Stimulus Hype: Will the Stimulus Work? (Part I)
In recent weeks I have spent a considerable amount of mental energy trying to decide what to think of the stimulus battle. It's not an easy subject to unravel.
I've found a handful of interesting and informative articles that have helped shape my opinion of what should happen. But first, this disclaimer of sorts: I am not an economist. I did not go to business school. I'm just a fairly well read, well rounded, middle class educator with 11 years of college (or there abouts), three degrees and an interest in economics. Now that that's out of the way…
One of the first pieces that really peaked my interest and got me emotionally involved in the discussion was by Alan Schram, a hedge fund manager. His article at the Huffington Post back in January struck me as a condescending regurgitation of Far Right Republican thought. Some quotes:
Economic growth occurs when there is an increase in national income, not a redistribution of it…So if our government has money to spend, it is far better to suspend all personal income tax for six months. That will cost about $700 billion, less than Obama's stimulus plan, and create an unprecedented flurry of economic activity.
Can anyone in government spend that much money, $8,000 from every US household, more wisely than the average American would spend it? I simply do not believe that, and I also reject the morally dubious concept of taking people's money and spending it on their behalf, supposedly for their own good.
Spending is the problem that caused this crisis in the first place. We cannot fix the problem using more of its root cause.
Admittedly, these are excerpts; you can read the whole piece here. Of course, the stimulus plan is about spending, not income, and Schram presumably knows that. And economic growth occurs when people spend, because your spending generates income for other people – and it does it without even increase the actual amount of money there is around, just by moving it around faster.
Suspend personal income tax: now there's a stimulating idea. And the more money you make, the more stimulating you find that idea. But would it stimulate the economy?
I conducted a two-question personal survey this week and asked a dozen or so friends and co-workers what they'd do if I gave them $10,000. The consistent answers were "pay my bills off" and "put it in my savings account." One person said they'd seal it up in a mason jar and bury it in their backyard for later. Answers like "put it down on a new car" or "get that flat screen TV I've been wanting" or "take my wife on a cruise" – those sorts of answers were totally lacking. Second question? What would you do if the government reduced your taxes by $10,000 this year. And I got all the same answers (along with a few annoyed looks from my more conservative friends).
I do not believe tax cuts or rebates will stimulate the economy in the near future. Right now, they just increase the deficit. And Schram's "unprecedented flurry of economic activity" would not materialize. So why does Schram favor the idea? Because he rejects "the morally dubious concept of taking people's money and spending it on their behalf, supposedly for their own good." In other words, Schram thinks taxation period is already immoral and sees this as a good opportunity to dismantle our civilization.
Finally, we did not get here because of government spending. We got here because a presidential administration that nurtured greed on Wall Street allowed the finance industry to operate with a reduced code of ethics. They loaned money to people they knew would in all likelihood eventually default. They did it for performance bonuses at the time. And the result was a credit crunch and a stalled housing market that's dragged the rest of the economy down with it. If Schram whats to talk about dubious morality, he should talk about that.
I'm not sure what the perfect stimulus package would look like. But I do know that Schram is full of horse hockey…
Photo courtesy of iStockphoto, Image# 6901663
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By Joe88, February 12, 2009 @ 2:33 am
hi,
There are good business opportunities for the up comers. I liked their hard work.
joe
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