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LA Times: Obama stimulus spending: $246,436 per new job

apdst said:
I own a business. I'm at the bank every week. I talk to the honchos and that's what they're telling me,
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Interesting. I wonder if their thoughts are reflected by people who follow these things more closely, on the national level.

besides, I possess an above average level of common sense.
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Common sense is often wrong.

Let's see where the CBO says so.
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Whoa, first actual link of the thread, I believe.

"According to CBO and JCT’s assessment, enacting the Chairman’s mark, as amended, would result in a net reduction in federal budget deficits of $81 billion over the 2010–2019 period."

Director’s Blog Blog Archive Preliminary Analysis of the Senate Finance Committee Chairman?s Mark As Amended

This is for the Senate bill. The House bills probably cost more.

[/quote]So they don't care that all those businesses getting the stimulus contracts are getting lots of new orders and hiring people and such? Hmmm.[/QUOTE]

Sure they would care, if it were actually happening. There just aren't enough businesses prospering from the pork pack to turn the economy around. Sorry!!!! Not here in the real world, anyway.
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So now you're saying the stimulus is too small?
 
Ooophh. What a discussion. Essentially we have the Keynisian school represented by Misterman and Goldenboy insisting that any spending is good - when the private sector does not then the government must pick up the slack. The Austrian school then chimes back that the government picking up the slack causes greater government debt which must come out of the economy in the form of taxes sooner or later and this will decrease economic growth in the future. The Keynisians retort that later is better than now. The Austrians reply that the government does not slow down its programs when the economy gets better - it just keeps increasing them - so the debt is still out there . . . etc. etc. etc.

A few facts then to break the deadlock. The lead article stated that the stimulus bill is averaging over $240,000 per job created. The obvious retort is that it does not consider the number of jobs saved by the bill. Even if only one job was saved, the average would go down. I don't think anyone can really argue that at least one job has been saved by the stimulus bill - after all think of all those investment bankers at AIG! So the headline is obvious hyperbole and sensationalism. Kind of a duh!

So now the argument boils down to whether government stimulus is worse than private investment for the economy in a recession. This creates the above argument between the Keynesians and Austrians. I tend towards the Austrian school myself, believing that the private sector is a much better place for money to be than the government sector for economic growth. Economic growth is a great equalizer and helps everyone in our society improve - the infamous 'rising tide raises all the boats'. As a mention to the retort that the Austrian school of economics has been proven wrong and discredited, I would like to point out that several of the Nobel Economics Prizes since 2000 have gone to economists of the Austrian school including a few of the more prominent thinkers in the school. So I doubt that the Austrian school is 'dead, discredited, and disgraced'. But the argument continues as evidenced in this thread.

But, like many opposing schools of thought, the reality is probably a mixture of the two schools. Whichever school you do believe in, however, the constant spending by the government will have to end at some time or another. One of the primary reasons for government to spend 'stimulus' money during economic downturns according to Keynes is that the government will be able to purchase more infrastructure during a downturn for less money. This has been neatly defeated by the 'prevailing union wages' law (I can't recall the name off the top of my head) that forces the government to pay top dollar whether during a downturn or not. There goes one of Keynes' primary arguments.

When the downturn is done, we will have to start figuring out how to pay down the debt. And the debt over just the past 11 months has been HUGE. All of that debt is going to have to come out of our economy at some point, and that will limit our economic growth and that will affect ALL members of our society. So even our Keynisians must agree that some of our stimulus spending has been unwise and overly expensive. I fell that the amount of money thrown in a shotgun effect has been very wasteful. If all of the money had gone strictly into infrastructure (construction of roads, hospitals, schools, etc.) that would have been one thing, but very little of it has been.
 
misterman said:
Interesting. I wonder if their thoughts are reflected by people who follow these things more closely, on the national level.
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No doubt that's the case. Why do you think lending is down like it is?



Common sense is often wrong.
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It's very rare for common sense to be wrong...if ever.



Whoa, first actual link of the thread, I believe.

"According to CBO and JCT’s assessment, enacting the Chairman’s mark, as amended, would result in a net reduction in federal budget deficits of $81 billion over the 2010–2019 period."

Director’s Blog Blog Archive Preliminary Analysis of the Senate Finance Committee Chairman?s Mark As Amended

This is for the Senate bill. The House bills probably cost more.[/quote]

This has BS written all over.

According to CBO and JCT’s assessment, enacting the Chairman’s mark, as amended, would result in a net reduction in federal budget deficits of $81 billion over the 2010–2019 period. The estimate includes a projected net cost of $518 billion over 10 years for the proposed expansions in insurance coverage. That net cost itself reflects a gross total of $829 billion in credits and subsidies provided through the exchanges, increased net outlays for Medicaid and the Children’s Health Insurance Program (CHIP), and tax credits for small employers; those costs are partly offset by $201 billion in revenues from the excise tax on high-premium insurance plans and $110 billion in net savings from other sources. The net cost of the coverage expansions would be more than offset by the combination of other spending changes that CBO estimates would save $404 billion over the 10 years and other provisions that JCT and CBO estimate would increase federal revenues by $196 billion over the same period. In subsequent years, the collective effect of those provisions would probably be continued reductions in federal budget deficits. Those estimates are all subject to substantial uncertainty.
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misterman said:
Why would they be worried about government spending?
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Because government spending results in debt, debt results in interest rates, interest rates tend to grow and accumulate, have you ever had a credit card? They also worry about the free money they have been given recently, and how high the interest rate will be in the future, so as I said, they are keeping their powder dry, only investing in the sure thing. Finally, if the government continues to spend like they are today, there will be no more bailouts for them, no more free money, perhaps not even a fed window to speak of!



Which bills?
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Health care, Cap and Trade, the new credit card regulations, and who knows what else?



Well, that may be a factor, yes, but the Fed is hardly worried about inflation right at this moment. Deflation is more like it. The Fed has pushed interest rates really really low and lowered the discount rate as well to make it easier for banks to loan out money.
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We are far, far past deflation, this was a short lived factor last year, we are now headed for massive inflation, just as soon as that little boy bernanke take his finger out of the dyke.
 
carlkay58 said:
This has been neatly defeated by the 'prevailing union wages' law (I can't recall the name off the top of my head) that forces the government to pay top dollar whether during a downturn or not. There goes one of Keynes' primary arguments.
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Davis-Bacon Act.
 
I know there's going to be a lot of disagreement on where a recession starts, so let's just start somewhere where we can all agree: banks are not lending money. Also in the current situation we have high unemployment and a lot of uncertainty. So this means that people start saving more money. This pushes banks to start lending (Goldenboy says that banks are lush with reserves, but are they anywhere near 100%?), and so companies will start to grow again once credit becomes more easily available. It's like we're reconciling the lost loans with more savings, like whatever was defaulted on is now keeping us back from progressing. The faster we fix that problem, the faster we can move on.
 
phattonez said:
I know there's going to be a lot of disagreement on where a recession starts, so let's just start somewhere where we can all agree: banks are not lending money. Also in the current situation we have high unemployment and a lot of uncertainty. So this means that people start saving more money. This pushes banks to start lending (Goldenboy says that banks are lush with reserves, but are they anywhere near 100%?), and so companies will start to grow again once credit becomes more easily available. It's like we're reconciling the lost loans with more savings, like whatever was defaulted on is now keeping us back from progressing. The faster we fix that problem, the faster we can move on.
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I totally agree.
 
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Just because they are above the required reserve ratio does not mean that it is high enough for them to start lending.
 
phattonez said:
Just because they are above the required reserve ratio does not mean that it is high enough for them to start lending.
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You make yourself look foolish at times. What does a zero bound federal funds rate signify?

During a very expansive year in 1997, the total to required ratio was very close to 1:1. Meaning banks were meeting their reserve ratios. Now, the total to required ratio is 17:1! Meaning, banks are holding 17 times the amount of reserves they need. Can you tell me other times in history when this has happened?

When is it enough? I have stated before this is not a liquidity issue and short term savings will not lead to growth (time frame error).
 
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17 times the amount that they legally need. It doesn't mean that they will feel comfortable lending yet, especially since there are still government programs trying to encourage spending and so decrease savings.
 
phattonez said:
17 times the amount that they legally need.
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The amount not loaned is 4 times the required reserve ratio. If you do not understand the significance, why continue to bring up savings (as if liquidity is an issue)?

It doesn't mean that they will feel comfortable lending yet, especially since there are still government programs trying to encourage spending and so decrease savings.
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Once again, savings has nothing to do with growth in the short run; there is no need to continue to mention it. Banks are flushed with liquidity, and rates will not be going up until sometime next year (so says the chairman). Its about jobs! Job creation improves credit availability.
 
Goldenboy219 said:
The amount not loaned is 4 times the required reserve ratio. If you do not understand the significance, why continue to bring up savings (as if liquidity is an issue)?

Once again, savings has nothing to do with growth in the short run; there is no need to continue to mention it. Banks are flushed with liquidity, and rates will not be going up until sometime next year (so says the chairman). Its about jobs! Job creation improves credit availability.
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My point is that the required reserve ratio is completely arbitrary and has nothing to do with when banks will be comfortable with lending again. If there were no required reserve ratio, do you think that banks would still lend to get to a ratio of 0%?
 
Grim17 said:
This colossal waste of taxpayer money is a classic example of the inefficiency of the federal government, and the number 1 reason why we need to keep the government out of the health care industry.

Do you people realize, that if the Obama administration would have taken that $157 billion, split it up, and simply given it to the 3 million people who have lost their jobs since Obama took office, that would have given each of them $52,600 a piece... That's an entire years wages.

.
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The figures presented are misleading because they do not reflect the new bridges and roads that will be built with that money.

Our infrastructure is failing because of our previous priority of optional wars and tax cuts for the rich. I for one am glad to see my tax money being used for more productive purposes, in addition to creating new jobs! :sun
 
phattonez said:
My point is that the required reserve ratio is completely arbitrary and has nothing to do with when banks will be comfortable with lending again.
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Ok, never did i make a point in regards to required reserve ratios. Excess reserves as a percentage what is required however is telling indeed. For someone who claims to "hate the Fed", you are not too familiar with how the system actually operates. And for this reason i cannot take your criticisms seriously; they are riddled with error.

If there were no required reserve ratio, do you think that banks would still lend to get to a ratio of 0%?
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That depends on their ability to loan in the first place; i.e. the bank reserves. A bank with very little reserves will have quite a bit of trouble making loans. The more a bank has in its reserves, the cheaper it can offer financing and therefore lower potential interest throughout the life of the loan is essential in attracting customers.

But jobs are falling. People without jobs cannot take out loans (anymore), and therefore the entire argument shifts back to unemployment. It is future job growth (if any) that will determine the future volume of lending, not necessarily savings. FDI can become a vital source of capital during periods of high consumption, although such behavior is unsustainable in the long run. As savings picks up during economic expansion will it begin to drive future investment.

Which brings us back to fiscal stimulus.
 
apdst said:
Newsflash: the government can't do that...:rofl
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Government spending for WWII is credited for helping bring us out of the Big Depression. This time it appears to have prevented another big depression.
 
Catawba said:
Government spending for WWII is credited for helping bring us out of the Big Depression. This time it appears to have prevented another big depression.
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We're not in one right now?
 
Speaking from the unemployed state of Michigan, where the last economic growth was in 1997, yep, it is a depression!

Another note - the point was made that the ratio for banks funds to reserve rate is currently 17:1. That means banks are holding onto 17 times the required funds by law. Do you know where those funds are held that are not out on loan? Federal Reserve Notes - i.e. loaned to the government, where they earn interest. So the money is currently on loan to the government rather than the private sector. Without this money on loan to the government, the government would not be able to raise the funds to spend on the stimulus. So the money is flowing from the private sector to the government sector because the banks are being actively encouraged by the rate on the Fed Notes over the risk of making loans.

Also remember that an estimated 25% or so of the existing mortgages still outstanding are considered 'at risk'. If the banks do not hold sufficient reserves to handle when these loans go bad, then we are right back where we were in the fall of 2008. So the FED is encouraging the build up of reserves.

After all is said and done, the government is soaking up capital from the system to be spent in the manner that the government wishes rather than the private sector directing the investment. Since some of this is payments of $6 Million to the PR firm that ran Hillary Clinton's 2008 presidential campaign to save all of 3 jobs, among other abuses, the 'stimulus' is not really stimulating the economy but rather paying off supporters. Not very efficient now is it? Oh, and what type of infrastructure for the benefit of the US is that?

Let's also look at the distribution of the stimulus spending. My company applied for a portion to help build high speed internet access for the thumb of Michigan - supplying a high speed internet option to over 1 million people who currently do not have an option short of satellite - at a cost less than one third the cost of satellite. Other companies applied for the same program in Michigan that could have covered the entire state with cheap high speed internet. Michigan, where the growth has been missing for over 10 years and leading the US in unemployment figures, no matter how you calculate it. How much of that stimulus money has reached Michigan? Less than $3 Million over the entire economy. Our project saw no awards in Michigan. There were only four states that got awards in our category: California, Illinois, New York, and Rhode Island. Yep, good stimulus there.

If we actually were spending the stimulus money on infrastructure, I would not be as anti-stimulus as I am. But the stimulus money is being gifted to the Democratic supporters in obscene amounts that are not 'trickling down' or 'trickling up' or anything other than lining the pockets of many rich Democrats at the expense of everyone else in the US.
 
Catawba said:
Government spending for WWII is credited for helping bring us out of the Big Depression. This time it appears to have prevented another big depression.
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Wow! Purdy much kills the Libbos notion that the two wars we're in right now helped cause the recession...:rofl
 
Catawba said:
Government spending for WWII is credited for helping bring us out of the Big Depression. This time it appears to have prevented another big depression.
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Exactly! They always say "it was WWII, not the New Deal," as if WWII wasn't about government spending too.
 
apdst said:
Wow! Purdy much kills the Libbos notion that the two wars we're in right now helped cause the recession...:rofl
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Who said that?
 
phattonez said:
I know there's going to be a lot of disagreement on where a recession starts, so let's just start somewhere where we can all agree: banks are not lending money.
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Well, I don't even agree with how you state that. Banks aren't lending money, but is it because they aren't willing to, or nobody is borrowing?
 
carlkay58 said:
Ooophh. What a discussion. Essentially we have the Keynisian school represented by Misterman and Goldenboy insisting that any spending is good - when the private sector does not then the government must pick up the slack. The Austrian school then chimes back that the government picking up the slack causes greater government debt which must come out of the economy in the form of taxes sooner or later and this will decrease economic growth in the future. The Keynisians retort that later is better than now.
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Don't sell Keynes short - later is better than now because we're in a deep crisis now. Later, when times are really good, we can afford to pay more in taxes and risk slowing the economy down a bit, and we might actually want to do that to prevent inflation.

But like I said, there's a big political problem with Keynesianism, because it's easy to get a stimulus in bad times but hard politically to raise taxes and cut spending later in good times.
 
I wonder if the last great depression started out like this.
 
misterman said:
Exactly! They always say "it was WWII, not the New Deal," as if WWII wasn't about government spending too.
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I never said that WWII ended the Depression.
 
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