumer spending, which means the economy crashes. Whether that is a good thing or a terrible thing depends on whose ox is getting gored. If you lost your job, it's probably a terrible thing. If you think the bubble needed to burst and you have the wherewithal to profit from the misfortune/mistakes of others, then you probably don't see a big problem. barfo
$1T+ deficits as far as the eye can see is gasoline on the fire, not water. The Wikipedia article is something they teach in macroeconomics 101, not some "out there" kind of theory. I get your argument tho. "If you loved Bush and the Republicans' spending, you're really going to love Obama's."
Do you think it is good for the country, in general, for lending levels to go back to how they were, say, 3-4 years ago?
When the fire gets bigger, then yes, it's a bad idea. It's not a difficult problem. We overspent, both on the governmental and personal consumer side. People are overstretched where we're reaching a point of debt overhang. Do you really believe the solution is getting into more debt? Please explain to me how that makes sense? Crowding out is a legitimate economic concept. There's a finite amount of capital, regardless what the Obama Administration believes. When the government borrows, that means there is less for the private sector to borrow. Sure, the Government can print more money, but that only works as long as others are willing to finance it. Pretty soon you end up with a Weimar Republic monetary policy.
No, I don't. At least, not if you mean sloppy lending practices. I'm not arguing for that at all. If you mean the total volume of loans, it would be good for the economy if that level was restored, but in a sustainable manner this time. That's clearly not going to happen for some time, however. barfo
I don't want to focus too hard on this metaphor, but fires do get bigger even after the firefighters start working on them, sometimes. Happens all the time with forest fires. Because we now have a bigger problem than debt? If we let the banks fail, if we let the car companies fail, if we let AIG fail, then ... well, what do you think happens if we do that? I'm not sure but I'd guess it won't be pretty. I wasn't meaning to suggest it wasn't a legitimate economic concept. However, so is, say, deflation. But by merely mentioning deflation, have I convinced you that deflation caused the current crisis? Or is the result of the current crisis? Or has anything to do with the current crisis? barfo
It's an interesting question. There are 2 plausible scenarios: 1) We let AIG and the auto companies file for bankruptcy. What happens? That's up to the company. They can shed some debt, shed some aspects of labor contracts that preclude them from making money, shed some business concerns that are losing money and re-emerge leaner and possibly profitable. Will it cause the loss of some business to competitors? Certainly. But that's the price for being a crappy company. Will it cost some jobs? Yes. But this is the way of business. The unions were so damned greedy that they knew this day was coming. I've been laid off from two jobs. ABM has been laid off a few times. It's never pretty, but all jobs cannot be guaranteed for life. Eventually, in a few years, the balance of business comes back according to the needs of the consumers. 2) We can continue to indefinately feed companies and whole sectors of the industry trillions of dollars. What happens? Eventually the USA becomes hyper inflationary and defaults on it's obligations. When that happens, the economy collapses in ways we cannot imagine and we may very well cease being a nation. Or, in a better case scanerio, we just keep feeding them money forever and let our debt grow out of the trillions and where ever it goes from there. But at some point in time there will be a price to pay.
Do you think there are no consequences for folks outside of those companies? I'm not particularly concerned about the welfare of AIG/GM/etc employees, or the stockholders of those companies, but I am concerned about what effects the failure of those companies might have on the overall economy. barfo
Supposedly you are trained in economics, why don't you provide some value instead of just being insulting? barfo
