Economic Stimulus
Jan. 18th, 2008 12:52 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
bjarvisThe powers-that-be in Washington are starting the early negotiations on some form of economic stimulus package. W, Pelosi, Reid and Bernanke are all agreed on the need for a package so it's a matter of details. I'm not optimistic.
Pelosi is pushing for something heavy on spending with some tax breaks tossed in to make it palatable to Republicans. W is pushing for large tax break with some minor spending tossed in to make it palatable to Democrats. Bernanke is working very hard to be as opaque as possible on just about everything. I'm not optimistic on any count.
Putting aside the political differences, I'm just not convinced the gov't can do anything. We're dealing with a massive real estate/credit bubble. A package at a proposed $140 billion is simply insufficient for a problem --and an economy-- so large. Worse, components of the problem are the budget deficit and the trade deficit: any extraordinary spending or tax cuts will only compound fundamental economic problems.
I don't see tax cuts as being useful: they work too slowly. The poorest aren't paying much in taxes anyway, middle-class folks will have only a small extra in their pay checks so the impact will be minimal if not sucked up by state increases to offset their deficits, and the upper-class won't even notice the change. Lowering corporate tax rates will also just spread their small gain across several quarters, having little impact in the short term. Recession-induced tax cuts are a classic manoeuvre, however, for reducing gov't spending overall and effectively unfunding existing programs: it's a neo-con's wet dream.
Extra spending and tax rebates probably won't make much difference either: the funds required to lift a $14 trillion economy would be vast and it would all be borrowed. Eventual repayment would be very painful.
I don't have any solid answers, but so far, things are working more or less as they should. Certain banks, dealers and investors are writing down their balance sheets; they made bad business decisions and they're taking a bath for it. Individuals are losing their houses; many should have been paying closer attention --it's their home, for god's sake!-- but some are truly the victims of fraud. Some are just collateral damage: they've done nothing wrong but the disaster upon their neighbourhood or city has crippled their home value and the local economy.
Fraud by mortgage brokers should be actively prosecuted; there should be assistance to those who risk losing their homes since it would be vastly cheaper to keep them housed than to push them into the street. I could get behind extra spending to increase unemployment benefits but I doubt the feds can do anything more than symbolic acts to lift the economy.
Pelosi is pushing for something heavy on spending with some tax breaks tossed in to make it palatable to Republicans. W is pushing for large tax break with some minor spending tossed in to make it palatable to Democrats. Bernanke is working very hard to be as opaque as possible on just about everything. I'm not optimistic on any count.
Putting aside the political differences, I'm just not convinced the gov't can do anything. We're dealing with a massive real estate/credit bubble. A package at a proposed $140 billion is simply insufficient for a problem --and an economy-- so large. Worse, components of the problem are the budget deficit and the trade deficit: any extraordinary spending or tax cuts will only compound fundamental economic problems.
I don't see tax cuts as being useful: they work too slowly. The poorest aren't paying much in taxes anyway, middle-class folks will have only a small extra in their pay checks so the impact will be minimal if not sucked up by state increases to offset their deficits, and the upper-class won't even notice the change. Lowering corporate tax rates will also just spread their small gain across several quarters, having little impact in the short term. Recession-induced tax cuts are a classic manoeuvre, however, for reducing gov't spending overall and effectively unfunding existing programs: it's a neo-con's wet dream.
Extra spending and tax rebates probably won't make much difference either: the funds required to lift a $14 trillion economy would be vast and it would all be borrowed. Eventual repayment would be very painful.
I don't have any solid answers, but so far, things are working more or less as they should. Certain banks, dealers and investors are writing down their balance sheets; they made bad business decisions and they're taking a bath for it. Individuals are losing their houses; many should have been paying closer attention --it's their home, for god's sake!-- but some are truly the victims of fraud. Some are just collateral damage: they've done nothing wrong but the disaster upon their neighbourhood or city has crippled their home value and the local economy.
Fraud by mortgage brokers should be actively prosecuted; there should be assistance to those who risk losing their homes since it would be vastly cheaper to keep them housed than to push them into the street. I could get behind extra spending to increase unemployment benefits but I doubt the feds can do anything more than symbolic acts to lift the economy.
