damn is she smart and beautiful.
Here she is :
Posted on 01/26/2008 9:12:26 AM PST by SeekAndFind
Why America Must Have Fiscal Stimulus
by Lawrence Summers, Financial Times
The odds of a 2008 US recession have surely increased after a very poor employment report, growing evidence of weak holiday spending, further increases in oil prices, more dismal housing data and further writedowns in the financial sector. Six weeks ago my judgment in this newspaper that recession was likely seemed extreme; it is now conventional opinion and many fear that there will be a serious recession. Markets now predict the Federal Reserve will provide further stimulus to the economy by cutting rates by an additional 125 basis points on top of the 100 basis points by which they have already been cut so that rates fall to the 3 per cent range.
There is now a compelling case for the president and Congress to create a programme of fiscal stimulus to the US economy that could be signed into law in the next several months.
Given the market’s prediction of Fed policy actions, the debate now is not about whether or not to provide macroeconomic stimulus. That question appears to be settled. The question is whether it is better for all the stimulus to come from discretionary monetary policy or for some of the stimulus to come from discretionary fiscal policy. A diversified policy approach seems clearly preferable in that (i) in a world where judging the impact of policy measures is difficult, the outcome is less uncertain with a diversified mix of stimulus measures; (ii) the proximate impact of fiscal policies is felt by the families bearing the brunt of recession, in contrast to monetary policies whose immediate impact is on financial institutions; (iii) use of fiscal policy reduces the amount by which interest rates have to be reduced, thereby reducing downward pressure on the dollar, which in turn contributes to upward pressure on US inflation and international instability; (iv) partial reliance on fiscal policy mitigates the various risks of bubble creation associated with excessively low interest rates.
Beyond policy mix considerations there is the desirability of maintaining stable demand by insuring against excessive declines in consumer spending that lead to reduced employment and further declines in incomes and spending. The economy has been more stable in recent years than historically – one reason is that consumer credit markets have allowed households that suffered income declines as the economy turned down to maintain spending by borrowing on credit cards or home equity. These mechanisms, like monetary policy, are less reliable with burdened borrowers and troubled financial institutions. Japan’s experience in the early 1990s – when it failed to act decisively to respond to a downturn associated with collapsing financial bubbles and then experienced a disastrous vicious cycle of economic downturns and credit problems – should be highly cautionary regarding the importance of supporting consumption in the wake of financial problems.
Fiscal stimulus is appropriate as insurance because it is the fastest and most reliable way of encouraging short run economic growth at a time when a serious recession downturn would pressure American families, exacerbate financial strains, raise protectionist pressures and hurt the global economy.
Poorly provided fiscal stimulus can have worse side effects than the disease that is to be cured. This suggests close attention to three issues:
First, to be effective, fiscal stimulus must be timely. To be worth undertaking, it must be legislated by the middle of the year and be based on changes in taxes and benefits that can be implemented almost immediately.
Second, fiscal stimulus only works if it is spent so it must be targeted . Targeting should favour those with low incomes and those whose incomes have recently fallen for whom spending is most urgent.
Third, fiscal stimulus, to be maximally effective, must be clearly and credibly temporary – with no significant adverse impact on the deficit for more than a year or so after implementation. Otherwise it risks being counterproductive by raising the spectre of enlarged future deficits pushing up longer-term interest rates and undermining confidence and longer-term growth prospects.
Taken together these criteria suggest the desirability of a programme of equal payments to all those paying either income or payroll taxes combined with increases in unemployment insurance benefits for the long-term unemployed and food stamp benefits. Such a programme could be implemented quickly and would largely benefit those most likely to be cut off from credit markets and with the most urgent need to spend. It could easily be made temporary. Ideally, further stimulus would be provided by measures to reduce future deficits and increase long-run confidence.
How large should a programme of fiscal stimulus be? It depends on what else is done to help the economy – a subject to which I will return soon. But a $50bn-$75bn package implemented over two to three quarters would provide about 1 per cent of gross domestic product in stimulus over the period of its implementation. With some multiplier effects the total impact would be in the range of 1 per cent of GDP over a year. This seems large enough to take some burden off monetary policy and yet unlikely, if properly implemented, to risk substantial damage given flexible monetary policy if the economy proves stronger than expected. After many months of behind-the-curve policy, moving to implement such measures seems more prudent than waiting till the necessity of even greater ones has been unambiguously established by further pain.
The writer is Charles W. Eliot university professor at Harvard University
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A Stimulus Plans That Won't Stimulate
by Amity Shlaes, New York Sun
Proposing ways to deal with the prospect of recession is a job requirement for presidential candidates, and every one of them — from John Edwards to Ron Paul to Mitt Romney — is offering some antidote or other.
The surprise is that one of the largest projects under discussion comes from a man who isn't running for office at all. His name is George W. Bush.
Ok, so the president would probably call the package of ideas that he was hinting at recently in Chicago "economic stimulus," not "political logrolling." And it is true that the economy has troubles. There is the subprime mess. The dollar's slide suggests that the relative competitiveness of America may be in jeopardy. Americans save too little. Then there is the jump in unemployment to 5%, and the looming structural deficits from entitlements. Everyone wants a less bumpy future.
But some of the devices that Mr. Bush has apparently been thinking about in recent weeks aren't worthy of him. They are so targeted, so temporary, and so political that they could come out of Hillary Clinton's playbook. They contain too little for long-term growth to make them welcome, even to fellow Republicans before the Michigan primary trying to explain away foreclosure on a ranch home in Flint.
The first idea on the Bush table is bonus depreciation, something similar to what was once called accelerated depreciation. This would let companies deduct half the purchase price of capital equipment, such as computers or machine tools.
So far, so good. Such depreciation would curtail the over-taxation of corporations, one of the great American disadvantages and a concern of Treasury Secretary Hank Paulson.
But the plan also may give disproportionate benefit to one industry, autos, at the expense of another, say, financial services. What makes the proposal downright unappealing is that it is temporary, for 2008. A one-year break will make businesses shop like crazy in response for 12 months and then stop abruptly. That amounts to more bumps, not fewer.
Second, the administration is apparently discussing giving a $600 rebate to families with taxable income of less than $100,000. Under review is a wider program that reaches even families who pay no income tax, handing out $400 per household.
Another idea is to reduce the bottom tax rate to 1% from 10%, a full nine percentage points. Any one of these, the estimates suggest, would cost about $100 billion. And again, the break lasts just one year, 2008.
The general concept of the temporary rebate is reminiscent of Jimmy Carter's $50 per head rebate in 1977. It is also similar to something Mr. Bush did early on in his first administration, giving families checks of as much as $600 in the summer of 2001.
But rebates are off-point. As mentioned, saving, not spending, is what Americans need to be doing nowadays. The very risibility of the concept killed the 1997 proposal. Barber Conable of New York, the leading Republican from New York on the Ways and Means Committee, likened rebates to "dropping money out of airplanes."
As for Mr. Bush's rebate, scholars Matthew Shapiro and Joel Slemrod of the University of Michigan found that consumers didn't spend the cash as politicians hoped for, but saved it. How perverse of them! More important were the income, capital gains and dividend tax cuts that the Bush administration and Congress made law in the first term.
A final proposal on the table is a refundable tax credit for first-time home buyers. In other words, you get money even if you pay no taxes. This idea overlooks the role of easy credit in the subprime disaster.
The worst thing about the stimulus fad overall is that it steals political capital from good projects, such as making the Bush income tax cuts permanent. Indeed the only way to justify the abovementioned concepts is as a giveaway to Democrats in exchange for permanence for Bush's cuts.
What else is going on? Staffers at the Treasury Department recently produced serious proposals to address that corporate tax problem. They suggested replacing the corporate income tax with a form of value-added levy that rewards investment. Staffers also talked about simply cutting corporate tax rates. And they proposed expanding depreciation permanently.
These last thoughts reflect the broad proud culture that is Mr. Bush at his best. The Bush administration has after all achieved a lot, with historically low unemployment and many dozens of months of strong growth.
My own guess is that the consumerite package — whatever form it eventually takes — isn't even what Mr. Paulson believes in. It is what one, maybe two, political advisers want. To paraphrase a worse economist than Mr. Bush, Richard Nixon, we are not all Keynesians now. When it comes to the economy, the president would do better if he just stayed off the campaign trail.
Miss Shlaes, a senior fellow in economic history at the Council on Foreign Relations, is a columnist for Bloomberg News.
You all (mostly) know Larry Summers ( former US Treasury Secretary, Former Harvard President and now Harvard Professor ( why he wants to stay at Harvard after the grief he got, only he can explain ) ).
But who is Amity Shlaes ?
Here’s a brief bio....
Amity Shlaes writes a syndicated column for Bloomberg News. Ms. Shlaes is a senior fellow in economic history at the Council on Foreign Relations. Her many appearances on television and radio include commentary on public radio for Marketplace.
Shlaes graduated magna cum laude from Yale University. She previously wrote a column for the Financial Times for five years, for which she won the International Policy Network’s Bastiat Prize for Journalism in 2002. Before that, she worked at the Wall Street Journal, where she was a member of the editorial board. She has also written for The New Yorker, The American Spectator, Commentary Magazine, Foreign Affairs, National Review, and The New Republic, among others. She is an ardent student and admirer of the work of Milton Friedman.
She was recently awarded the 2007 Deadline Club award for Opinion writing[3]. She was also recently awarded the Newswomen’s Club of New York’s Front Page Award for her Bloomberg columns.
Her first book was Germany: The Empire Within (ISBN 0-224-02700-X), about Germany at the time of reunification. She followed it with The Greedy Hand: How Taxes Drive Americans Crazy and What to Do About It (ISBN 0-375-50132-0).
Her latest book, The Forgotten Man: A New History of the Great Depression (ISBN 0-06-621170-0), about the Great Depression and the New Deal, was published by HarperCollins in June 2007. Many public figures provided blurbs for the dust jacket: Harold Evans, former Federal Reserve Chairman Paul Volcker, William Kristol, Paul Johnson, former SEC Chairman Arthur Levitt, and Mark Helprin.
She is married to fellow journalist Seth Lipsky.
But that would never work here.
Yes. But if it lasts more than four hours, you should see a doctor. Or so I’m told.
Let me do some research on it and see what I can nail down.
Regardless, economics works. If any government tightens their elt and reduces taxes, industry prospers.
Yea, it “stimulates” all the foreign countries where most of the consumer products purchased are made.
The only fact that “stimulus” packages have proven in the past is that THEY DO NOT WORK!
okay, name one “stimulus” package that worked?
hmmmmmmmmmmmmmmmmmmmmm...waiting...
Apparently they did not realize that they had taken the money via taxes in the first place.
I’m all for tax cuts!
This “stimulus package” is redistribution of wealth!
which is total unadulterated Bravo Sierra.
As I have stated earlier, if the clowns in D.C. were serious about solving the problem they would BALANCE THE BUDGET & eliminate the IRS!
I have seen Amity Shales on tv.
damn is she smart and beautiful.
Bush is just as rotten as FDR!!
the picture doesnt do full justice.
I personally women become even more beautiful up around 40. and im 21.
“. . . okay, name one “stimulus” package that worked?
hmmmmmmmmmmmmmmmmmmmmm...waiting...”
Okay stop waiting. Here’s a stimulus package that really worked: World War II. Pulled the country right out of the depression.
Here’s another federal “give-away” that lead to a massive post-war upgrade of U.S. human capital and ushered in an unprecedented era of economic, scientific, and technological growth: The G.I. Bill.
The nice thing is, we now know how big the stimulus needs to be to work AND we also now know that we don’t really need a world war to justify the stimulus.
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