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November 06, 2008

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Rick Ballard

John Keynes Laffer lives!!

bgates

Some of you younger readers may not remember, but there was a time when the Times was opposed to deficit spending. That was in an era now known as "Monday".

So a well-written stimulus bill can pay about 40 percent of its own cost.
A trip to Vegas can pay about 98%, if the slots perform as advertised (I'm assuming if you go to Vegas and spend on a federal scale you get room and meals comped).

sbw

Laugher

michaelt

The old multiplier effect....how long has it been since this was a regular part of the discussion on the economy?

My guess? About eight years.

Jim Ryan

When I pull upwards really hard on my bootstraps I get about 40% lighter.

I do this when I have to stand for long periods and my feet feel tired.

rhodeymark

bgates - didn't we just get an earful about "casino economics" from our House bettors? Err betters, I mean.

PeterUK

How about a bridge in Alaska?

E. Nigma

I predict stimulus in employement at Printing and engraving, as many more dollars are made. Isn't that how wealth is created, daddy?

That, and wheelbarrows to carry the cash to the store.

rhodeymark

An inflation prediction thread? Step right up and place your earnings, ladies & gentlemen.

Rick Ballard

Any bets as when the market will awaken to the fact that the billionaire's rent boy is unlikely to harm the multi-nationals? Small business is definitely going to get screwed but Obama is owned by the bigs. And the Saudis.

bgates

PUK, that's an excellent idea, and we'll soon be reading about how Obama and Biden championed just such a project only to see it killed by Sarah Palin because she's anti-economy.

Forbes

Someone ought to take a look at how the advice Feldstein doles out worked for Japan--for it is the same antidote as offered to their real estate crack-up in the '90s. Low interest rates? Yup. (Nearly zero.) Infrastructure projects? Yup. (Japan basically paved over the entire country in concrete.) Deficit government spending? Yup. (Debt-to-GDP now exceeds 100%.) Lengthy recession? Yup. (Lasted a decade.)

Why should the same medicine cure our malady, when it only made Japan's worse? And wasn't the lesson of the Great Depression that it was the government's meddlesome hyperactivity that made the recession in the US so much worse (Greater) than for the rest of the world?

By the way, has anyone noticed that we've already been running a fiscal deficit for the entire up-cycle of the economy, with a $700 billion rescue (spending) package yet to be paid for? How is more such spending going to do anything (besides postpone the day of reckoning for all the excesses) but lead to inflation?

Pofarmer

Small business is definitely going to get screwed

I'm counting on it.

bgates, you're killin' me.

matt

I heard the gummint is discussing a new jobs program called the CCC as well. It will take unemployed auto workers, commodities traders, bond salesmen, and lehman staff and retrain them to build dams and bridges and repair infrastructure across the country. They will get meals and board, and be paid $10/day.

I wish....

Pofarmer

By the way, has anyone noticed that we've already been running a fiscal deficit for the entire up-cycle of the economy, with a $700 billion rescue (spending) package yet to be paid for? How is more such spending going to do anything (besides postpone the day of reckoning for all the excesses) but lead to inflation?

Been thinking about that quite a bit. If the budget had been balanced, then the spending might make some sense. But, when you are deficit spending in GOOD times, then that doesn't leave any cushion for that bad. However, I do realize that the Bush years have practically been the great depression.

kim

I love it. Smokey, over on Watts Up, says that Gore has called socialism 'Sustainable Capitalism'. I don't know the source, or have a link, but I appreciate Smokey's reference to George Orwell.
===============================

bgates

Matt, that's a two-fer. You get the direct stimulus of the construction, and when word gets out that Lehman Brothers built the bridges, the ferry boat industry would roar to life.

PeterUK

"Après moi le deluge"

PeterUK

It will be great when the auto workers five mile bridge connects with the five mile Lehman Brother's tunnel.

bgates

PUK, that reminds me - we may not need bridges or dams any more, depending on how far the waters recede.

And if they don't recede, we can call on the divine to hold the waters back.

In the words of Wright who taught us to pray, "God, dam America!"

matt

AP News
Washington, DC

Obama Promises Massive New Public Works Project

Today it was announced that one of the first items on the Obama presidential agenda will be the construction of a new, 120,000 seat arena/stadium complex in Washinbgton, DC. The facility will be used for multiple purposes, including mass rallies and sporting events.

The new project, to be named either Nuremburg or the Obamaseum, is projected to hold it's first event on early 2011, a rally sponsored by the National Socialist Workers Party featuring noted speaker and demagogue A. Hintler.

After this, the stadium will be configured to accomodate over 100,000 for newly adapted editions of Extreme Cage Fighting using real weapons. It is expected that over 20,000 new jobs will be created.

Project manager T. Caesar stated that the facility would be built at minimum expense as "volunteers" would be used and the construction materials donated by the pharmaceutical, coal, and automobile industries, as well as small businesses nationwide.

All hail Obama!

Message approved by J. Goeppels
Minister of Information

bgates

Maybe we should update an old standard...

God Damn America
Land where I live
We know we're selfish
So we relish
The great man
With a plan
To make us give
From each according
to his ability
To each according
to his need
God damn America
Because of white folks' greed!

PeterUK

bgates,
This is no laughing matter,construction will begin soon on the Great Pyramid of the Pharaoh Obama.

PaulV

there are limited resources available for the proposed improvments to the intrastructure. Any massive increase will lead to shortages and increased costs and inefficiencies. Currently bids for construction project are coming in lower reducing costs for taxpayers

PeterUK

The view from this side of the pond Daily Mail specially for Clarice.

Rick Ballard

PaulV,

I really don't believe that most people understand that commercial construction was doing fine through at least August. You're correct, the skilled tradesman aren't looking for work. Neither are the illegal immigrants laid off from the residential workforce. They've been back in Mexico for some time.

A drop in bid prices indicates that the market is tightening a bit but there are plenty of future contracts already in the pipeline.

matt

AP


strike demagogue....add motivational speaker

torquewrench


Every dollar in new government spending tends to increase the gross domestic product by about $1.50 on average, according to Moody’s Economy.com. This $1.50 results in about 40 cents of additional tax revenue. So a well-written stimulus bill can pay about 40 percent of its own cost.

You will find that a childish belief in, and reliance upon, the multiplier effect is something which goes way, way back.

One prominent occurrence is related in David Stockman's The Triumph Of Politics, which is a great book to read when reminding oneself that the Reagan Revolution ran off the rails in many areas, notably deficit control. (And which has lessons for conservatives about how to help derail liberal landslides -- as though *that* were ever going to be a contingency requiring action.)

Stockman relates that, circa 1983 or so, he was in a Cabinet meeting where Cap Weinberger was pushing for even more extensive defense expenditures. Stockman pointed out that hitting the numbers in question would require abandoning even the slightest pretense of fiscal discipline.

Quoted very roughly from memory, Weinberger turned to Reagan and said, "But Mr. President, every dollar that gets spent on the military is a dollar someone else gets. And they spend that dollar and give it to someone else, et cetera. And it gets taxed at every step. So in the end, all of the various taxes come back to the Treasury and pay for the original outlays. There's nothing to worry about."

Reagan beamed amiably and approved the numbers.

Of course, there are no fiscal perpetual motion machines any more than there are physical ones.

And what happened after that -- deficits as a percentage of GDP which even now we are not surpassing -- should not have been a surprise. It certainly was not one to Stockman. Nor to your faithful correspondent.

For the record, I thought that in the context of the early 1980s, with the Soviets on ascent and the Carter hollow military still echoing, massive new defense spending was absolutely non-optional. Were I Ronald Reagan, I would have told Weinberger that he was just going to have to take a deep breath and buckle down and find some way to spend another $500 billion.

But I wouldn't have done that (as Reagan did) while putting on an act of being a responsible steward of the public treasury, or pretending that the bills would not some day come due.

Jim Miller

More than a decade ago, I read a study in Public Interest. Seems that practically every administration (including Reagan's) tried to speed up spending on public works to stimulate the economy -- and all of them failed.

What typically happened, if I recall correctly, is that the money was pumped into the pipeline, but didn't get spent until the economy was in recovery.

In principle, those delays are fixable, but I wouldn't bet that Obama is the man to do it.

sylvia

Well the Laffer curve makes sense. Republicans keep saying lowering taxes will increase the revenue, and that may be right, up to a point. There is a point, say 0% taxable income where it isn't true, and if you keep slowly raising it, there is a point where raising taxes will increase revenue until the curve flips, and then decreases revenue as we approach a 100% tax rate. So the trick is to find the ideal tax rates for the time, not just to forever lower.

So what is the ideal tax rate. I think one way to judge is the level of the national budget deficit. A little debt is okay to help invest and grow, too much may be a sign you need to increase revenue. And then also whether there are any bubbles in the markets, particularly the housing market, which is the major end result of most investment in this economy.

I would suggest that the existence of a housing bubble means there is too much spent on investment, not enough in consumption. A quick way to remedy this is to raise taxes on the rich, lower taxes for the middle class. That would increase sales, and decrease excessive capital investment. Raise the miniumum wage slightly. Increasing sales would stimulate the consumer market, stimulating jobs, and stimulating the tax revenue. Raise the mortgage interest rates very slightly. I think this would help even out the housing bubble, so that the housing market cools slowly, yet consumer spending is stimulated at the same time.

fors

http://insidertrading.procon.org/viewtopic.asp

Uncle BigBad

Steve Diamond updates the lies surrounding the Ayers/Obama relationship

LUN

Rick Ballard

If anyone cares to examine PaulV's correct premise that dumping money into nonresidential construction is unlikely to achieve anything whatsoever, the supporting data can be found here. Nonresidential construction, including government projects, is doing just fine. Pumping government projects out ahead of schedule is just going to be very wasteful and inflationary.

It's Obama so I guess it's almost a sure thing.

Rick Ballard

I mean here. Nonresidential construction is up 8% YOY. This is "We're from the government and we're here to help you." squared. Dump money into a sector that's going great in order to stimulate...?

Headlines, I guess.

simply stupid

This presidential campaign was the latest and hopefully the last chapter in the leftist media's attempt to further their agenda. They were successful in emasculating Bush although some of Bush's decisions such as Gonzalez, Meiers and the handling of Katrina were his own failures.

It was easy for the media to exaggerateon the devasting loss es of Katrina and place blame on Bush rather than the incompetence of Nagin and Blanco. The media will try to control the narrative for Obama as they did with Clinton, but as they say it is the economy stupid and if it does not turnaround by summer 2010 we may be in store for a rerun of 1994. Remember Congress approval rating is even lower than Bushes.

In these dark days, with limited sunspot activity, I am always heartened by the Jewish festival of Hannukah which symbolizes the triumph of Jewish culture and religous spirit over Greek philosophy which celebrated human accomplishments through mythical portrayal. Maybe that was the theme of the Greek columns in Denver. Secular Humanism has created its own myth and its own savior.

clarice

Good enough SS, although it wouldn't have hurt if we'd paid more attention to gymnasium .

Angie Smith

Falling home prices have already reduced homeowner wealth by about $3 trillion; the stock market decline has cut wealth by an additional $8 trillion. This reduced household wealth is causing consumers to cut spending, leading to lower employment, lower incomes and, therefore, further cuts in consumer spending.

Angie Smith

The price of homes has fallen which has reduced reduced our wealth by approximately $3 trillion. In addition, the stock market decline has cut wealth by an additional $8 trillion, which has reduced household wealth and causing consumers to cut spending, which in turn leads to lower or no employment, lower incomes and more cuts in spending. Who's going to pay this debt? Surely not Obama and his liberal, illuminati tax-and-spenders in Washington!

sylvia

Yeah, that figures that Ayers is appearing now. No telling who else is going to pop up now too, now that the restraining pre-election orders are lifted. Ayers is going to start being everywhere now I bet. No way he is going to miss his next 15 minutes of fame. And I believe the source that Ayers and Obama wer talking this whole time. I'm trying to think back of the BHO interviews, did he say he hadn't "spoken" to Ayers in a year or hadn't "seen" him in a year, cause it makes a difference.

sylvia

"Falling home prices have already reduced homeowner wealth by about $3 trillion;"

True. But falling home prices means that new home buyers will pay less in mortgage, thereby increasing their spending power, thereby increasing the economy. With everything with the economy, it's 6 of one, a half dozen of the other. It's all about balance.

sam

A parting poem:

The election is over
The bitterness will pass
I'll hug your elephant
If you'll kiss my ...

sylvia

Good one Sam.

George S

This is nothing new - we've seen this done during the Great Depression when FDR instituted the Works Progress Administration to keep people "employed". Just one teeny little problem - you needed money to pay the workers. So, you could either print the money or transfer wealth by raising taxes. And raise them FDR did - from 29 percent to 90 percent. This perpetuated the depression and did nothing to lower the 14% unemployment rate.

To repeat history's mistakes in the hope that THIS time they'll work is a staple of leftist economics along with the tax the "rich", establish minimum wages and discourage investment by consumption. The only way to generate wealth is to engage in labor that other people benefit from or want. We can do without the roads and bridges that do not yet exist, for if we needed them we would have built them. Putting people to public works is just a diversion for it still sucks wealth from the private sector. And you just know that the political class will pass these "salaries" to voting blocs who won't work (for the children, of course).

Lowering taxes to encourage risk in scarcities is the only way to sustain economic growth, along with people remaining free to labor as they choose to meet the ever changing needs and wants of their similarly free bretheren. And this economic freedom is what irks the smartest people in the room.

Always remember: capitalism is the economy of a FREE people.

glasater

Very well said George S.

Anyone notice that Penny Priztker is part of Zero's economic transition team?

crackheadpoetcoward

Dems couldn't cosmetic the 2 years of pleasing obama with foreign aid cash and five year terms, cancelled loans and bank presidents bailouts for foreign investors.

Extensions amy lead to them haring out their broke now.

http://www.cbsnews.com/stories/2008/11/06/politics/main4579885.shtml?source=RSSattr=HOME_4579885

CalyMichelle

Obama picked the uniforms('the citizens' uniform') out for his national security corps. Chavez thinks high schoolers should be drafted, not just college.

'Armed with constitutional reform'

'Michelle Wants You'

sylvia

Saw this in the London Times. LUN. Just somehow relates to my theory of some sort of computer monkey business by the left. I'm wondering if it was a cover-up move.

"Upon discovering what they thought was a computer virus last summer, the Obama campaign were visited by agents from the FBI and Secret Service and told that their systems had, in fact, been hacked. "You have been compromised, and a serious amount of files have been loaded off your system," an FBI agent was quoted as saying, by the American Newsweek magazine."

sylvia

Or- was the FBI actually doing some investigative work on the "donations". I've been wondering where the FBI has been on this craziness the whole time. And on Obama's questionable friends. I hope I have been wrong about their inaction, and I hope they move fast, they only have a few months to work on this.

sylvia

"To repeat history's mistakes in the hope that THIS time they'll work is a staple of leftist economics along with the tax the "rich", establish minimum wages and discourage investment by consumption."

Well we can't make the tax on the rich 0%, although I think some on the right would love that. It has to be at a reasonable rate, and it's been lowered already. Lowering helped for a while but the effect has worn off. I doubt lowering it more will help any more and I think we need to turn it the other way for a while.

As to this "Lowering taxes to encourage risk in scarcities is the only way to sustain economic growth". Yes that is the mantra, however, there can be a problem with encouraging TOO much economic risk. What you get with that is an inflated stock market and a bloated housing market, where everyone and their cousin, including investment firms which lend the money out for this, is "investing" in this housing pyramid scheme. And that's what we have now.

Besides, decreasing the investment and raising consumption is one way to get the money out of the hands of people or forces who want to manipulate our systems and get it back into use in our economy.

Verner

here's a question. If the New York Times is so freaking fabulous on matters economic--why doesn't it get uber genius--Nobel winner Krugman et al to whip up a business plan to get the company solvent! Huh?

As far as all the "building infrastructure" jobs go. Great--but who is going to do the work? Whenever I drive by a construction site, half the workers are illegals. Do you think the moist eyed little obamabrats are going to lift a hammer or pour concrete?

Me either. Too good for that.

George S

When government gets involved in the market things tend go bad, for one simple reason: government only acts if it benefits politically while the market only acts to benefit the people. So what's the problem with an inflated market? If it's overpriced then it will correct itself by weeding out things that didn't work.

As for the "housing pyramid scheme", this is the poster child for government meddling in the market. Look at me. When the CRA was used to force banks to loan to those who didn't have the capital to obtain a mortgage by conventional means, the housing market exploded. Why? Because people who couldn't enter the market now came barreling in with their gubment mortgages looking to buy houses. The folks who did have the means to buy houses now found themselves in competition for the same houses (i.e., scarcities). So, those who had the means were forced to bid higher, thus telling the market there were termites in the wood pile so start buying. Now, housing prices rose, which forced the Fannie-Industrial Complex (with non-existent capital) to underwrite higher priced paper. Rinse. Lather. Repeat. This is precisely why the housing prices rose 5-times the rate of inflation from 2001 to 2004.

But eventually, the market collapsed because, hey, people just can't afford the rise anymore. Those who HAD to sell found themselves lowering the price to attract buyers. This signalled the market that the binge is over and the market fell, leaving us holding the bag because Fannie "guaranteed" these loans - but they only had one dollar in the bank for every thirty dollars of loans. There's where our 700 billion comes in, to cover the 29 dollar difference. (Funny how there's not a single Republican in the picture, ain't it?)

So, yes, the principles of capitalism did indeed cause the housing market collapse - the same principles that would cause economic disaster with public works programs. But if your going to turn a blind eye as to the reason why this market acted inimical to free market principles, then you are simply engaging in ideologically-induced denial.

So, once again, why should we be concerned with people who got mortgages they hadn't earned in exchange for their vote?

Angie Smith

Have we not learned anything from Japan? What about the $700 billion so-called "rescue" package from those liberal, illuminati tax-and-spenders that we taxpayers have to pay for? Is no one listening or watching?

Angie Smith

Have we not learned anything from Japan? What about the $700 billion so-called "rescue" package from those liberal, illuminati tax-and-spenders that we taxpayers have to pay for? Is no one listening or watching?

sylvia

"Why? Because people who couldn't enter the market now came barreling in with their gubment mortgages looking to buy houses. The folks who did have the means to buy houses now found themselves in competition for the same houses (i.e., scarcities"

Well that is one big factor. But I doubt that is the whole scope of the problem. The poor are not that large of a number, the percent of the poor who actually attempt to buy houses is an even smaller number.

No how about those miles of strip malls and shoddily built housing subdivision thrown up all across this country that no one needs. Who got the money to built those? It had to come from somewhere. It came from the banks, funneled at some point through the large investment firms. Also if you had any knowledge of those builders, half of them seemed to always go bankrupt half way in the process of building those homes. Those builders all lived on the edge. That's where the big money went. Not a few percent of poor people not paying their mortgage. That's what I'd like to see looked into.

matt

Re: Krugman

Economists don't actually do anything. They just explain it all years after it happened.

sophy

I will thank for my friends bringing me in this world. I am not regret to buy flyff penya .

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Wilson/Plame