The problem is not spending ENOUGH!

[ShackledNation]

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.

 

[Tech_Esq]

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.

 

[MikeFrank]

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!

 

[cutter]

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

 

[hellofromwarsaw]

So much for jobs bills...enjoy the pub double dip, Foxbots! Brilliant!!

 

[ladyliberal]

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.

 

[Sundial]

The appropriate response would have been targeted cuts and incentives for businesses to spend on long term projects like R&D.

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.

 

[ScienceRocks]

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.

 

[Tech_Esq]

@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?

 

[asterism]

The appropriate response would have been targeted cuts and incentives for businesses to spend on long term projects like R&D.

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.

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.

 

[CrusaderFrank]

Krugman had a bad falling out with reality, the two are no longer talking to each other

 

[ShackledNation]

The appropriate response would have been targeted cuts and incentives for businesses to spend on long term projects like R&D.

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.

The problem is that demand was overstimulated in certain sectors artificially during the boom period, but real demand never existed because real wealth never existed. By creating money, the Federal Reserve mangaged to keep interest rates low to "stimulate" borrowing. A lower interest rate signals that there is a high percentage of saving, and that people therefore will demand goods in the future rather than the present.

When people demand future goods, companies invest in technologies and other capital goods rather than consumer goods. The policy of artificially low interest rates caused businesses to invest money in capital goods, even though real savings of consumers were actually quite low and people were demanding consumer goods. During the past decade, the structure of production moved towards producing capital goods, and employment was put there. However, because the lower interest rates were brought about due to an increase in the supply of money, and not an increase in the savings rate, prices rose. Inflation ensued, notably in the housing market. And when people could not actually afford what was being produced because they did not have the real savings to pay for the higher prices, the unsustainable boom collapsed.

If interest rates are low, savings should be high. But they are not. What needs to be done in a recession like this is for interest rates and savings to go back into balance. This is done by individuals saving more not spending more, and the interest rate rising to its free market price.

Trying to stimulate spending will only delay the necessary correction. This is not a matter of a shortage of aggregate demand. This is a matter of recovering from unsustainable excess demand in the past decade that led to malemployment and malinvestment. The economy needs to restructure, and the natural actions taken during this process are to cut back on spending, save, and be careful with money. This is what private individuals are trying to do, but government is trying to push them in the opposite direction. And as a result, we have a longer downturn.

The problem is not aggregate demand, and it never was. The problem is price controls set by the Federal Reserve and the manipulation of the money supply. Low demand is not causing problems at all.

 

[Auxous]

Take out the China factor and then compare Germany to the US.

This week, we examine the key EXTERNAL factor for Germany’s export-oriented growth – its tremendous success in penetrating key niches in China’s industrial powerhouse, most notably in high-tech capital and luxury consumer goods, at which Germany both specializes and excels.

Germany, more than most other Western industrialized countries, has tied its economic well-being to China's recovery. Indeed, trade with Beijing is the most important driving force behind the current German upswing.

It also explains why economists foresee a bright future for the German economy in the medium term.

China Exports Key to German Economic Success | Economy Watch

 

[Sundial]

@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?

You didn't answer the question: How does giving more money to big corporations get them to spend money, when they're already sitting on $2 trillion in cash?

Would it not be more effective to give the money to ordinary Americans? Especially when so many are out of work?

 

[CrusaderFrank]

@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?

You didn't answer the question: How does giving more money to big corporations get them to spend money, when they're already sitting on $2 trillion in cash?

Would it not be more effective to give the money to ordinary Americans? Especially when so many are out of work?

Yeah! Maybe like a Stimulus program?!!

 

[ShackledNation]

@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?

You didn't answer the question: How does giving more money to big corporations get them to spend money, when they're already sitting on $2 trillion in cash?

Would it not be more effective to give the money to ordinary Americans? Especially when so many are out of work?

Ordinary Americans aren't spending money either, they are saving it, as they should be.

 

[dilloduck]

@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?

You didn't answer the question: How does giving more money to big corporations get them to spend money, when they're already sitting on $2 trillion in cash?

Would it not be more effective to give the money to ordinary Americans? Especially when so many are out of work?

Ordinary Americans aren't spending money either, they are saving it, as they should be.

If the fed will print me 50K I promise to spend it in America on American products. I swear I will.

 

[ShackledNation]

You didn't answer the question: How does giving more money to big corporations get them to spend money, when they're already sitting on $2 trillion in cash?

Would it not be more effective to give the money to ordinary Americans? Especially when so many are out of work?

Ordinary Americans aren't spending money either, they are saving it, as they should be.

If the fed will print me 50K I promise to spend it in America on American products. I swear I will.

And your spending will cause prices to rise, lowering the standard of living for everyone who did not get newly printed money. So in other words, you are indirectly stealing from everyone else.

 

[dilloduck]

Ordinary Americans aren't spending money either, they are saving it, as they should be.

If the fed will print me 50K I promise to spend it in America on American products. I swear I will.

And your spending will cause prices to rise, lowering the standard of living for everyone who did not get newly printed money. So in other words, you are indirectly stealing from everyone else.

So------50K is chump change compared to what the Fed printed for the richest people in the world.

 

[Tech_Esq]

@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?

You didn't answer the question: How does giving more money to big corporations get them to spend money, when they're already sitting on $2 trillion in cash?

Would it not be more effective to give the money to ordinary Americans? Especially when so many are out of work?

I did answer it. In the part where I said, "I didn't suggest giving money to anyone."

That means corporations too. Directly to your question though. If the government gives you a dollar, you must answer the following questions:

a. Where did it get the dollar it's giving you?
Governments don't make anything and thus have no money of their own. That means they got it through some form or taxation (corp or personal likely).
b. How much did it cost the government to first collect the tax and then figure out that they needed to pay it to and finally to actually pay it to you?
The costs associated with providing money to individuals unless done through things like tax cuts, is usually excessive.
c. Ultimately, you are not going to provide one person with a job with all the money government spends on you. As the Democrats are finding out, even a weak payroll tax holiday for employees doesn't do much more than maintain the status quo.

For businesses to start spending money, government needs to create regulatory certainty. Currently, there is so much regulatory uncertainty that businesses do not have any understanding of what their future costs will be. Add to that an administration filled with people that love regulation and are constantly coming up with new ones and you have a business community that is paralyzed by the current regulatory environment, known regulations that haven't hit yet and unknown regulation that they fear may come at any time.

It will help when this situation no longer exists, but people may not want to wait around for business to naturally unwind after the being this pent up. To spur it, you would provide breaks as I mentioned in my previous post. That gets business to spend more (in the form of hiring and R&D) than they would naturally do. Why should we forgo revenue from businesses? Because the result, more people hired quicker and the future benefit, maintaining US industry's technological advantage, is deemed by government to be of more importance than a few additional nickels it could squeeze out of business if it didn't. Basically, the same reason we have the mortgage interest deduction for individuals.