Tell me again how Fiscal Stimulus will grow the economy?

[Jomama]

In the US falling oil prices have freed up about a half-trillion$ in 'free-cash' but it's not going back into the economy. That's equal to about 1/3 of all personal income taxes but the American consumer is not spending it. Meanwhile some people act like a 5% or 10% tax reduction will stimulate the economy?

And don't tell me that business owners will buy more machinery on speculation in this low demand economy. Some dipshit like Ed might say it but you cant find a business owner or lender who believes it.

So we've got unheard of monetary stimulus, massive fiscal stimulus by way of energy prices and... and the economy grew 0.7% in Q4'15.

Call me a bear but I don't see much more than secular stagnation with massive levels of debt for the next ten years - regardless of who is president.

Discuss

 

[baileyn45]

In the US falling oil prices have freed up about a half-trillion$ in 'free-cash' but it's not going back into the economy. That's equal to about 1/3 of all personal income taxes but the American consumer is not spending it. Meanwhile some people act like a 5% or 10% tax reduction will stimulate the economy?

And don't tell me that business owners will buy more machinery on speculation in this low demand economy. Some dipshit like Ed might say it but you cant find a business owner or lender who believes it.

So we've got unheard of monetary stimulus, massive fiscal stimulus by way of energy prices and... and the economy grew 0.7% in Q4'15.

Call me a bear but I don't see much more than secular stagnation with massive levels of debt for the next ten years - regardless of who is president.

Discuss

I would disagree that americans aren't spending the "free money". They are, just to keep a roof over their heads. It begs the question where would we be with $3 gas?

 

[ScienceRocks]

Investing money into r&d, infrastructure and science = more jobs and more jobs more people able to buy things.

Also your trucks need to drive over these roads too so it also has a positive in increasing productivity.

 

[Jomama]

Bailey, I agree and household debts keep dropping. It does seem like competitive and well managed infrastructure investment are always a big winner. Science, I'm more skeptical.

 

[Bob Blaylock]

Tell me again how Fiscal Stimulus will grow the economy?

The same way that this generates unlimited free energy…

 

[Andylusion]

In the US falling oil prices have freed up about a half-trillion$ in 'free-cash' but it's not going back into the economy. That's equal to about 1/3 of all personal income taxes but the American consumer is not spending it. Meanwhile some people act like a 5% or 10% tax reduction will stimulate the economy?

And don't tell me that business owners will buy more machinery on speculation in this low demand economy. Some dipshit like Ed might say it but you cant find a business owner or lender who believes it.

So we've got unheard of monetary stimulus, massive fiscal stimulus by way of energy prices and... and the economy grew 0.7% in Q4'15.

Call me a bear but I don't see much more than secular stagnation with massive levels of debt for the next ten years - regardless of who is president.

Discuss

First off, Lenders do not create the economy. Lenders only lend, when someone else is already creating the economy.

If your business is not profitable to begin with, they are not going to lend you money and "hope" it works out. The only time you get a loan, is if you have a home with equity, and they can loan against the equity. That way if the business fails, they take your home. Since most people do not have tons of equity in their homes after the sub-prime crash, that isn't happening much.

It doesn't matter if the "lenders believe it". Lenders will lend, if you are loan worthy. Good or bad economy, they will lend if you are loan worthy. If you are not loan worthy, they won't lend, no matter how good the economy is. The only real exception to that is sub-prime loans pushed by the government, and car loans. (because they at least get the car back)

Second, "oil prices have freed up about a half-trillion" sounds like a lot, but it's actually nothing.

For starters, that's only a bit over a thousands dollars per person. That's 50¢ an hour. Let's say everyone in the entire country got a whooping 50¢ an hour raise. Do you really think that would create miracles in the economy? Not likely.

But most of that savings isn't focused exclusively on the average citizen anyway. The average citizen drives 12,000 miles a year, at the average MPG of 24. That's 500 gallons of gas. The difference between $3 and $1.5, is of course 1.5, times 500 gallons of gas. The average savings a person receives in a year, is a whooping $750.

The bottom line is, flat out, as much as people yell and scream and cry and moan about OPEC and the evil oil companies every time the price goes up.... fact is, gas prices are not nearly as significant to the economy as everyone makes them out to be.

It wasn't gas prices that killed the economy in 2008. It was sub-prime mortgages the government pushed. And low prices for the last few years, certainly hasn't caused economic boom.

Third, cutting taxes would free up about $2,000 a year for me to use.

I don't drive 12,000 miles a year, so reducing my gas prices, certainly wouldn't even save me $500. Which do you think, would bring the most benefit? $2,000 or less than $500?

Moreover, economically speaking, which harms more, high gas prices, or high taxes?

Well... what are they used for? Money spent on gas, is used by people at the gas station to create jobs. By people transporting the gas, which creates jobs. By people refining the oil to gas, to create jobs. By people transporting the oil, to create jobs. By people who drill for the oil, to create jobs.

What does money given to government do? To pay Solyndra to make rich people wealthy, who then leave with our money. Or welfare people who create no jobs. Or food stamp people who create no jobs. Or even retired people who create no jobs. Or to pay people with grants, or political supporters, or special interest groups, Green Peace, or the NEA to put a crucifix in a jar of pee, or other wastes.

So given the options of paying the oil companies more, or the government more, I'd gladly pay the oil companies a ton more, to pay the government less.

Forth, monetary stimulus has never worked. At least not that I can see.

It certainly didn't work in World War 2, and it most certainly hasn't worked since then. Handing out money, has never worked. Look at Zimbabwe. If monetary stimulus worked, Zimbabwe should be leading Africa, and likely most of Asia.

You would be hard pressed to find a single example where it worked.

Lastly, to your main question how does fiscal stimulus work...

Well the theory in leftist ideology, is basically the myth in the movie "Field of Dreams"... "if you build it, they will come".

The fatal flaw in the mythology of the left, is that they confuse 'stimulating' with 'unrestricting' growth.

What's the difference? You have two towns. Town A, and Town B. There is a two-lane road between the towns.

There is tons of trade, and thus tons of traffic, between the towns. More companies would like to move into both towns, but the road between the two towns is too small, so growth is hampered.

The government decides to expand the road to four-lanes. Suddenly there is large growth in both towns.

Now... did expanding the road "stimulate" growth? Or did expanding the road reduce the restriction on growth?

The infrastructure investment didn't "stimulate" economic growth. It simply removed a barrier to economic growth.

But the left, would like to believe that there was no growth already, and that them blowing billions of dollars building stuff, just magically created growth.

However we know that isn't how it works, because hundreds of times, left-wingers living in their mythology, blew hundreds of billions of dollars building stuff, only to find it worthless and useless, creating no growth at all.

Take Ordos China.
Ordos, China: A Modern Ghost Town - Photo Essays

This city was built about 5 years ago, is completely abandoned. No one lives there. Entire city, completely empty.

Take Spain's White Elephant projects.
The white elephants that dragged Spain into the red - BBC News

Many infrastructure projects, all of which are largely abandoned. The worst being an international quality airport, built, opened in 2008, closed in 2012, only had a handful of planes land there. Now empty and deserted.

I've actually seen both sides of this argument played out. When I was a kid, my grandmother lived down south, along the Ohio River. There was another smaller river that fed into the Ohio River there, and back in the 1930s, the public works agency, built a bridge that crossed that river. On the one side, was the town, and the other was... pretty much nothing. Now if you kept going several miles, you hit State 52, which follows the river. But you could get on 52 from town. There was no reason to go down to the river, and cross on that public works bridge. And the city didn't upkeep the bridge either, because... why? No one used it, and it didn't go anywhere. There was nothing on the other side, that anyone wanted to get to.

I apologize, this is obviously not the bridge, because it has railroad tracks. But it was exactly like that. Rusted, steal framed metal bridge. I think in all my years, I might have seen one single car go across that bridge.

Eventually the city closed the bridge for safety reasons. So from 1930 to the late 1990s, that bridge was there. Then they closed it.

Then something happened in the mid/late 2000. Some people purchased land on the other side of the river. They built a dirt race track there, and built housing, and some other stuff.

But now people had to drive all the way up to the State 52, go across the river that way, and then back down to get to town. Now there was an economic demand for transportation across the river.

They rebuilt the bridge, and here it is, today. And there are now shops, and stores, that line the road all the way to the river.

So tell me, why did the bridge built from the tax money stolen from the working people of the nation, during the great depression, not produce any economic benefit at all, and then this bridge, funded and built with local money from the city, create tons of economic growth?

Because there was no economic need for the bridge in the 1930s to the 1990s. Thus having it there did nothing. When the economic need was created by private enterprise and growth... then the bridge reduced the restriction on that growth.

When economic growth creates an infrastructure demand, then creating that infrastructure, will facilitate that economic growth.

Without the demand created by the economic growth, infrastructure spending doesn't do diddly jack.

The left lives in a myth that infrastructure magically creates economic growth. Wrong. Economic growth happens first, which causes a demand for infrastructure. That growth is then hindered until the infrastructure needs are met.

When you create a bridge that goes nowhere, that doesn't create anything, and in fact hinders the economy because you are wasting limited resources on something that has no society value.

 

[waltky]

Actually the drop in oil prices...

... will do more to affect and spur the economy overall...

... than fiscal stimulus could ever hope to dream to do.

 

[EdwardBaiamonte]

So we've got unheard of monetary stimulus, massive fiscal stimulus by way of energy prices and... and the economy grew 0.7% in Q4'15.

1) inflation =0% so no stimulus
2) energy prices have nothing whatsoever to do with fiscal stimulus you illiterate
3) economy slow because of anti business liberal socialist policies.

 

[EdwardBaiamonte]

When you create a bridge that goes nowhere, that doesn't create anything, and in fact hinders the economy because you are wasting limited resources on something that has no society value.

A liberal simply lacks the brains to understand that when a lib soviet bureaucrat spends other people's hard earned money he does not spend it as wisely as the person who actually worked hard to earn the money. This is why the USSR, Red China, and 132 other countries failed, unbeknowenst to our goof liberals.