The problem is not spending ENOUGH!

Discussion in 'Politics' started by ShackledNation, Aug 19, 2011.

  1. ShackledNation
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    ShackledNation Libertarian

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    Or so says Paul Krugman.

    Maybe we should look at other countries in this recession to see how they have fared and how much they have spent.

    How about we look at Germany. From a balanced budget during 2007–2008, Germany has been running a deficit of only 3 percent of GDP during these tough times. So, with only modest stimulus compared to our deficit of 11 percent of GDP, what do you think has been happening to unemployment in that country? Keynesians would predict that it is worse in Germany than in the United States. If more spending really is the answer, clearly Germany is not spending enough.

    Both the United States and Germany had unemployment rates of about 8 percent at the beginning of 2009. Here, in the United States, the unemployment rate quickly rose up to a peak of 10 percent, and has remained at 9 percent ever since. Over in Germany, the unemployment rate hardly rose at all, and is now down to 7 percent.
    Keynes and Space Aliens - Clifford F. Thies - Mises Daily

    Who spent a lot? Greece. Hmm.

    Guess big spending is not the answer after all.
     
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  2. Tech_Esq
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    Tech_Esq Sic Semper Tyrannis!

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    Keynsians are cracked. There is no way that government can spend enough money to provide enough stimulus to move a $12 or $13 Trillion dollar economy. All it could possibly do is nudge it slightly. We did that. We spent a Trillion dollars on a slight nudge. Anyone with the most miniscule amount of economic knowledge knew that when we started down this road.

    The appropriate response would have been targeted cuts and incentives for businesses to spend on long term projects like R&D. This strategy would have provided a private sector multiplier effect so instead of a $1:$1 ratio government spending to net effect (and that's being generous), there would have been a $1:$4 or more ratio. In that case, the $1 would have been in forgone revenue instead of borrowed money. This would have resulted in a $4 trillion stimulus without the $1 trillion dollar hangover the Keynsian "strategy" left us with (New debt to the Chinese).

    The Keynsians gave us the worst of all possible scenarios. A super-expensive program, that requires massive incursion of new debt AND DOESN'T WORK! Worse yet, it wasted time and created an economy in which money evaporates on a regular basis. (ala Jimmy Carter). Obama just gave us a new way to get the same effect.
     
  3. MikeFrank
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    MikeFrank Member

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    What an assclown.

    President Obama how do you plan to end the debt crisis in america?

    Obama : Well it's easy, I will print money until we run out of paper!
     
  4. cutter
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    cutter Silver Member

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    A large increase in spending would be great as long as IT'S NOT GOVERNMENT SPENDING.
     
  5. hellofromwarsaw
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    hellofromwarsaw BANNED

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    So much for jobs bills...enjoy the pub double dip, Foxbots! Brilliant!!
     
  6. ladyliberal
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    ladyliberal Progressive Princess

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    The notion of comparing deficit spending to unemployment across different countries is an interesting one. I'd be interested to see if there are any studies that try to do this. The linked article does not really purport to do this, performing no original research and citing no sources from the last 60 years.

    The examples given are by themselves rather unpersuasive. Different countries face different problems. Germany's economy has certainly been better-run than Greece's. Precisely because of this, no Greek policy, one of reduced government spending or otherwise, could possibly restore the Greek economy to health in the near future. A good study would include as many countries as possible that were *similar* prior to divergent post-crisis differences in spending, while correcting for other differences.
     
  7. Sundial
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    Sundial Class Warrior

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    US companies are already sitting on between $1 and $2 trillion in cash, depending on who you ask.

    Top 20 Firms with cash

    1. Citigroup $526B
    2. JPMorgan Chase $414B
    3. Wells Fargo $112B
    4. General Electric $82B
    5. Microsoft $53B
    6. Google $39B
    7. Oracle $29B
    8. Apple $28B
    9. Johnson & Johnson $27B
    10. Pfizer $24B

    11. Chevron $18B
    12. Coca-Cola $14B
    13. Intel $12B
    14. IBM $12B
    15. Exxon Mobil $10B
    16. Walmart $9B
    17. Schlumberger $5B
    18. AT&T $4B
    19. Procter & Gamble $3B
    20. Philip Morris $2B

    Read more: Companies sit on $2T as economy tanks - NYPOST.com


    How would giving them tax money get them to spend money they're not spending already?

    US companies are not spending because there's not enough demand. The only way to increase demand is to get money into the hands of ordinary Americans - for example, by creating jobs so that fewer people are unemployed.
     
  8. Matthew
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    Matthew Blue dog all the way!

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    We need to do everything we can to avoid going down the same road as the wiener republic of germany and Zimbabwe. Get a balanced budget and fast!

    Get our troops out of the middle east and close the fucking bases there. Fuck the middle east. Cut, cut, cut. Of course you can build streets and put money into that, but that won't save us for decades if we do. We got to cut now or we will be down graded more. Lift the red tape on drilling for oil.
     
    Last edited: Aug 19, 2011
  9. Tech_Esq
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    Tech_Esq Sic Semper Tyrannis!

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    @sundial

    Sorry limitations of phone response.

    I didn't suggest giving money to anyone. Your agenda is showing by using that language. That you don't understand the inherent difference between forgoing revenue and spending money might explain why we are where we currently find ourselves. Apparently this lack of understanding is broadly shared across your side of the debate.

    Stimulating long term r&d efforts means more jobs. Targeting other similar incentives will similarly mean more good paying jobs. More of those kind of jobs support more burger flippers or other service jobs. All that means more revenue to treasury.

    Are you starting to get it yet?
     
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  10. asterism
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    asterism Congress != Progress

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    The companies that would use such a tax credit are in the small business sector, which typically are the ones that expand after a recession. The big companies like the ones you listed are hanging onto the cash in the event things get worse. They are not as nimble and do not fuel recoveries.

    I'd spend and hire more on my new venture if I didn't have to amortize the new equipment. Another policy that would foster growth and hiring would be an accelerated carry forward for past losses. Currently for small business owners, that's limited to $3000 per year. It's a much larger risk to sink after-tax money in a new venture if it doesn't offset income.

    I am possibly going to be in a situation this year where I have substantial taxable income but negative cash flow because I can't deduct all my expenses (some are considered capital investments and have to be amortized). And if the new venture fails, I can't deduct any of the losses unless I liquidate everything and then I'm still subject to the $3000 per year limitation.

    Gotta love it, if I lose money I still owe income tax. I hired people and bought equipment but can't deduct them as expenses even though they were actual expenses.

    This used to be solved by leveraging the new ventures (borrowing the money) because in the event of business failure the bank would liquidate the assets and collect on the rest of the debt. The business owner could then pay off the debt using the borrowed cash and the interest was deductible. Thanks to the new financial reforms as well as the FDIC stress tests, banks are not lending to small businesses in this fashion anymore. I doubt anyone with the President's ear has ever heard of this situation, which is why it's dreadful to have these theorists formulating his policy.
     
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