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I’m also worried about the time scale over which these expenditures happen, but doesn’t Friedman’s permanent income hypothesis argue in favor of stretching out these time scales?

Written By: Rich Hanna
URL: http://
Well, if the permanent income hypothesis is entirely true, it’s difficult to justify a stimulus financed by borrowing. I’m perfectly willing to entertain the hypothesis, generally, but this post was for judging the stimulus on its own terms.

Written By: Bryan Pick
URL: http://www.QandO.net
I think I see what you’re getting at Bryan - in terms of the PIH, that by borrowing the money for the stimulus, we know the bill will eventually come due and therefore tailor our spending accordingly.
I’m not really making an argument in favor of the stimulus - more trying to solicit more informed opinion than my own on this idea. Let me expand for a moment.

The income tax rebate checks didn’t provide any lasting gains, because everybody knew that that income was quite temporary. A $1000 check in hard times is nice, but unless I know I’m getting one every year, it’s not going to change my behavior.

Can the idea be extended to businesses and capital spending? Is it possible that the elongated spending timetable will encourage more aggregate demand? i.e. if I own a construction company that isn’t positioned to take advantage of immediate gov’t spending, I might consider hiring people and buying equipment now because I know that the government contracts will still be available next year and the year after. Yes, we know that the borrowing is eventually going to come due, in the form of higher taxes down the road, but as a construction business owner I could, theoretically, reap a disproportionate benefit from the borrowed cash by scaling up my business, knowing that I’ll receive a good chunk of the borrowed cash that _everybody_ will have to pay back.

Written By: Rich Hanna
URL: http://
I’ll take that bet on how well it is targeted.

The Dems targeted it to be a payoff/slush fund to their various pet groups and causes, and it is going to fill that bill very well.

Written By: shark
URL: http://
The payoffs are already in the works.
Acorn #1 - In excess of $4 billion for community work?
oh yeah buddy...oink oink oink.

Written By: looker
URL: http://
I hope this is NOT a short term, quick consumption-oriented stimulus, but a long term investment in future productive capacity. More consumption via debt may create a short uptick in the economy, but that will fade. The only chance this has to work is to focus on building infrastructure and setting the framework for enhanced productive capacity. That should be done over a number of years, not all at once.

Written By: Scott Erb
URL: http://scotterb.wordpress.com
I was going to make a joke about this being very accurately targeted at destroying the money in our wallets.

But there is no way I can top Erb.


Written By: newshutz
URL: http://

 
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