Posted on 01/22/2008 2:35:21 AM PST by Aristotelian
A reporter on Fox News recently asked, "Which presidential candidate is most qualified to turn the economy around and avoid a recession?" The quick answer is: none.
No candidate will become president soon enough to matter, and to ask the question is to presume that recessions can and should be avoided. But some business mistakes require time to be fixed. Too many houses were built in some areas, so prices have to fall to discourage more building and encourage more buying. Some banks made too many bad loans, so they need to become more cautious. Besides, if presidents really knew how to avoid recessions, why do we keep having them?
Nonetheless, President George W. Bush is now joining the election-year rush to "give the economy a shot in the arm." A shot of debt, that is.
All proposals for fiscal stimulus claim to "jump-start" the economy by having the government borrow money from Smith and give it to Jones. Unfortunately, Smith is paid interest on that IOU, which implies a higher tax burden on somebody. That future taxpayer is, as usual, the forgotten man. All the attention is instead focused on Jones -- trying to get the Jones family to spend more on what Mr. Bush alluded to as "basic necessities."
Investors know such consumer staples are the least cyclical component of the economy. The most recession-prone household purchases are those that can most easily be postponed, such as new homes, cars, appliances and furniture. Increasing the generosity of unemployment benefits, home heating subsidies, and food stamps is no help to such cyclical industries.
An indiscriminate spurt in "aggregate demand" is essentially irrelevant to longer-term economic problems concentrated in particular industries and particular areas.
(Excerpt) Read more at online.wsj.com ...
giving tax rebates to people that do NOT pay taxes is not a real good stimulus plan.......unless you are a lib/dem!!!!
I don’t know if I would agree that the checks are completely useless. They don’t have as much punch as a rate cut. But the big problem we’ve got is that like in 2001, the Dems are dragging their feet. It should not take 2 months to pass this stimulus. They should have done it in December, before the holidays, and there is no reason why it can’t be passed by the end of the week, so that the checks can be passed out by next week.
I heard them say on FoxNews yesterday that this bill is moving like the speed of light. Hardly. Only if you consider that we’re dealing with a bunch of do-nothing Congressmen. Compared to the rate at which the economy adjusts, it’s just dragging on and on.
So where is that conservative McCain demanding tax cuts.... oh that is right he voted against tax cuts being permanent. NO leadership to be found in the Congress, rather more hand outs for votes always called stimulus.
This article is spot on. Quick fixes will not work. It has to run its course. This is the hangover price to be paid for the house of cards that was built on subprime mortgages and collateralized debt. Nobody will be buying a house with a rebate check.
The rebate checks would be paid for with the sale of Gov’t bonds. So the effect is to switch money from the investment side of the ledger to the consumption side. Trouble is, economic growth is based not on increased consumption but increased investment.
I think it will accomplish two things: 1. Delay the recession until after the November elections, which may help the Republican candidates. 2. The best use of this would be to pay down a credit card, since it is free interest. A family can put the 1800 down on a card, thus improving their credit rating and saving about 6 months of interest charges.
“Many purchases of low-income consumers are, of course, imported. A one-time spurt in retail sales of foreign goods may please retailers, briefly, but cannot sustain the broader economy.”
Exactly.
And I love where Chuckie Schumer wants the handout to include people who don't pay fed tax, but people who pay payroll taxes. Even he, in a backhanded way, admits that the poorest people spend irresponsibly for what is needed.
That’s the old Milton Friedman monetarist argument. Even Milton Friedman eventually abandoned it, though. I think the checks work, they just don’t give as much bang for the buck, since there is no supply side inducement—only demand side.
The Dems like them because they have a redistributive effect. That is about the best Bush can hope to get out of this Congress.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.