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Lord Keynes resurgent
Posted by: McQ on Monday, November 24, 2008

It appears Obama is mostly Keynesian when it comes to economic policy. On the one hand he seems to understand that raising taxes on anyone (except, perhaps, businesses) during an economic downturn is simply foolish:
President-elect Barack Obama may consider delaying a campaign promise - to roll back tax cuts on high-income Americans - as part of his economic recovery strategy, two aides said on Sunday.

David Axelrod, the Obama campaign strategist who was chosen to be a senior White House adviser, was asked if the tax cuts could be allowed to expire on schedule after tax year 2010 rather than being rolled back by legislation earlier. "Those considerations will be made," he said on "Fox News Sunday."

Bill Daley, an adviser to Obama and commerce secretary under former President Bill Clinton, said on NBC's "Meet the Press" that the 2010 scenario "looks more likely than not."
He's pure Keynesian when it comes to governmental deficit spending during a down economy, somehow buying into the notion that going further into debt to the tune of 500 to 700 billion, depending on which version of the proposed stimulus package he's pushing you believe, is a good thing.
Facing an increasingly ominous economic outlook, President-elect Barack Obama and other Democrats are rapidly ratcheting up plans for a massive fiscal stimulus program that could total as much as $700 billion over the next two years.

That amount, more than the nation has spent over the past six years in Iraq, would rival the sum Congress committed last month to rescuing the country's financial system. It would also be one of the biggest public spending programs aimed at jolting the economy since President Franklin D. Roosevelt's New Deal.
Who is going to pay for this? Most likely the US military in the short run. And, when the economy cycles back into the black, you are - with massive tax increases. By then, middle class will carry a completely different upper limit.

Remember the Obama $700 billion is in addition to the previous $700 billion spent to bailout financial institutions. Of course that's up a bit from the $175 billion stimulus plan he touted on the campaign trail.

1.4 trillion (about 10% of the GDP) we don't have but will have to "get" eventually.

And if you thought the WPA of the New Deal was gone forever, think again:
The plan would include new funding for public-works projects to repair the nation's crumbling infrastructure, as well as a fresh infusion of cash to promote green technology and alternative-energy sources. It also would include targeted tax cuts for working families, students, the elderly and job-creating businesses that Obama touted on the campaign trail.
But of course the necessary companies and jobs to do all of that infrastructure repair exist now.

So let's look at the same plan restated:
Obama said on Saturday he was crafting an aggressive two-year stimulus plan to revive the economy, aiming to save 2.5 million jobs by January 2011 through projects including transportation infrastructure, school modernization and alternative energy.
Note carefully the language. This isn't about creating new jobs, it is instead his belief that it will save 2.5 million jobs by 2011. Of course, none of this will most likely get underway until 2011 either, given the process necessary by law to fund all of these infrastructure projects he speaks about. If it's that bad out there, you have to wonder what those with the 2.5 million jobs he's going to save will do until then.

It is also about chasing the vaporware of alternative energy and the promised resultant jobs those programs will create. In relative terms, if unemployment reaches the projected 7%, this sector isn't likely to take much off of that figure.

So, possibly no new taxes on individuals - a good policy. Massive government deficit spending to the tune of 500-700 billion dollars we don't have (in addition to the other 700 billion we don't have) on infrastructure and vaporware with the promise to "stimulate the economy". A foolish policy.

And the little engine that could - tax cuts and investment incentives for businesses? Ignored.

We're going to deficit spend ourselves out of this mess, by gosh. And if you believe that will work, I have some land east of Florida in which you may be interested - or is it beach front property in Kansas? Either way, you'll probably like it. And the price is quite reasonable. Much less than this stimulus package but with at least equal value.
 
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If it is not a good idea to repeal those tax cuts when the economy is doing poorly, can Obama explain why it is a good idea to repeal those tax cuts when the economy is doing better?


Or maybe Erb? Cap?


 
Written By: shark
URL: http://
Any way you slice this, our economy is in very dark and disturbing times. We are standing on the edge of an abyss with one foot half way already down into it. It seems like as a nation we are running around like chickens with our heads cut off. Everyone knows we are in deep despair but no one seems to be able to agree on what to do about it. So much attention has been given to the mortgage crisis that little attention or credit for what the high cost of fuel this past year has played in our downward spiral. That one single factor caused families to break the budget at the pump alone. Consumer goods in every capacity from production to shipping passed the increased costs on to us. (and most products now cost more and come in smaller packages) Electric companies sought and were granted huge price increases. We cut back, quit going out to eat as much or at all, quit spending on frills and even necessities, that sadly resulted in even more jobs being lost. It has been a real catch-22 in the economy. Record jobs and homes are being lost still. Unemployment is climbing every day. While most of the public seem to be doing the happy dance around the pumps, and reporters are reporting the happy dance, little is being reported about OPEC’s plans to keep cutting production and they will until they get prices back up where they want them to be. The average family is so far behind they will never get caught up. Jeff Wilson has an interesting book just out called The Manhattan Project of 2009. I heard him on a radio talk show interview and he blew me out of the water. I got his book on Amazon. I think we are going about this whole thing wrong. WE keep spending billions on bailouts and stimulus checks. Why not invest in creating improved grids, infrastructures, and creating millions of badly needed new green collar jobs? The last stimulus package cost us 168 BILLION and did NOTHING to stimulate our economy. That would have gone a long way toward starting up alternative energy projects and creating new jobs. www.themanhattanprojectof2009.com Check out what they are doing in California.Check out this link to read the news. This is so exciting for those who realize the importance of seeing out country transfrom away from fossil fuels and to cleaner, cheaper electric cars. I read about this in Jeff Wilson’s book The Manhattan Project of 2009. I am thrilled and surpriesed to see it taking place so soon. Go The Manhattan Project of 2009, Go Jeff Wilson for writing this enlightening book, Go California, Go Arnold, and GO BETTER PLACE...IT IS ENCOURAGING TO SEE THERE ARE THOSE OUT THERE WHO ACTUALLY GET IT. HOPEFULLY WASHINGTON WILL FOLLOW SUITE SOON! Link to news story below or simply type electric car infrastructure california or Better Place into search engine. http://www.freep.com/article/2... http://www.dailygalaxy.com/my_ weblog/2008/11/better-place-gl.html




 
Written By: sherry jansen
URL: http://
"Green collar" jobs are wishful thinking. Any putative energy replacement capable of creating millions of new jobs will also have to cost enough to fund those millions of news jobs, making it completely uncompetitive with conventional energy sources. Including fission, which is by any actually rational accounting far greener than solar, wind, or any other such thing.

Obama’s touting of "green collar jobs" is just further proof he has no clue how an economy runs; those following along are either equally ignorant or looking for a slice of what they correctly perceive as government about to cluelessly spend yet more billions.
 
Written By: Jeremy Bowers
URL: http://www.jerf.org/iri
Two issues:

1. Fiscal stimulus on the spending side often come too slow - by the time you get it up and running you’re out of the recession anyways. Maybe this will be a long one, and that won’t be a problem - but maybe it will be. Example: When I fantasize in "state planner" mode, I imagine hundreds of GE made nuclear power plants going up in every state of the union. Good jobs that generate electricity not fueled by imported oil. But by the time you even get the environmental impact reports done it would be 2012 or so...I doubt we will be in recession then.

2. Some of this crisis may end being about the credibility of the US government to keep on spending. Now, our debt level as % of GDP are not that high yet (see Japan) but the ticking time bombs of entitlements just makes everyone nervous.

Maybe Obama is the One to do a Nixon on entitlements...only the first black Dem president could cut them without fear of being called a Rich, White Fatcat Republican.
 
Written By: harun
URL: http://
I’m wary of sniping without a counter-argument.

You seem to be arguing that the stimulus shouldn’t be done and should be done faster at the same time.

So what’s the anti-Kenyesian to do? End the entitlement programs that are staving off a Great Great Depression? End the capital gains tax to create wealth that is likely to be hoarded rather than invested or spent?

I don’t understand the rationale for spending 700bln a year on national defense for 50 years but a one time infrastructure investment on the same order is considered foolish.

Roosevelt erred when he attempted to balance the budget in a depression, through spending cuts and tax increases, and exacerbated the crisis. The federal government has to spend money it doesn’t have because local governments don’t have access to the credit to do so. If local governments raise taxes to cover shortfalls, as has been happening by stealth with inflated property tax assessments, the economy will continue to flounder. Once the economy recovers and the GDP increases, the taxes realized from those increases, without creating new taxes, will pay for the investment. Assuming a competently managed government, which we will enjoy for the first time in over a decade.
 
Written By: mark r
URL: http://
I don’t understand the rationale for spending 700bln a year on national defense for 50 years but a one time infrastructure investment on the same order is considered foolish.
Well I guess it has something to do with that silly little document called the Constitution which, for whatever reason, finds expenditures for war to be legitimate and therefore authorizes them, but says absolutely nothing about bailouts.

Or at least nothing any Constitutional scholar has yet to be able to turn up to legitimize them. Maybe you have a better handle on that than they do.

Oh, and we’ve spent 700 billion in 5 years, not 1, for Iraq. We’ve thus far committed approx 1.4 trillion to bailouts (not to mention 7.4 trillion in fed loans) this year to bailouts .

 
Written By: McQ
URL: http://www.QandO.net
Correct me if I’m wrong, but aren’t "Green Collar" jobs precisely the wrong kind of idea right now? Even putting aside the timeline of any such projects, my take is this:

Many of these GC jobs do not exist because they are an inefficient immediate use of resources. The cost per unit output is higher for a GC job than a non GC job — hence why they don’t exist.

During an economic slump, don’t you want to invest your money in an efficient venue with high immediate value relative to cost? This is akin to the public works projects of the New Deal. It was money spent on creating something of little or no value (many of the projects). That money could be much better spent funneled into a sector of the economy that actually creates wealth.
 
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URL: http://
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Written By: 3
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