My wife and I work hard to make sure we stay solvent and that we live within our means. But it’s nice to know that we don’t have to quite so diligent. If we ever get into financial trouble due to our own incompetence, overspending, and shortsightedness, I’ve learned from President-Elect Obama that the answer is clear, easy, and win-win.
We’ll just re-model the kitchen.
That’s right. If I’m in the red, all I need to do to stimulate my bank account is to spend a ton of money fixing things up around the house. My bank account will magically be worth more, and I can proudly take credit for helping people out in my community who need jobs.
Hmmm… On second thought, that doesn’t make any sense at all.
Obama’s plan to stimulate the economy is to re-visit the New Deal policies of “creating jobs” by simply legislating them into place. Why has no one thought of this before?!? We should just make unemployment illegal. We might have to repeal the 13th Amendment, but it’s all for the greater good, right?
What Obama doesn’t understand is that every government job is actually a net loss to the economy. They are a necessary evil – a drag on the economy, not a stimulant. We need to look at it ship or aircraft design. There will always be some drag on the hull, but that doesn’t mean we should make the bow square.
Every new government job, assuming a 25% tax rate, requires the private sector to come up with 3 new jobs (since the government employee is also taxed) to cover his salary. (It’s actually probably more, because government benefits are so much more generous than most private jobs, unless you’re a UAW guy.)
The other option is to just tax a “rich” guy a lot more. But because of said government benefits and government unions, we’ll take two or three private sector jobs worth of money away from a potential employer. Once again, the economy and society as a whole suffers a net loss.
And what if the government employee is no longer needed, or is doing a bad job? It’s not like it’s easy to lay them off or fire them. “Stimulants” like this almost never flush their way out of the system. The only way we got rid of the massive government employment schemes from the ’30s is that most of those workers went to war and were pretty tired of it when they were done.
Government jobs = government spending, which necessarily means spending money we don’t have. And by the way, private contractors still count as government jobs, and still require the associated private sector growth to sustain them.
The idea, I guess, is that if you give a bunch of unemployed people government jobs, they will go spend their paycheck around town with local merchants, which will lead to more economic activity. The problem is that whatever benefit those merchants are getting from the new customer base is more than offset by the money taken away from them on the front end to pay for those government employees in the first place.
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A friend of mine pointed out some other interesting math earlier today. The U.S. has about 100 million taxpayers. Most of those are productive, working people.
The bailout, which thus far has been nothing but an utter failure, cost $700 Billion. That’s an average of $7,000 per taxpayer, which may as well have been set on fire in a big pit. (At least that would have provided heat for people over Christmas. The bailout was even less useful.)
Obama’s infrastructure “stimulus” package is estimated to cost about $1 Trillion in new spending on roads, bridges, internet access, computers, “green” technology (whatever that is), and probably sensitivity training for people who still go around wishing others a Merry Christmas.
That’s $10,000 per taxpayer. And that’s in addition to the TARP bailout.
That’s right, America. Under the Democratic Economic Revitalization Plan (of which George bush is, shamefully, a proud member), the average American will take a $17,000 cut in their pay. Or their kids will, if we just kick it down the street for a few years of defecit spending…
Think about that. How will taking that much out of every paycheck, that otherwise could go to paying mortgages, buying things from local companies, investing in new businesses, or even charitable donations make the economy grow?
Just you wait until they tackle health care.
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Obama compares the new plan to the Interstate road system in the 1950s. But that had two significant differences.
First, that spending and building took place during a time of unprecedented peace and economic prosperity. The private sector was growing at an enormous rate, and was able to meet the math required to hire all those government employees. We could afford it. We had some extra cash lying around.
Second, those roads were an investment in a better, more efficient transportation system that paid off in faster shipments of goods and services. Maintenance is necessary to keep our transportation system up today. But that’s just holding steady, not taking a leap forward as we did when we replaced slow 2 lane highways with limited access freeways. It’s not spending money to make money.
It’s just damage control.
That might prevent losses, but it’s not going to stimulate a darned thing.
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The time to re-do the living room is when you’ve had some success and are flush. It’s not the way to recover from a series of bad financial decisions that have put you deep in debt with a mis-managed financial portfolio.
Although I kind of home I’m wrong. We have sime siding on the house that needs to be replaced, and I’d love it if paying some guy to put new stucco on the walls could actually make me more money.
Well stated. Next time I lose my job I want to buy some investment properties and, as you said, remodel the thing. I wish upgrading my car would help put money into my pockets, too.
Sorry but you are completely wrong. The purpose of this is to get money flowing, which is how we got out of the Great Depression. All the factories started opening up jobs and creating weapons, and the money flow got us out of the depression. The purpose of the stimulus package will make people spend more money, and place more money in the banks. More money in banks will increase the banks’ ability to lend money for businesses. Thus the stimulus package also gives money to the businesses and banks in order to keep them afloat long enough for people to start placing more money in banks.
You keep on telling yourself all that. We’ll see how it’s all going to work out in a few years. I’m sure that extra $13 per week will make ALL the difference in terms of “making people spend more money.” (eye roll)
Absent a war, which forces productivity by spiking a demand for certain products, massive government intervention does not help. Had the New Deal not ended after WWII, the Depression would have certainly returned and been exacerbated, just as FDR’s socialism kept it going for the previous decade.
Wall Street is pretty much unanimously betting on catastrophic and epic failure of this plan, which is why they’re cutting loses and selling off before things get worse.
Economic health must be measured in terms of productivity – not jobs, not government spending, not consumer spending (although it helps). Nothing about Obama’s economic policies address or stimulate productivity. Quite the opposite, in fact.
I wrote this, of course, before Obama’s budget came out which so stunningly punishes the productive. It’s worse than I thought.
But you keep drinking that Kool-Aide. Maybe you’ll even be right – after all, even though socialism has NEVER worked to make an economy more productive, it should be due for a win this time, right? In that unlikely event, watch this space – I’ll be the first to admit it. It will probably follow a post labeled, “Wow! Who knew pigs really COULD fly?!?”