$30B IT Stimulus Will Create Almost 1 Million Jobs

itif writes "This report takes a look at how many jobs you get if you invest $10 billion each in three different IT infrastructure projects — broadband, health IT and the smart grid. It argues that if you are going to be spending billions on a stimulus package, investing in 'digital infrastructure' creates more jobs than physical infrastructure (e.g. roads and bridges) in the short-term, and you get a whole host of other benefits in the long-term."

Comments

Bad economics

[Joey Vegetables]

You will get NO net jobs. Every penny spent on a "stimulus" must be taken from taxpayers, either directly or indirectly, either now or in the future, and that penny will NOT be spent creating jobs elsewhere. At best, you are taking away future jobs to support current ones, or, to state exactly the same thing in different terms, you are borrowing from the future to support unsustainable lifestyles now . . . which is exactly what got us into this mess to begin with.

Re:Bad economics

[CTalkobt]

In a word, No.

If I borrow $100 now and put it to work now, that $100 will have a net effect of the $100 spent x the current multiplier (ie: I pay Paul, Paul pays the grocer, the grocer pays the mob boss, the mob boss pays the police comissioner, the police comissiner pays his bookie... but I digress).

So, borrowing $100 now is not the same as borrowing $100 in the future. The $100 now can be used to generate money that, in the future, will simply have never existed.

And you'll still be left, with the $100, somewhere in the system, unless it's been exported overseas. (joy)

Re:Bad economics

[Joey Vegetables]

But the future spending would have the "multiplier" as well. They cancel each other out. Read Hazlitt's "Economics in One Lesson" for more info (there is a free version online but I don't have the link handy ATM).

Re:Bad economics

[DragonWriter]

You will get NO net jobs. Every penny spent on a "stimulus" must be taken from taxpayers, either directly or indirectly, either now or in the future, and that penny will NOT be spent creating jobs elsewhere.

If every use of money (including taking it in cash and stuffing it in a mattress or lighting it on fire) were equally effective at creating jobs, this argument might be relevant (except that the relevant thing isn't that every penny must be taken from taxpayers now or in the potentially-infinitely-distant future, but that every penny must be taken from some other use right now, whether its in the form of taxation or borrowing from someone who has money and would use it for something else if they weren't lending it to the government.)

Of course, not every use of money is equally effective at creating jobs, and even moreso not every use of money is equally effective at creating jobs within the US economy, so its pretty clear that changing how money is used by either taxing or borrowing money that would be used for one purpose if it were not taxed or borrowed and applying to a different purpose can create more (or less, depending on the uses the money is taken from and the uses it is put to) jobs than would otherwise be the case, and even more certainly the case that doing so can create more jobs in the US economy than would otherwise be the case.

Re:Bad economics

[CTalkobt]

If the $100 is spent now, and the multiplier effect takes place now then it's worth say, $100 x R.

If the $100 is simply saved, and spent at a future point then at that future point in time, $100 is still only worth $100.

The net effect of the future $100 would be delayed an additional time until it is actually utilized.

Re:Bad economics

[Shakrai]

The point of a stimulus is to take that cash from the people who are currently holding it and use it to try and get those millions of adults productive again.

Fixed that for you.

Re:Bad economics

[larry bagina]

if I borrow $100 and burn it, I've just multiplied it by zero! If I borrow $500,000 to buy a house, then default on the loan when the real estate market shits itself, I (or, more accurately, the bank) just multiplied your money .5.

Re:Bad economics

[mc6809e]

If the $100 is spent now, and the multiplier effect takes place now then it's worth say, $100 x R.

If the $100 is simply saved, and spent at a future point then at that future point in time, $100 is still only worth $100.

The net effect of the future $100 would be delayed an additional time until it is actually utilized.

But even saved money gets spent by those that borrowed it from savers. There is very little money sitting idle.

All the government is doing here is diverting saved money that would be spent by borrowers in other parts of the economy and redirecting it to government projects.

It doesn't create jobs. It reallocates jobs.

Re:Bad economics

[zappepcs]

That is exactly why I am disappointed that the stimulus packages do not come with a stipulation that all funds must be spent in the USA. They cannot fund overseas operations, outsourcing, shell companies that use outsourcing, or even H1B visa holders. All must be spent on/in the USA. While that has some possible down sides, I don't see them as outweighing the benefits.

Re:Bad economics

[LordKronos]

That's a pretty simplistic view. Better infrastructure can return it's cost by reducing costs in other sectors. Those other sectors, being more cost efficient, have a better chance at competing with other countries, which means more jobs for us, and less for them (and we don't count foreign jobs when figuring net).

In addition, there are a number of people who don't spend all of their money, but rather just hold onto a bunch of it. Having a better infrastructure can result in a wider variety of companies, services, and product offerings, which increases the chance that maybe something will catch their interest, so that's more money for the average person and a little less in their bank account. Now, granted that is technically a wash, but it will improve things for the people with less money, and the people with more money will be just as happy having their new shiny thing, so everyone wins.

Re:Bad economics

[MickLinux]

You are also forgetting that we are living in the bursting of the largest credit bubble in human history. So every dollar taken in taxes right now is *not* an additional expenditure now.

Rather, every dollar taken in taxes right now is a dollar that will not be spent in a different way, now.

Now, where that is nonapplicable, is in the fact that a lot of dollars are spent in "investment", and those dollars are evaporating at an amazing rate. In other words, if you leave the dollars with the rich, then they will disappear with no net benefit at all. On the other hand, redistributing them to new jobs gives a current net benefit.

But unfortunately, dollars spent in electronics basically are the easiest for the rich to cull from. Almost as easy is dollars spent in construction contracts (or any contracts). If you really want to stimulate the economy, you have to spend the dollars directly to the wages (that is, massive government hiring).

But all that is neither here nor there. Any number of theories about what *should* be done have nothing to do with what *will* happen.

Re:Bad economics

[Skreems]

Every penny spent on a "stimulus" must be taken from taxpayers, either directly or indirectly, either now or in the future, and that penny will NOT be spent creating jobs elsewhere. At best, you are taking away future jobs to support current ones, or, to state exactly the same thing in different terms, you are borrowing from the future to support unsustainable lifestyles now . . . which is exactly what got us into this mess to begin with.

Not exactly. Borrowing for the wrong reasons is what got us into this mess. Borrowing for the right reasons (increase future earning potential) can more than offset the debt, leaving you with an income large enough to both pay back what you owe and have more to live on than you ever would have without that initial debt. It happens all the time at an individual and corporate level, this is just expanding it to the entire country. The key is having the discipline to pay back the debt once the increased earnings are realized, which so far very few incarnations of government have had the discipline to do.

Re:Bad economics

[Flavio]

If I borrow $100 now and put it to work now, that $100 will have a net effect of the $100 spent x the current multiplier

Right. And the multiplier has fallen below 1.0. The United States cannot print or borrow out of this mess, which is the point that the grandparent post was making.

It's not like the United States has a safe with trillions of dollars that can be distributed or invested in some central planning scheme. The trillions of dollars which are being offered represent money that the US government doesn't have.

Re:Bad economics

[MobyDisk]

Yes, but that is ok.

The purpose is to smooth out the bumps in the economic road. So borrowing from a future wealthier future where unemployment is low, in exchange for balancing out a recession, is a good thing. Too fast of an economy is dangerous too.

If only our politicians learned to save, then we could borrow from a pool of money from past good times, instead of borrowing from an uncertain future.

Re:Bad economics

[CannonballHead]

Hi, I'm Paul, I would like to be paid!

On a serious note, though... it's still true that if you tax to create something, you're not exactly creating wealth in such a way that you are able to now pay someone to do something... you're just taking money (a tax) in order to pay someone to do something else.

The point is that you aren't exactly creating a new job, you're almost ... splitting someone else's job. You're taking someone else's worked-for-money to pay someone else to work. Yeah, it's a "new job" but it's not creating a new income, it's taking it from someone else's income. Or many someone else's.

Either way, it's significantly different from starting a business and "creating jobs" that way. Now, if they do a stimulus where the money comes from other canceled projects, that might be nicer. In other words, more efficiently use existing revenue, not try to take more in an effort to give more.

Which reminds me of one other point. I take $100 from everyone. I pay the people that I had to hire to take the $100, and the huge organization that is now required to run this new operation. By the time I actually get around to paying the "new hired" people, how much of that $100-per-person do I have left? I've paid a bunch of superfluous people. In other words, I'm taking money, paying some un-necessary people, and finally getting around to paying someone else with it. The taxpayer is losing money on this deal while making more bureaucratic jobs. That's ... stupid.

Re:Bad economics

[plasmacutter]

Wrong. The mess we are in right now is a result of millions of people left unproductive because others are hoarding their cash. The point of a stimulus is to take that cash and use it to get those millions of adults productive again.

BINGO!

This is what most reaganites simply fail to grasp, but people who actually own their own businesses understand.

If you have a corporation, you use that corporation as a tax shelter. The higher the tax on your income, the less you will claim as an official salary from your company. That money stays WITHIN the company, and must be used in some way to avoid loss to taxes, which means investment (more credit for everyone), higher wages (more consumption->GROWTH), or more jobs (again, Growth).

What's more, those taxes taken from what they do claim don't affect their lifestyle, and the plan is to produce subsidized infrastructure.. for businesses! --They get all their tax money back indirectly.

I don't know of any competent business owner who would have a problem with the proposed policies.

By pushing down taxes on INCOME for the wealthy, reaganomics does nothing for the business OWNER.

Now, on the other hand. the executives who run but don't OWN large companies benefit a lot from these policies. Note how these types are the same types who create scandals like enron. Their motivation is not the health and well being of a company, but to siphon off as much in salary and bonuses as they can then cut loose before the collapse.

Obviously it's hard for those types to get rich if taxes on income over..say.. 1 million a year are in the 80%+ bracket.

Re:Bad economics

[DragonWriter]

But even saved money gets spent by those that borrowed it from savers.

It might. It might not. It particularly might not when, as is the case right now, deflation occurs, as $1 tomorrow becomes worth more than $1 today, so it makes perfect sense from the perspective of each individual spender to hold cash and defer spending, since cash then has a positive real rate of return.

There is very little money sitting idle.

Not only does hoarding result in money sitting idle, right now there is money outright being destroyed as banks just don't extend credit at all (at least, not in the quantities they have until recently), while they continue to accept deposits and payments on existing debt. Its not like the actual money supply is some fixed number based on the number of pieces of paper currency printed and in circulation; most money exists entirely as notations of account, and while reserve limits and similar regulations limit the amount of some forms of money that can be created, there is nothing that keeps the money supply constant.

All the government is doing here is diverting saved money that would be spent by borrowers in other parts of the economy and redirecting it to government projects.

Even if this was true (which it is not, even if you refer to the world economy when you say "the economy"), that could still create jobs in as not all spending is equally effective at job creation. This is especially the case if you talk about creating jobs in the US economy, since the economy from which the US government takes money to spend when it borrows money is not exclusively the US economy.

It doesn't create jobs. It reallocates jobs.

No, it reallocates money. Whether or not it creates more jobs than would otherwise be the case depends on how efficient the use it puts money to is at creating jobs as compared to the uses to which the money would otherwise have been put. This is also true (and even more relevant) if you add "in the US" after each instance of "jobs" in the previous sentence.

Re:Bad economics

[dwiget001]

Yeap, "make work" projects are not sustainable in regards to growth. The greatest economic stimulus package would be to cut taxes 50 percent across the boards, and reduce government spending by 60 percent or more. And, getting the hand of government out of most things it has had it hands in for the past 60 years (like no welfare, no social programs whatsoever, letting charities handle these things like they used to), no Fannie, no Freddie, no Community Re-investment Act, nothing. Clamp it the hell down. I mean, that's what individuals have to do, clamp it down. Individuals do not have the luxury of *raising taxes* like government does, which is and has been horribly abused over the past 60 years plus.

Re:Bad economics

[wytcld]

Most taxpayers do create jobs. They are the demand side of the economy. When demand is strong, people with the means to satisfy it will do so. (See: drug trade.) By choosing to buy an endless stream of mostly crap made in China, normal American taxpayers have created tens of millions of jobs in China just in the last decade.

Putting taxpayer money directly into the economy worked well in the 50's and 60's in building the Interstate Highway System, in building out educational infrastructure, even in setting NASA and DARPA - from all of which the downstream economic benefits have been immense (despite instances of spending idiocy).

This doesn't point directly to an answer. It may not be what we do, but how we do it, that determines success or failure. An IT build out though makes a lot of sense, and Obama has spoken strongly in favor of, for instance, the "smart grid." So wait a few weeks, and we'll see it beginning to happen.

Re:Bad economics

[nine-times]

By that logic, no expense of money will ever lead to a net creation of jobs-- since that money is always being taken out of something else somewhere else in the system. At best, you're taking away jobs from someplace else to support the ones you're "creating".

Of course, it doesn't really work out. Money can be spent on good things that improve the economy, or can be spent on stupid things that harm the economy.

Re:Bad economics

[garett_spencley]

This is total fallacy. First of all, most people don't hoard their cash, contrary to popular belief. Furthermore, the people who pay the VAST MAJORITY of taxes (the ultra-rich top 1%) don't hoard their money. Just look at the way they live.

Now, stop being short-sighted and follow the trail of money. You have $1 to spend, you choose to buy a chocolate bar. The store you bought the chocolate bar from is now $1 richer (over simplification as their profit margin isn't 100% but you get the idea). That money either goes to pay wages or goes to buy the store owner a chocolate bar of his own etc. but at every single point in the chain that dollar ends up in someone's pocket and what are jobs if not earnings ?

You trust the government, who spends money that is not their own, and doesn't really suffer in the short-term if their spending fails to be more responsible with capital than small business owners who put their lives on the line because they truly believe in the viability of their business ? Please.

As to your argument that the hypothetical dollar may not stay inside the US this is another extremely outdated mercantilist concept. The belief that we should somehow magically maximize exports while minimizing imports (which is impossible because in the long run imports and exports must be equal) in order to keep jobs in the US. The reality is that we don't import for the sake of giving money to people outside of the country. We import because other countries make those products more efficiently than we do. So by trying to keep things entirely domestic you raise everyone's prices and people have less money to spend on the things that they really need. Not to mention that you're promoting inefficient business which will cause the country's GDP to decline since people are not going to be buying your exports because they are more expensive. You are effectively promoting inefficiency which will ultimately lead to jobs being sent to more healthy economies. Way to go.

Re:Bad economics

[Anonymous Coward]

Gasp! True libertarian thinking on slashdot?

Welcome to -1

Re:Bad economics

[Anonymous Coward]

People sitting around doing nothing is wasted capital. Even if you have to borrow to get them to do work, you have produced something greater than your investment.

The idea that the private sector would more efficiently allocate human capital is irrelevant in deep recessions. In these cases, the private sector is quite literally sitting around waiting for someone else to take the risks.

Re:Bad economics

[beanyk]

As someone who might be an H1B visa holder in the not-too-distant future, what's your problem with them? Is it that we didn't -start out- in the U.S., or that we might leave in the future, or that we're sending envelopes stuffed with cash back home in the mean time? While here, we're paying taxes and consuming locally bought (not locally produced, usually) products just like everyone else ...

Re:Bad economics

[bennomatic]

Totally true. Imagine if the information infrastructure were so good and so pervasive that no IT workers needed to be in an office. It's true for many who work from their homes, but I'd bet we're at the tip of the iceberg.

Good info infrastructure leading to a 40-60% reduction in commuters would mean less need for the gov't to spend money on roads, less money that people would have to spend on cars and gas, and would create a resurgence in local economies, because people would spend more money at their local cafe, rather than the Starbucks downtown near their office.

Not to say there wouldn't be fallout. Lots of low-wage jobs support people who provide maintenance for those huge (suddenly worthless) office buildings, the satellite industry around road maintenance would see reduced growth at the very least, and the auto industry would likely suffer. Of course, they're doing that on their own. Maybe GM and Chrysler should start building bicycles.

Other positives, though, would include less stressed, more balanced, healthier people (it'd probably bankrupt the healthcare industry to eliminate 2 hours of commuting from so many peoples' days), and reduced dependence on foreign oil and similar reduction of CO2 emissions.

I'm not saying info infrastructure is the be-all end-all, but man, the possibilities are huge.

Re:Bad economics

[larry bagina]

And if you dig up too much gold, it loses its value. Take a look at zimbabwe's inflation rate sometime.

Re:Bad economics

[GooberToo]

The problem with government "creating" jobs this way (aside from the fact that it's misleading and a good way to get votes by promising an ignorant public jobs that will not actually be created, just moved from elsewhere) is that government does not risk with it's own money. If you take money out of private enterprise you can pretty much guarantee that the money will not be used efficiently. Thus more jobs get "created" by leaving matters up to the free market rather than redistributing it for the government's perceived benefits.

While I couldn't agree more with that statement, it fails to account for the human condition. Part of the problem that caused the Great Depression to become so great, was the human condition. The human condition caused the runs on banks, caused the call on stocks, and prevented money from circulating, creating vast quantities of money sitting idle. Even now we are constantly hearing the banks have screwed us because they are refusing to let the billions flow given to them to specifically let money flow. Already in our current economy, we have vast amounts sitting idle in addition to wealth simply disappearing.

So your theory only works in a perfect world without humans. So long as humans are part of the equation, the reality is a moving target, somewhere between theory and the Great Depression.

If you look at the many steps taken thus far, you'll quickly realize many of the actions taken were done so strictly to address the human condition.

Re:Bad economics

[dlaudel]

Pretty sure the Democrats are behind that one along with Republicans. They all want the same thing: a way to end the recession without actually cutting down on anything. An impossible goal, and the means they use to attempt it are going to hurt everyone even more.

Re:Bad economics

[AmericanGladiator]

But the future spending would have the "multiplier" as well. They cancel each other out. Read Hazlitt's "Economics in One Lesson" for more info (there is a free version online but I don't have the link handy ATM).

You beat me to it - I was about to suggest it as well. I love that book.

Re:Bad economics

[BLQWME]

Thank you for writing this, you just saved me some typing. You know the work will be doled out to companies using H1-B's. On a side note with the financial bail-outs- Are the banks that received money from the gov't still going to go after the mortgage holders that defaulted?

Re:Bad economics

[Lumpy]

$100 saved is $100 + interest earned on it - Inflation.

$100 kept in a box is $100 - inflation.

$100 invested is a gamble. It might be $10,000 in a few years or it might be $0 in a couple of weeks. you can not guarantee anything when it comes to money. that's how a lot of the problems we have today started. It all depends on the odds of the investment.

Re:Bad economics

[Wonko the Sane]

Those graphs are scary enough that even a PHB should be worried.

Re:Bad economics

[CyberLord Seven]

If a small business owner fails he loses everything he fronted to create his business. There is very powerful incentive to succeed.

Absolutely! But, back in the 1990s there was a statistic that was floating about that indicated that 90% of all small businesses fail in the first five years. That's why bank, at that time, were loath to loan to a small business that had not been around for at least five years.

When those small businesses fail, they usually fail owing somebody money. Real money. I think that's the part that gets forgotten a lot.

If government fails they just pass on the blame to everything they possibly can and move on. The tax payers are out money that would have been used much more responsibly in the open market.

I'm not so sure that's true.

Hell, even Alaska's famous "Bridge to Nowhere" created some jobs during construction. It actually created ONE real job that persists. I saw the lady who had the job of watching the road that was built leading up to the bridge. I'm willing to bet she buys pizza and tampons from time-to-time with her earnings, thus putting real money back into the system.

Now, I do agree that she is non-productive. The money could, and should have been spent elsewhere with much superior results. But in terms of getting money into the system, the "Bridge to Nowhere" seems to have worked.

The only point I want to make is that government spending can get money moving which is what the economists seem to agree that we need to do.

Re:Bad economics

[GooberToo]

The trillions of dollars which are being offered represent money that the US government doesn't have.

Almost all money offered by the government represents dollars the government doesn't have. That's the basis of our entire economy.

Re:Bad economics

[Hognoxious]

Every penny spent on a "stimulus" must be taken from taxpayers, either directly or indirectly, either now or in the future, and that penny will NOT be spent creating jobs elsewhere.

Got some guy called Keynes on line 1...

Re:Bad economics

[scamper_22]

The real danger is in central planning. It's not just a bad word for the sake of it being a bad word. Like debt, it is a long term structural problem.

Suddenly, your economy becomes based on who can game the central government for funds (read corruption) instead of who can create the best products at the best price and sell it. Please don't give me junk about there will be an 'oversight' committee and what not. It still rests on the principal that you begging with your connections to see who can get the money from the government.

So while you might get some short term boost, you can be guaranteed in the long term this kind of action is going to result in people less likely to start businesses.

Re:Bad economics

[Shakrai]

Obviously it's hard for those types to get rich if taxes on income over..say.. 1 million a year are in the 80%+ bracket.

So basically you've decided how much money people should be allowed to make, after which you intend to seize the lions share of their earnings?

Re:Bad economics

[cayenne8]

"On a serious note, though... it's still true that if you tax to create something, you're not exactly creating wealth in such a way that you are able to now pay someone to do something... you're just taking money (a tax) in order to pay someone to do something else. "

Ok...how about instead. The US govt. just gives a tax vacation for the next year?? No taxes taken outta paychecks. I know many middle income people could really use that extra $20K-$30K a year. That way...it is targeted ONLY at taxpayers. They will have more money to spend/save/invest....let that stimulate the economy.

Re:Bad economics

[cdw38]

This should NOT have been labeled flame bait.

CTalkobt, while your argument is accepted as basically the gospel of "modern economists," it's just not that simple. Taking your argument to its logical extreme, the bigger the deficit, the better. The government should just borrow as much as possible, since any wealth generated from government borrowing and spending now will always be easier to pay back in the future...(we may as well pay people to dig holes and fill them up again, since this "multiplier" will bring prosperity to us all regardless of the usefulness of the initial projects).

What you and all the Keynesian "Who's Henry Hazlitt?" economists forget is that the $100 is still just $100 (+ any return earned on it). The government pays Paul $100, he buys $100 in groceries, and the grocer pays $100 to the mob boss, etc...there is still only $100 floating around there. So, ignoring returns on the $100, someone in the future is going to be violently deprived of $100, meaning the net addition to and from the economy is, at most (assuming that the government is as efficient in allocating capital as the free market) nothing.

Further, considering that the government is NEVER as efficient at allocating capital as the private market is, we have shown there to be a net LOSS of jobs, over time. And we haven't even discussed the moral implications of violently stealing from future C and D in order to give present A and B "jobs."

Re:Bad economics

[ip_fired]

I think the majority problem that people have with H1B visas is that the H1B visa holders end up working for less than a similarly skilled US worker would normally ask for. As a result it is seen as having their wages pushed down for those who are already here in that particular industry.

So, when you come over as an H1B, don't settle for a reduced wage. Find out how much they are paying for someone with your experience in the area and then ask for that.

Re:Bad economics

[RAMMS EIN]

``The key is having the discipline to pay back the debt once the increased earnings are realized, which so far very few incarnations of government have had the discipline to do.''

This is, of course, compounded by the fact that it will typically be a different government by that time. But, at least, in the case above, the new government would be inheriting a debt and a _good_ economy.

Re:Bad economics

[liquidsin]

i bet this is what you were referring to. thanks for the lead, it's rather interesting!

Re:Bad economics

[d1gabes]

Jobs would only be reallocated if someone were actually going to pay them. Currently, nobody wants to pay for new employees (check the current unemployment trends). Therefore government intervention is the only way to take the otherwise idle hands and put them to work.

Paul Krugman wrote on this topic a bit ago:
http://krugman.blogs.nytimes.com/2008/12/22/bad-anti-stimulus-arguments/

Re:Bad economics

[larry bagina]

I could also get money moving by stealing your wallet.

Re:Bad economics

[turbidostato]

"You will get NO net jobs"

OR you will get net jobs. On this regard there's no magic on government "borrowing" from taxes vs a big corporation borrowing from private investors via saving funds. What makes the difference is the way such money is used and it can be badly used both ways (see the current financial crisis for a glaring example of badly invested money).

On a side note, while I share the concerns about government managing money (they are unefficient because they are big and they are not risking their own money, etc.), I find a bit naive not seeing this is not a problem with the government but a problem with each and every big organization, either public or private: a transnational CEO's doesn't risk his money any more than a public employee; in fact, the CEO has now much more weapons on his toolset than the government employee to turn his malpractices against his company and the society as a whole into personal benefits, so all things being equal we should expect such malpractices coming more usually from private companies than government and, in fact, I'd say that's exactly the case and it makes no argument saying that, well, that would mean the company will go bankrupt and it'll give space for new opportunities: we've seen not only that those malpracticers got their bonuses but the companies are not being displaced by "better" ones; the companies will be "saved" anyway or companies of the same kind, with even the same executives on board will take the place reducing even more overall rivalry.

Re:Bad economics

[bberens]

When you artificially grow the supply of labor by trucking in employees from other places you deplete the wages of people who are already there. Is it selfish? Yes. But it's no more selfish than the people who want to move into my area because we have higher wages.

Re:Bad economics

[CyberLord Seven]

GREAT IDEA!

I will immediately take this money and pay down my existing debt and go buy some stuff I have been wanting. This will have an immediate effect on the economy as I know my neighbors and many others will do the same thing.

Hey, too bad about those people wearing U. S. military uniforms in Iraq and Afghanistan. Too bad about my nephew who works for Homeland Security. Guess he will have to move back in with my brother. Too bad about all those air traffic controllers. Fuck 'em anyway. Reagan fired a bunch of those jerks and we got along just fine.

Too bad about those banks that get robbed in the next year. Too bad about those states that will have to deal with criminals running rampant across state lines. The F. B. I. will be out of business for the next year.

Too bad about your grandmother when she catches that strange disease that would have been caught by the Center for Disease Control.

Damn! Too bad about a lot of folks, now that I stop and think about it.

Awww, what the Hell! Government (or is that gubamint?) never producing anything of value!

Re:Bad economics

[suprslackr420]

The point of a stimulus is to take that cash from the people who are currently holding it and use it to try to get those millions of adults productive again.

Fixed that for you.

Fixed that for you.

Re:Bad economics

[sunking2]

I'm currently in the 100% tax bracket for anything over my income. You don't hear me bitching about it. Anyone making more than me is getting a tax break.

Re:Bad economics

[zappepcs]

Paying taxes is the cost of doing business. The simple fact is that the bailout money is supposed to stimulate the US economy, and prevent calamity for US citizens. While you are not a citizen or LPR, you shouldn't directly be positively impacted while US citizens are suffering. Sorry, that's just how things are. It's a bit protectionist, but if there are no employed people here to pay taxes the whole house of cards falls apart. If you can't afford bread, you won't be paying taxes, or buying things from local producers.

Also to be considered, this is citizens' money being spent. We should be getting something for it other than the warm fuzzy thoughts of knowing some CEO types are comfortable in their retirement plans with their 7 houses and yacht, and some foreign workers are fortunately still able to send money to their families in a foreign country while US Citizens are suffering.

And lastly, since you are planning on coming to the USA to work, there are a few things you need to understand:

The government works for ME. They are spending MY MONEY. I have EVERY right to expect them to spend it wisely, and by extension EVERY right to be angry if they don't. By that convention, I am right to speak up and say how I want MY money spent. If you want to work here, remember that. You will be contributing money to a big pot that *I* get to say how it's spent. You won't have that right. H1B is not a citizenship, and your attitude of entitlement is unwarranted. The same holds true of all citizens of the USA.

Re:Bad economics

[garett_spencley]

"Absolutely! But, back in the 1990s there was a statistic that was floating about that indicated that 90% of all small businesses fail in the first five years. That's why bank, at that time, were loath to loan to a small business that had not been around for at least five years."

I'm a small business owner myself. In fact, this past year marked my 5 year mile-stone :) I understand this fact quite well.

First of all, lets use the appropriate terminology. We're not talking about money we're talking about credit. A creditor takes risk by lending capital to an entrepreneur and expects to collect interest. However, there is the very real risk that the loan may be defaulted on. Let's assume that happens. The creditor is definitely out the capital, but where did it go ? Again, we're being short-sighted by thinking of the poor creditor who made the bad risk and is now out the money and may even lose his job. However, the question still remains. Where did the money go ?

Did it vanish ? No.

It went to pay the wages of the business owner's employees. It went to pay for equipment and leasing and licenses. The money was put back into the system. The net effect on the economy is nil. You can make a point that in this case jobs were relocated, just as government relocates jobs. Yet my point was not that it doesn't happen in private industry. It happens all the time. My point was that government, despite all of it's power, does not have the power to alter the laws of economics and thus can not "create" jobs.

"Hell, even Alaska's famous "Bridge to Nowhere" created some jobs during construction. It actually created ONE real job that persists."

Here we go using that word "create" again. It did not create that job. If that woman is being paid by the government the tax payers are using money that they could use to hire their own hypothetical employee for their own hypothetical business. Every government dollar spent is a tax dollar taken. Every government job "created" is a job destroyed somewhere else. I'm not saying that this is always bad. There are services we demand of the government. We want to have our garbage collected and a fire department to put out our fires and for various reasons we've decided the government will do a better job of these tasks than private enterprise. The point is that these aren't jobs created. They've been taken from somewhere else and put where they are now. Whether or not they persist after the government cancels it's original program is irrelevant.

I have to assume that your point was that "sometimes the government makes choices that aren't so bad". That's certainly true but it's still like throwing darts at a dart-board while blind-folded and hitting the board sooner or later. The economy is complex and totally intertwined. Thinking that the government can somehow control it and get it to produce results that it wants is absurd. Economics is a social study of human behaviour. If we trust the government to control the economy we trust the government to control people and when you put it like that I don't think anyone would ever go along with it. Yet people do because they want a magic bullet to solve all of their financial troubles.

Re:Bad economics

[larry bagina]

Epic failure. Most of the congress critters that opposed the financial bailout and auto bailout are republican.

Re:Bad economics

[SecondHand]

Thanks to the billions invested by the US government to develop computers in the 50's (cfr. the SAGE project), the US has had the upperhand in computer hardware and software until now. The US have been able to develop fantastic new technologies that stimulated economic growth and boosted productivity. Slashdot is a fine example of these new technologies. If the US invests heavily in smart grids, within 10 years we will be able to slashdot distributed nuclear battery networks.

Re:Bad economics

[nicolas.kassis]

Awww, what the Hell! Government (or is that gubamint?) never producing anything of value!

the INTERNET! oh wait, the porn industry is bad right?

Re:Bad economics

[plasmacutter]

Obviously it's hard for those types to get rich if taxes on income over..say.. 1 million a year are in the 80%+ bracket.

So basically you've decided how much money people should be allowed to make, after which you intend to seize the lions share of their earnings?

Let's make the exact counter-argument:

"So basically you've decided how much money people should be allowed to make, after which you intend to offshore jobs until they agree to untenable wages?"

Without consumption from a middle class to fund production there is no "economy" to make people rich.

This isn't about capping wealth, this is about maintaining a fixed ratio between maximum and minimum income to optimize both economic growth and the well-being of the populace at large.

Compare this to a vineyard... you want to grow vines as large as you can, but if you don't skim a little off your revenues to reinforce the stakes, they will eventually snap and not only won't your vines be larger, you will have to shell out considerably more than that small skim to get them back the way they were.

Re:Bad economics

[Austerity Empowers]

And a good amount of our economy and it's "health" is based on perceptions of the market versus actual value. So if you could effectively broker hope, you could actually drive positive change.

On the other hand if we believe that money given to corps is going to be spent overseas (and it will, as things stand today), and that the company you work for is big, bloated, inefficient, bogged down by a cross of greedy executives and misguided laws/standards that deserves to fail...then you're just flushing the money.

It's part of high school history..."What ended the great depression?" (in the US, for me) Some think FDR and his public works, some think industrial capacity increase for WWII, some think victory in WWII...some think just the act of winning it. My thought is probably the ability of the masses to align to, and achieve a common objective that could be agreed upon, something that took us out of the greed/fear rut we were in.

I don't think merely spending a money, even an epic amount of money, is itself going to unify what is a very divided nation. Something else needs to get going in the mean time, and we have to believe in it, however ridiculous it might be. Hopefully not a war...great engineering projects have sufficed in the past, not just in the recent past either. Something that stimulates many industries, and involves a wide array of people and that is...very expensive and requires the resources of a large nation (or the world, if we're bent on the "global economy" angle).

Re:Bad economics

[Rolgar]

How are they hoarding it? For them to hoard the money economically would be for it to be where it is not active, and those would be in cash holdings at home or in a safe deposit box, or in a non-interest earning account, such as a brokerage account. If they are not doing one of those three things, they aren't hoarding the money.

If it's in the stock market, they're letting someone else use their money while they hope their investment grows. If it's in a CD or savings account, the bank has loaned it out to buy or build a house, run a business, or for other purposes.

Can you explain how the money as it's currently being used (if the funds are in the bank, and thus loaned out to somebody) is going to be inferior to what the government is proposing to do with it? If the money is active, in the way I point out, taking that money from the people who currently has it forces them to liquidate those funds, which forces to the bank to stop lending that money out to the next person who wants a loan, which prevents the economy from growing naturally. Because, all of that money that is loaned, even if used to buy used items, eventually finds it's way to somebody who is selling something to buy something new with it, and there it will create or maintain jobs for the people that make that something. Besides, what you call hoarding is really saving, which is the opposite of credit (for every dollar borrowed, one is loaned), unless you have proof that many people have been taking cash and holding it as such.

In the end, we limit growth by keeping people from getting the funds necessary to do other things. So you can't count the '1 million jobs' as a gain. You can only count the net (gain or loss) between letting things happen without government interference vs with government interference. Really, every thing the government is doing is just looking busy to keep the boss (voters) placated to think they're fixing things when they probably will have no effect.

I was just reading this morning on the how FDR's New Deal didn't fix the Great Depression, it prolonged it (confirmed by quotes of members of FDR's own administration), and we only ever managed to recover because of WWII, and the government had to send many soldiers overseas who would have been unemployed otherwise, and all of the other economic activity that feeds off of a war (caskets, uniforms, weapons, ammunition, ships, tanks, jeeps) including what we were selling to allies. After the war, our economy did well despite the programs instituted by FDR, not because of them.

In the end, government control of more money (there is a necessary amount, something less than now) only really gets us two things, more corruption and more dependence on politicians to fix our problems (ha!)

Re:Bad economics

[Tanktalus]

So, when you come over as an H1B, don't settle for a reduced wage. Find out how much they are paying for someone with your experience in the area and then ask for that.

But, but... that's not how the free market works, is it? If I can offer services (me) for less than someone else, why shouldn't I?

Re:Bad economics

[Pope]

You mean the bridge that doesn't exist?

Re:Bad economics

[hardburn]

In addition, there are a number of people who don't spend all of their money, but rather just hold onto a bunch of it. Having a better infrastructure can result in a wider variety of companies, services, and product offerings, which increases the chance that maybe something will catch their interest, so that's more money for the average person and a little less in their bank account.

Having money in a bank account isn't (usually) the same as hoarding money the way stuffing cash into a mattress is. It's money that the bank will invest on your behalf as long as you have it there (giving you a small cut in the form of interest), so it's still circulating usefully to the economy.

One major problem right now is that banks aren't investing that money (usually in the form of loans), so having a savings account isn't necessarily better than burying it in a jar.

Re:Bad economics

[DragonWriter]

First of all, most people don't hoard their cash, contrary to popular belief.

Most people don't actually keep all of their money in cash stuffed in a mattress, true. OTOH, there is plenty of subtler hoarding going on.

(1) When banks are perceived as unsafe, people do tend to keep more of their money as cash.
(2) With less economic certainty, depositors are more likely to put funds into demand accounts rather than time deposit accounts; this doesn't seem like "hoarding" at first glance, but because higher reserve requirements apply to demand deposits than time deposits (nonpersonal time deposits in the US impose no reserve requirements on banks!), it is effectively hoarding,
(3) Banks effectively hoard money (actually, reduce the money supply, but the economic effect is exactly identical) simply by not lending out as much money as they could under laws imposing reserve requirements (note that reserve requirements are about 10% of transaction accounts like demand deposits, and 0% of nonpersonal time deposits, so banks have huge leeway in how much money they can lend of what is deposited.) This is, of course, a particularly prominent feature of the present credit crisis.

Furthermore, the people who pay the VAST MAJORITY of taxes (the ultra-rich top 1%) don't hoard their money.

Actually, the ultra-rich have the lowest mean propensity to spend, and so money in their hands produces, directly, the least economic activity, dollar-per-dollar. They do tend to save/invest a lot, which means they can contribute a lot indirectly to growth. But that depends on how they save and invest. But they make the same kind of shifts in bad economic times that amount to hoarding discussed above. And, even in continuing to invest, right now what is happening is that demand for government debt (perceived as essentially risk free) is going up so much that short-term T-bill rates over the last month actually dipped at least once into negative territory and are hovering around zero: that is, investors are willing to pay as much or more now than they will get at maturity for short-term government debt.

Regardless of the social utility (in terms of job creation, etc.) of private investment overall, the current economic situation has driven the perceived utility to investors of such investment so low that they are desperate to do anything else possible with their money. So to realize the social utility of money pumped into the domestic economy, the government (which exists to realize social utility, not to make direct profits) needs to pump the money in. And because the incentive for private actors to invest in the private sector right now is low, its exceptionally cheap for the government to borrow money to do that right now.

As to your argument that the hypothetical dollar may not stay inside the US this is another extremely outdated mercantilist concept.

Er, no, its not. Its purely fact. Some uses of money have higher domestic velocity than others. Mercantilism is a particular set of policy preferences, which differ very greatly from what I am proposing.

The belief that we should somehow magically maximize exports while minimizing imports (which is impossible because in the long run imports and exports must be equal) in order to keep jobs in the US.

That's not the idea I'm promoting at all. Promoting, as short-term policy stimulus, policies which focus spending on uses of money which are rationally expected to have a high velocity in the domestic economy, while attempting to derive revenues from sources that would otherwise tend to use money in ways that do not have a high velocity in the domestic economy is not the same as a mercantilist policy of erecting barriers to prevent imports while attempting to promote exports.

Indeed, contrary to mercantilism, you

Re:Bad economics

[nicolas.kassis]

What is wrong with H1-Bs if the goal is to keep that labor in the country with a quick path to residency within a year or so. They don't all want to go back home. Keep the smart ones here.

Re:Bad economics

[scorp1us]

Bah.

The government has no money. Not with a $1T deficit.

When you borrow the $100 now, you have to pay interest on that to the FED, which is not Federal. In order to cover the interest, you need to print money. So then you have inflation. For example a $100,000 mortgage for 30 years comes out to cost another $198,000 in interest.

So for every dollar spent, we have to print 2 more in the next 30 years.

A real stimulus package would be to take the value of all the stimuli to date and divide it by the number of people in the country, and give it to them. The last time I did that (a month ago) I got a number of $13,000 per PERSON in the US. Imagine if we gave everyone that kind of money. people would pay off debt, spend or save the rest, liquidity would be restored, and happiness for all.

Instead, our government continues to reinforce and reward their friends and their contributors.

Re:Bad economics

[cayenne8]

But, my point is....rather than have the US govt...take taxes...then 'redistribute' them in the form of some stimulus package, usually ladden with pork, etc....why not just leave the money WITH the taxpayers to begin with?

On the way to work this morning...I heard the new Obama stimulus package was now in the $800B neighborhood. Now..rather than them deciding where to give this money, why not just leave it at the source, the tax payer...and make it so we don't have to pay $800B next year? I'd bet in doing that, we'd save a lot of lost money...in the form of govt. bureaucracy and red tape...paper work...etc.

My example probably was more than $800B....but, let's start with any figure they come up with for a stimulus package....and just not tax tax payers that much money.

Re:Bad economics

[Curunir_wolf]

Paul Krugman wrote on this topic a bit ago:
http://krugman.blogs.nytimes.com/2008/12/22/bad-anti-stimulus-arguments/

Krugman? Seriously? That guy is still stubbornly refusing to acknowledge the failure of the philosophy that he has been espousing for years. You know, the one that created the economic mess we're in right now.

Why even when Keynesian economics has been proven a failure do people keep trying to claim it works?

Re:Bad economics

[mattrumpus]

Dead right. Don't get all caught up in the money side of it. Look at the resources. This "crowding out" of the private sector by government spending is only really relevant in a situation of full employment, exactly the opposite of a recession.

In a recession there is unused capital capacity in the economy, either machines that make things, or labour, well both usually. Government spending puts this capacity to work, more "stuff" is made, income is generated, by putting the people in work, giving you a population standing ready to buy the "stuff". Round and round it goes.

The supply side, anti state, perfect market, neo-classical economics the grandparent post is appealing to is, in a word, bullshit.

IAAE

Re:Bad economics

[tweek]

Keynes, is that you?

Maybe the reason the private sector is scared of the risks is because they're...risky?

Why, then, does it make sense for our government to take that risk.

The odds aren't really in the government's favor here.

Re:Bad economics

[FiloEleven]

You know what, though? If we pulled our troops out of Iraq and Afghanistan and the 130 other foreign countries where we have bases, and if we stopped spending money on things that blow up or have no other use except in the military, we probably would be able to afford some big tax cuts or infrastructure spending.

Much of the money that goes to fund our unnecessary wars is money that disappears. The goods that it purchases either do not exist after one use (bombs, bullets, missiles) or are so specialized as to be useless in our society (fighters, bombers, tanks).

Now, the way things are being run, by a political class that is completely out of touch with reality, such a sensible position is entirely unrealistic. But GP still has a point with a tax vacation - the government certainly does not limit its spending to its intake, and it's already between $10 and $50 trillion in debt depending on who you ask, so what does it matter at this point if we dig the giant hole a little deeper?

Re:Bad economics

[zappepcs]

And some will say 'why not make the people already here smart?'

Fix the education system, train indigenous workers, you know... support your neighbors, keep it in the family. Yes, everyone wants a shot at the American dream, but it won't be much of a dream soon the way things are going. Americans should get the first shot at it, even if that means spending to train people. Employers that want to bring in foreign workers should have to contribute to education funds for US citizens for the duration of the foreign worker's stay. If it's _that_ important to bring in a foreign worker, it's important enough to mandate more spending on education at home.

Re:Bad economics

[Mattsson]

It doesn't create jobs. It reallocates jobs.

Depends.
If you use the money on X instead of Y and X create exactly the same amount of jobs as Y, then it simply is a reallocation.
If X creates one more job than Y, then more jobs are indeed being created.

It's all about how to most wisely spend what is collected as tax.

Re:Bad economics

[bendodge]

This stimulus thing is called Keynesian economics. Here's a crash course on Keynesian economics. Keynes says that the government should cut taxes and increase spending during a recession and cut spending and increase taxes during an expansion.

Keynes used the analogy of pump priming to explain government stimulating of the economy. During good economic times, money is set aside to be spent during a recession, much like a farmer would prime a pump with a bucket of water and then refill the bucket. The problem with this is that there is no money on reserve. None. Nada.

The multiplier you speak of is called the marginal propensity to consume (MPC). You are correct that the money will be spent and respent to create an increase in the national income. But where does the money come from?

In order for the government to prime, stimulate or bail out anything with money, it must do one of three things:
1) Print money
2) Tax
3) Borrow
Printing creates inflation and increasing taxes is political suicide. Therefore, the government takes #3. They borrow money. Now, this borrowing is very destructive for several reasons.

For one thing, borrowing is addictive. It seems like politicians are in a race to the bottom. Whoever promises to spend the most wins (similar to the fiscal decline of Rome). Raising taxes to pay the debt is political suicide (see Walter Mondale).

Second, government borrowing has an effect known as crowding out. The money that the government borrows comes from a bank. Where does the bank get the money? From your deposits. When the government borrows money, the bank can no longer lend it out to a business. The more the government borrows, the less is left for the private sector. Crowding out is when the government borrows such a huge chunk of the money supply that the private sector can't operate efficiently. (Coming soon to a country near you!)

The government also borrows from foreign governments, which is even worse. I won't go into that here.

When the government creates a job, it create busywork. When the borrowed money runs out, the job disappears and national debt is left. If the government had not borrowed that money, a business would have borrowed it. When a business borrows money, it creates real jobs and factories that will last after the money runs out and the debt is repaid. Businesses create real economic growth as opposed to the cash-burning jobs government creates.

Let's look at another possibility. Suppose the government raises taxes. The government takes money and spends it through the MPC to create income. That's fine and dandy, but the MPC also applies to the private sector. If the money had not been taxed, it would have been spent or saved. If the money were spent, the MPC would have applied to it just the same. If it were saved, it would have been lent by the bank to a business which would spend it through the MPC. The net effect is nothing but bureaucratic overhead.

There are three fundamental problems with Keynesian economics.
1. It assumes money in a bank is idle. That's nonsense.
2. It ignores the fact that money the government spends came from somewhere else, where it would have been spent more efficiently.
3. It ignores the fact that nobody ever increases taxes and cuts spending.

Keynes was wrong. Plain and simple. If we want to fix the economy, we must allow insolvent businesses (Ford, GM, etc.) to fail, cut taxes and spending, and shrink the government. Obama's charisma will never invalidate Adam Smith or Karl Menger. There's no school like the old school.

Re:Bad economics

[IonHand]

Shhhhh you're breaking the illusion for everyone if you keep talking like that.

Re:Bad economics

[CodeBuster]

While it is possible to approach investing in the same way that one approaches gambling the idea that Investing == Gambling is one of the most persistent and damaging ideas to enjoy wide currency among the non-investor classes of society. The definitions taken from the following article are instructive:

Investing is any activity in which money is put at risk for the purpose of making a profit, and which is characterized by some or most of the following (in approximately descending order of importance): sufficient research has been conducted; the odds are favorable; the behavior is risk-averse; a systematic approach is being taken; emotions such as greed and fear play no role; the activity is ongoing and done as part of a long-term plan; the activity is not motivated solely by entertainment or compulsion; ownership of something tangible is involved; a net positive economic effect results.

Gambling is any activity in which money is put at risk for the purpose of making a profit, and which is characterized by some or most of the following (in approximately descending order of importance): little or no research has been conducted; the odds are unfavorable; the behavior is risk-seeking; an unsystematic approach is being taken; emotions such as greed and fear play a role; the activity is a discrete event or series of discrete events not done as part of a long-term plan; the activity is significantly motivated by entertainment or compulsion; ownership of something tangible is not involved; no net economic effect results.

Re:Bad economics

[DragonWriter]

Right. And the multiplier has fallen below 1.0 [denninger.net].

The M1 multiplier (that has fallen below zero) is the ratio of the M1 meaure of money supply to the Adjusted Monetary Base measure. . It is fair to say it is something of a measure of the utility of policies that seek to stimulate the economy by increasing M1 (though even there it is limited, since even the Adjusted Monetary Base measure is just a different measure of money supply, not a measure of economic activity); it has little to do with either the velocity of money (the source of the "multiplier effect" being discussed in this thread, which is not the same thing as the "M1 multiplier" you point to; the "multiplier effect" relates to how often a particular dollar in the money supply is spent, not the ratio between two different measures of the money supply) or the ability of the government to stimulate by borrowing dollars from domestic and foreign holders of dollars and spending it in particular, focussed areas (since such policy does not rely on manipulate M1.)

The author of that piece attempts to confuse the issue by posting a different graph that shows a falling trend in how effective stimulative government deficit spending has been on average recently, and attempting to suggest, without any real reason, that the two graphs are directly related and indeed that the M1 multiplier graph says that the trend shown in the other graph is actually worse than it appears. This is not rational. The second graph does show a long-term problem, and particularly does show why, once this recession ends, the US government must, in the subsequent expansion, begin to pay down the debt or at least stop expanding the debt faster than the GDP during expansions, because if we keep deficit spending through expansions so that the debt:GDP ratio keeps going up, we'll soon reach the point where we can't use deficit spending to stimulate the economy when it is in recession. But, contrary to Denninger's alarmism, the M1 multiplier going below 1 doesn't indicate that the trend in debt utility shown in the second graph is worse than that graph actually shows. They are completely different issues.

Re:Bad economics

[sexconker]

No. If you borrow X, X has to be repaid.

Putting existing money to use is a separate issue, and requires no borrowing.

You can't create money without devaluing existing money.

Stimulus packages are a joke. They're psychological tools, not financial tools. If you want to improve the economy, you have to trim the fat.
Bye bye bailouts. Bye bye unregulated futures/commodity trading. Bye bye war in Iraq. Bye bye corn subsidies. Bye bye foreign relief aid. Bye bye greenbelts. Bye bye welfare programs. Bye bye social security. Bye bye corporate tax loopholes. Bye bye accounts in the Camen Islands. Bye bye war on drugs. Bye bye illegal immigrants. Bye bye bullshit.

We simply can not support all the reckless, ineffective spending. There is no way around it other than going to/threatening war and taking resources from others.

Re:Bad economics

[sexconker]

You missed the point.

While this is true, the point is the practice is fucking retarded. We need to STOP spending money we don't have, and reduce spending on shit we don't need.

Re:Bad economics

[ShadowMarth]

And we get a better tech infrastructure for it. Fair trade.

Re:Bad economics

[JesseMcDonald]

If you're being paid interest then it's an investment, not simple savings. You don't get interest from money sitting in a bank vault; it has to be loaned out. They try to pretend that these sorts of investments are "risk-free", but they're really just insured -- and as with any insurance scheme, the accounts are only protected from isolated failures. In a way it's not unlike the recent debacle regarding repackaged mortgages; both schemes rely on the questionable assumption that risks are mutually independent.

In the event of a widespread collapse the FDIC would only have two options: default on the insurance, leaving people without their pseudo-"savings", or dramatically increase the amount of currency in circulation. Either way the overall effect on purchasing-power is the same.

All life is a gamble, really, and the fact that currency plays a special part in the economy doesn't prevent it from gaining and losing relative value just like any other good. Some gambles are more rational than others, however, and for those who desire actual savings, holding on to dollars -- at the bank or in a mattress -- would not be a rational choice based on their history (95+% devaluation over the past century or so). A better plan would be to maintain a mix of durable commodities, with an eye toward easy of storage and marketability. You'd still be gambling, of course, but at least you wouldn't be placing all your eggs in one (leaky) basket.

Re:Bad economics

[jabster]

Of course, not every use of money is equally effective at creating jobs

In this you are correct.

Where you are incorrect, is in thinking that government bureaucrats (or even The Great O Himself) are capable of making the correct decisions.

Example: any gov't bill will say $x dollars ProjectA, and $y dollars for ProjectB. 6 months later, someone at a private business develops MethodC, which is 10 times more efficient/reliable/etc than A or B. Too bad for C. Since A & B are getting the funding, C, the better technology gets ignored for the next 10 years, as A & B can't handle the load, until someone says, hey, whatever happened to C?

Government is not able to adapt to changing markets or technology. Business is.

You want to create jobs and grow the economy? Eliminate capital gains and personal income tax for a year, and lower the corporate rate to 10%. Watch the economy take off like a rocket. And before you complain about the defict this would create, Obama is promising trillion dollar deficits for the forseeable future, so what's the big deal?

-john

p.s. Somewhat related true story: A guy I know worked for a smaller town outside Chicago, and asked for $3-million to repave a short stretch of road. The town told him the repaving budget was all used up for the year, but that he could have $3-million to patch the road, and then apply for the $3-million repaving money next year. A business would just repave the road.

Re:Bad economics

[LordKronos]

Having money in a bank account isn't (usually) the same as hoarding money the way stuffing cash into a mattress is. It's money that the bank will invest on your behalf as long as you have it there (giving you a small cut in the form of interest), so it's still circulating usefully to the economy.

But not in quite the same way. If more money were shifted away from the banks and into the hands of ordinary people, you might see a tightening of lending. However, with more people having more money, the businesses that do get loans will likely have better sales, generating more revenue. That probably means less risk of loan default, so more money makes it back to the bank to relend. It also means the businesses are less likely to have to take out additional loans once they get going, and the loans they do take have a better chance of being paid back sooner, so that money will be recycled more quickly.

Now, whether that would be a wash or a net positive/negative in available lending, I can't say, but there is at least some offset there.

Re:Bad economics

[alexborges]

Man...

Because for the current debacle, there is no other thing that will stop the declining employment rate GLOBALLY (this is not a crisis OF the US: sure, it started there, but it is a global crisis).

Yes, we can wait to see what the economy does all by itself and it will certaintly, in time, recover and justly make poor out of the rich that do nothing and so forth...

The problem is, by the time that happens, you could have most citizens in occident crying to oust all their governments.

Keynes or no keynes, the government (in all our countries) has money and the inevitable responsability (self preservation instinct, actually), to salvage as many voters as possible.

Why do people cling to economic theories like they were religions?

Re:Bad economics

[jbolden]

What are you talking about? If we have cyclical unemployed people, putting them to work increases output in the present. If that output is invested, then this increases future output.

Money is just a means of determining relative values for various assets. It doesn't actually mean anything, it really is just green pieces of paper the government prints.

Re:Bad economics

[Dixie_Flatline]

Because, frankly, if people are smart, they'll take the money and put it in their bank accounts and wait for everything to blow over. The only problem is that it won't blow over if they wait and don't spend.

It's the problem with living in a heavily consumer-driven society.

There's a time for people to save, and a time for people to spend. You SAVE when you have a bit of extra money. Sure, spend a bit of it as well, but sock away some for a rainy day, because a rainy day will surely come at some point. People overspent when they actually had NO money, so now they're in a big hole. Giving them taxbreaks right now will certainly mean that money goes to paying off debts.

This stimulus -- in my mind -- will partly kick free of the people that can't help you right now. You make sure that they've got roads to drive on and healthcare and all the things they need while they work and pay off their debts and return to solvency. Meanwhile, you've gotten some other people to come in and do some (necessary, hopefully) work. Now they have a bit of extra cash that they can spend.

The Economy is part psych experiment. To get people to spend, you need them to feel that they've got enough MARGIN to spend their money. They need to feel that their house is worth something, their job is secure, and that their investments or retirement fund or whatever is safe and growing. Without those requirements being met, people squirrel away their money because even the most short sighted of them realize that they're gonna need SOMETHING to live on in the future.

Re:Bad economics

[plasmacutter]

But the future spending would have the "multiplier" as well. They cancel each other out. Read Hazlitt's "Economics in One Lesson" for more info (there is a free version online but I don't have the link handy ATM).

Because we all know condensed pseudo-curricula really give adequate treatment to the nuances and complex interaction of an actual economic market.

"Read McQuack's 'Neuro-Surgery in One Lesson' for more info"

Re:Bad economics

[jbolden]

No we have cyclical unemployment, which means (excluding trade for now) that net savings is higher than net investment. Under those circumstances redirected savings to investment is exactly what you want to have the government do.

Re:Bad economics

[idontgno]

Why, then, does it make sense for our government to take that risk.

Because governments are too big to fail!*

*With a few exceptions, like Denmark, 1813; most of Latin America circa 2004-2005; Iceland, right now...

Re:Bad economics

[Anonymous Coward]

Krugman? Seriously? That guy is still stubbornly refusing to acknowledge the failure of the philosophy that he has been espousing for years. You know, the one that created the economic mess we're in right now.

I'm sorry, but you're just wrong. The "economic mess" we're in right now is almost entirely the fault of the government. The Federal Reserve, Fannie Mae, and Freddie Mac are the government institutions that created the current "mess." If they weren't buying up shit loans en masse, the investment banks never would have made so many shit loans.

Government interfering with the market is the exact opposite of what Krugman's philosophy. Nice try, though.

To explain a little further: By buying bad loans, Fannie and Freddie took the responsibility from the banks, more or less telling them not to worry about bad loans because the tax payers would foot the bill. Now that things have gone bad, guess what's happened? The taxpayers are footing the bill. Big surprise.

The funny part is that people like you are using this to make the case for even more government control and interference. Undoubtedly the next round of government caused mayhem will be even worse, which you'll no doubt use as evidence that the government still isn't doing enough.

Re:Bad economics

[DragonWriter]

Maybe the reason the private sector is scared of the risks is because they're...risky?

Quite.

Why, then, does it make sense for our government to take that risk.

Because the government is looking for a different results, one whose risks, if any, are almost completely unrelated to the risks that face private investors in acheiving the results they seek. When the government spends money for stimulus purposes, it is looking to get people working, get them paid, and get them spending money in the short-term. It usually is also looking at getting the job done that those people are being paid to do, for some long-term social benefit. The first of these, which is the most important in terms of economic stimulus, is fairly low risk. The second is often also low risk, though there is some speculative component in any such investment. When a private investor invests, they are looking to get money back on their investment; the social utility of employment and spending, and even the long-term social utility of the thing beings built by the enterprise that is being invested in are not the outcomes being sought by most dollars invested privately. The risk associated with the private goals is completely unrelated to the risk associated with the public goals.

Re:Bad economics

[plasmacutter]

I'd like to add that, even if the banks were lending money saved by others, they would not be lending it to the people who actually need it (as if they're keen to take on new debt now anyway).

Thus, the government taking over the distribution of that money is better for the economy, providing opportunities to earn rather than borrow money.

Re:Bad economics

[jbolden]

What risk? The government doesn't operate with the same risk portfolio as in an individual investor. If we ignore trade, because they have the power to tax all the money is really theirs. "Risk" to them doesn't exist, if they overestimate how much money is going from Paul to Peter they can move money from Peter to Paul instantly via. taxation.

Also they can create or destroy money at will (we have a fiat system) none of the individual players can do that.

Re:Bad economics

[mattrumpus]

Keynes is back!! And now he's pissed off!!

Well, somethings are too risky for the private sector not just because they're inherently risky but that the time horizon for profitability may be too long. Large scale transport infrastructure is a good example.

Or it may be that too many interconnected things need to be done at the same time to make any one part profitable, like digging a mine, constructing the refinery, laying down the rail line to the port, building storage capacity etc etc for some extractive industry. In this case, government commitment to part of the project may make it profitable for industry to tackle certain parts of it.

Lastly, some spending is simply socially desirable, such as health, defence, or transport any may never be "profitable" in itself, but is profitable to society as a whole when we have it.

Re:Bad economics

[jbolden]

How has Keynesian economics been proven a failure? Be specific please.

Re:Bad economics

[DragonWriter]

Example: any gov't bill will say $x dollars ProjectA, and $y dollars for ProjectB. 6 months later, someone at a private business develops MethodC, which is 10 times more efficient/reliable/etc than A or B. Too bad for C. Since A & B are getting the funding, C, the better technology gets ignored for the next 10 years, as A & B can't handle the load, until someone says, hey, whatever happened to C?

Actually, plenty of government bills say "$X for Broad General Purpose A" and provides some specified executive agency broad discretion in how to meet that broad general purpose.

This is particular true of bills passed to provide resources to an administration to address an emergency. (This can, of course, have its own problems, particularly if there is no accountability for how the purposes is addressed, as has been argued to be a serious problem with the recent TARP "bank bailout" bill.)

Your entire argument seems to rest on the idea that it is somehow impossible for legislation providing money to address a problem not to be excessively specific as to how the money is going to be spent. This is pretty clearly not the case.

Re:Bad economics

[Moralpanic]

Wow, you have no idea how the economy works. And reading 'Economics in One Lesson' is about as helpful as reading 'Abs in 2mins' and expect to get a six-pack.

Re:Bad economics

[Profane MuthaFucka]

Obviously, you spent more time in college booking cracks than cracking books.

Re:Bad economics

[Civil_Disobedient]

While here, we're paying taxes and consuming locally bought (not locally produced, usually) products just like everyone else ...

And being paid the salary that could have gone to an actual citizen. Why does that matter? Because an H1B visa holder operates outside the social contract between government and its citizenry. You can't be drafted into military service, for instance. As long as there are borders, there will be additional responsibilities for citizens and advantages and benefits as reward.

Re:Bad economics

[divisionbyzero]

Economics 101: Economics is not a zero sum game. Of course, that doesn't mean the economy will always grow. It may shrink. It all depends on how the money is spent.

The point of borrowing is that the rate of growth will exceed the cost of borrowing. That's the gamble the government is making.

Whether they will do it better than the private sector would is an open questions, but it's also counter-factual because the government is the only entity that can borrow at this time.

In any case, what you are describing makes about zero economic sense to me.

Re:Bad economics

[ThrowAwaySociety]

As someone who might be an H1B visa holder in the not-too-distant future, what's your problem with them? Is it that we didn't -start out- in the U.S., or that we might leave in the future, or that we're sending envelopes stuffed with cash back home in the mean time? While here, we're paying taxes and consuming locally bought (not locally produced, usually) products just like everyone else

Pure self-interest. US technology workers have nothing against the H1B visa holders, but rather the H1B program. Without the H1B program, technology workers who are US citizens would have less competition and higher wages. US-born tech workers aren't thrilled about the competition.

I have personally been turned down for a job interviews because I was a natural born citizen. This is a US-based company telling a US-based worker, "I'm sorry, we are not interested in hiring citizens for this position." (This is blatantly illegal, but not at all unusual. The only thing unusual about it is that they admitted this up front. Normally, they'll at least pretend to be interested in hiring citizens.)

Is this selfish of me? Sure.

But consider: There is hardly a job in the US, (construction laborer, factory worker fast food cook, programmer, doctor, lawyer, or corporate executive) that could not be done much more cheaply by people from elsewhere in the world. It's a big world, and there are plenty of capable people in it. Yet for some reason, our government has chosen to legally open the tech sector to competition from overseas workers to drive down costs. This causes some bitterness on our part.

I hope you understand that this bitterness is not directed to you, but to the companies and elected officials who have made things this way.

Re:Bad economics

[jbolden]

Agree with all you said. Except for one thing, in a recession there is idle capitol. It is not being taken away from other productive uses it is being reallocated from non productive to productive.

Re:Bad economics

[CyberLord Seven]

In my gut, I agree with you.

However, after the last eight years I think the economy/psyche needs stimulus to get out of this HUGE pit we find ourselves in.

Whether large or small, some kind of stimulus is needed to get people to STOP talking about the economic mess. Once we get over the psychological hump I think it will get better

A huge worry for me right now is that this mess officially started in December 2007 and it shows no sign of stopping. Depression is on the tip of my tongue and has started to show up frequently in mainstream media. My parents grew up during the Great Depression. I vividly remember watching a debate in Congress back in the 70s and somebody said something along the lines of: a loaf of bread only cost a quarter back in the 30s. The answer he got was "Yeah, but who had a quarter."

Re:Bad economics

[jbolden]

His [the link's] analysis of the M1:M ratio is silly. This probably just represents a drop off of checkable deposits which is a money shortage. If the Federal Reserve were to buy all the debt in the US we might have hyperinflation but we wouldn't have a debt overhang. The link is just plain wrong.

Re:Bad economics

[jbolden]

Well I'd presume the plan to resolve high debt:gdp in a fiat system is what it usually is. Debt is in nominal dollars while gdp is in real dollars. Inflation can adjust the one while having little effect on the other.

Re:Bad economics

[DragonWriter]

When you borrow the $100 now, you have to pay interest on that to the FED, which is not Federal.

Uh, no.

When the government borrows money, it issues treasury security (e.g., T-bills), which are sold, generally at auction. It pays interest to the holders of those securities. The Federal Reserve does buy some of the securities, so do domestic and foreign private investors and foreign central banks. (Actually, because they are sold at auction, it doesn't pay "interest" in the traditional sense on many securites, it pays the face value of the security at maturity, this may be more than it received for the security, it may be the same or less -- recently, short-term bills have frequently been selling at or near no discount from the face value.)

Re:Bad economics

[tehdaemon]

it10t error detected. What you are proposing is just another version of the Smoot Hawley Tariff. Widely considered a major cause of the Great Depression.

Second, you are not even consistent in your own statements. That H1B visa holder from India? Where does he buy his food? His gas? His clothes? Does he rent an apartment here in the US, or India? His money is largely spent here.

"I don't see them as outweighing the benefits."

You can't see very far then.

T

Re:Bad economics

[jbolden]

Because most of the taxes under the current scheme would go to the very rich. Now if you were to for example give $3k to every man woman and child in the US that would also be $800b and you would get some debt relief and the banks would be liquid. But even lowering taxes on the middle class a few percent while raising them slightly on the rich is so controversial that Obama got called a socialist

Re:Bad economics

[legirons]

Don't let the taxpayers keep that money -- they will never spend it on anything which requires work to create!

really, is that what government is thinking?

Re:Bad economics

[Flavio]

(...) or the ability of the government to stimulate by borrowing dollars from domestic and foreign holders of dollars and spending it in particular, focussed areas (since such policy does not rely on manipulate M1.)

The Fed's balance sheet was spent on the first bailouts, and the US is now printing money to cover the current bailouts. The government is manipulating M1.

The author of that piece attempts to confuse the issue by posting a different graph that shows a falling trend in how effective stimulative government deficit spending has been on average recently, and attempting to suggest, without any real reason, that the two graphs are directly related

You're confusing the issue by implying that they are not directly related. Manipulation of M1 leads to an even worse trend on the second graph.

The second graph does show a long-term problem, and particularly does show why, once this recession ends, the US government must, in the subsequent expansion, begin to pay down the debt or at least stop expanding the debt faster than the GDP during expansions

I love how people like yourself, Bernanke and Paulson concede under pressure that deficit spending is disturbing, but at the same time hold a Keynesian attitude of printing money to "stimulate" the economy.

There's only one correct attitude during a recession: liquidate bad debt and expose fraud. Deficit spending during a recession only drains money from healthy sectors of the economy.

Re:Bad economics

[CyberLord Seven]

The only real point I wanted to make was that government does not have a monopoly on bad decisions.

People, whether they own small businesses or not, make them all the time. Those people and small businesses go bankrupt all the time and nobody notices.

Large businesses make bad decisions too, but they seem to be too large to be allowed to suffer the consequences. Anybody seen the U. S. equivalent of the Prius?

No?

Damned shame since a law was passed back in the 1970s requiring the Big Three automakers to produce fuel-effecient vehicles by 1996. Then the Big Three automakers cried to Congress and got the law changed so that they only had to produce a fuel-efficiency as applied over their entire product line instead of to each vehicle. Now the bastards are getting MONEY.

WTF?

Re:Bad economics

[Sean0michael]

I think a tax vacation would be a great idea. Clearly the government thinks giving money back in the form of various stimulus payments or TARP payouts is good for the economy, and most people agree.

My follow-up question is this: if it is so good for the economy and nation to give Americans their money back, why did the government take it in the first place?

Re:Bad economics

[cayenne8]

"Because most of the taxes under the current scheme would go to the very rich. Now if you were to for example give $3k to every man woman and child in the US that would also be $800b and you would get some debt relief and the banks would be liquid. But even lowering taxes on the middle class a few percent while raising them slightly on the rich is so controversial that Obama got called a socialist"

But, I'm not talking about a tax break or rebate...like lump sum or end of the year after taxes are paid.

I'm talking cessation of taking payroll federal taxes out of working people's checks for a year...at least till it reaches $800B or whatever amount the stimulus is going to cost.

That way...it goes to the working people. Super wealthy people don't live on paychecks....so, to appease people that don't want the super wealthy to get a break...this should work. Anyone that earns a paycheck, would have their federal tax NOT taken out for a year. That allows them to keep more of their own money for that year to save and/or spend. Let them use the money rather than the Feds.

Re:Bad economics

[Curunir_wolf]

How has Keynesian economics been proven a failure? Be specific please.

Kind of a big topic. If you're not convinced by the current state of our economy and the machinations of the Fed and behavior of the banks, you may be as blind to evidence against the theory as Krugman is.

Why not do your own research?

Re:Bad economics

[uncqual]

Why do people cling to economic theories like they were religions?

Not surprising actually... Neither are very reliable at predicting the future accurately, both are based on faith, and neither are (in practice at least) falsifiable.

Re:Bad economics

[Cornelius the Great]

Exactly. You should always perform due diligence on the funds and stocks you buy into. Look at important things, like the yields over the last 10+ years, the prestige and experience of the people running the fund, and really scrutinize every document that is reported to the SEC.

This is why you should invest all of your life savings with us.

Otherwise, you're simply gambling.

Sincerely,
Bernie Madoff

Re:Bad economics

[jbolden]

Thank you for a reasonable post.

1) On the addictive nature, absolutely true. This is a real risk. But right now because the Republicans have done so well for so long our public infrastructure is heavily underfunded so even if there was a binge it would be highly productive.

2) Crowding: Not relevant in a recession. We have idle capacity right now.

I'd object to your assumption that government jobs are "busy work". There is no reason that governments cannot do investment spending, and given their longer time horizon and the underfunding I mentioned might be in a better position to do investment spending.

As for your three problems:

1) Keynes does not assume money in a bank is idle. He argues that money in a bank can be effectively idle under certain conditions.

2) In Keynesian economics money does not "come from somewhere else" because it is fiat. I think what you meant to say was "It ignores the fact that investment the government performs can displace private investment". Now that makes sense, it is however false. Keynes most certainly does not ignore that he has lots of equations which specifically deal with how much displacement will occur.

3) A guy by the name of Bill Clinton raised taxes and reigned in spending.

Re:Bad economics

[Xenographic]

> But the future spending would have the "multiplier" as well. They cancel each other out. Read Hazlitt's "Economics in One Lesson" for more info (there is a free version online but I don't have the link handy ATM).

How is that different from saying that I'll get 1% interest on my savings account both now and in 20 years, so it doesn't matter if I invest this $1000 now or then, because I'll have the same amount of money in 25 years? Aren't we completely ignoring the compounded interest over that span of 20 years?

Re:Bad economics

[jbolden]

You would have to replace where the payroll taxes would have gone to: social security, medicare, unemployment insurance....

But yeah I'd have no problem with that.

Re:Bad economics

[The Dancing Panda]

Because you're shorting yourself, and screwing over other people?

Re:Bad economics

[plasmacutter]

Not to say there wouldn't be fallout. Lots of low-wage jobs support people who provide maintenance for those huge (suddenly worthless) office buildings

There's infrastructure required to support tele-workers. People have to man warehouses and deal with routing office supplies, among other things.

Unfortunately, The trend seems to be moving away from tele-presence.
Really, though, I can't call it unfortunate. Look at tele-presence from a new entrant standpoint. You want to get into this field, but everyone works from home, so who is going to train you? nobody. They won't hire you because you're not "canned and ready to go", and with a full tele-presence staff they don't have the hands-on capacity to give you proper training.

A good compromise would be "micro-cell" offices, but right now companies are just reeling from the fact that turnover in their staff is much much more painful when the entire department is scattered to the far winds.

Re:Bad economics

[im_thatoneguy]

Exactly. We "steal" from the future all the time.

I took out thousands of dollars in student loans. If I had worked through college to pay for college as I went it would have taken me 10 years to graduate from college. Instead I stole future wealth and success from a time in which I was impoverished. The result was I finished college in 2.25 years in an intensive program and payed off ALL of my student loans in under 6 months with a high paying job.

This is the notion of an economic stimulus package. Yes you lose money. But we can fairly assume the economy can afford increased taxes in the future to compensate once the median income rises again.

Re:Bad economics

[plasmacutter]

it would be pretty much the same for lending, credit, and money supply.

The difference though would be the little guy gets the money, and does not have to rely on debt to spend. This means freer spending, lower risks of default, and consequently more stable growth.

Re:Bad economics

[JoeMerchant]

As someone who might be an H1B visa holder in the not-too-distant future, what's your problem with them? Is it that we didn't -start out- in the U.S., or that we might leave in the future, or that we're sending envelopes stuffed with cash back home in the mean time?

The envelopes stuffed with cash are a problem, but the bigger problem still is when you fill a job at a deep discount in salary rate compared to someone who might like to live here, raise a family and possibly retire within this economy, and this gets back to the idea that you might leave in the future.

I don't have a problem working for slave wages for a few years after getting out of school - I do have a problem competing with slave wage rate laborers for my entire career.

Re:Bad economics

[Dark_MadMax666]

You want to have the maximum number of Americans working and increase economic activity ? Lower the minimum wage. Level the playing field between legal and illegal labour.

So you saying that all it is there to blame is illegal labour? Even though it is only about 10 mill -and they do make more than minimum wage already! ( no americans will do hard work for $10/h -that is why illegals take that work, not because they work under min wage)

Re:Bad economics

[bendodge]

Thank you for a reasonable reply.

1) I disagree about the Republicans doing well. I'm of the opinion that modern Republicans are just go-slow socialists, and modern Democrats are go-fast socialists. It didn't use to be this way, but I think both parties are catering to an ignorant populace that just wants grain out of the public treasury. They just differ on moral issues.

2) Maybe so, but I don't think it's up to the government to redistribute it. I think that should be left to the private sector.

I agree that the government could invest wisely, but looking at the current balance sheets convinces me that that won't happen. Building roads and other infrastructure is a good use of money, but I'm afraid most of the Keynesian boosters will go towards social programs which won't return the investment.

1) I'm not sure what these conditions are.

2) If this money is fiat, doesn't that mean it's creating inflation?

3) Ok, I'll give you that, but for every fiscal Clinton there are a dozen fiscal Obamas. The balance is way, way out, and I don't think our population has it in them correct it and shun addictive spending.

Re:Bad economics

[jabster]

Well, no, not quite.

The point is that private enterprise is much better suited to wisely spend money than is government. Central economic planning by the government never works.

Another example would be two headlines here on slashdot. I think they were from this summer, tho perhaps earlier. First: CA bans incandescent light bulbs, mandates CFLs. A few days later, we were treated to this: Researcher gets efficiency of incandescent bulbs up to match that of CFLs. The more intelligent thing to do would have been to require a certain bulb efficiency, rather than mandating a specific technology.

The trillion plus we've spent so far should be proof enough that gov't spending is NOT the way to go here. Look how much good it's done so far.

Re:Bad economics

[GuloGulo]

et's make the exact counter-argument:

"So basically you've decided how much money people should be allowed to make, after which you intend to offshore jobs until they agree to untenable wages?"

That's not the exact counter argument, that's nonsense.

In the previous example, a person sticks a gun in your face and hauls your ass off to jail if you don't agree with their money allocation policies.

In your attempt at an equivalent, there is nothing comparable.

Re:Bad economics

[CodeBuster]

Alright, you continue to do whatever you want with your money, invest it or not, and I will do likewise, but please don't cross the finish line of your productive working years at age 65 broke with no savings and say, "Ok government...now take care of me".

Re:Bad economics

[plasmacutter]

You're right, there is nothing comparable to a warm cell in club fed with 3 squares a day.

Instead, you are struggling day to day WITHOUT government food or housing, either unemployed or not making enough anyway.

Re:Bad economics

[Thundermace]

I really just wanted to read the discussion and not get involved - but one comment I have not seen is simply this:

Any "Stimulus" from money being spent is going to have 0 impact on the US or the creation of US jobs.

Let's face facts here people - unless the money is spent on "American produced goods and services" the money will go everywhere other than the US.

For example: John Q. Public runs on down to Walmart and says, "Geez that there TV and blueray player looks good - Im gonna buy that with this here stimulus check" Where did the money go?

China, Korea, Japan, etc...

So let's face it - People don't think. You want a stimulus package that creates jobs and boosts America's economy - Hand out a voucher only redeemable at "X" American companies (not an American Subsidiary of X Global Company or better still - MADE, PRODUCED, DELIVERED, CREATED in the U.S. of A.). Forget handing out the cash, otherwise your stimulating someone else's economy.

Re:Bad economics

[GooberToo]

It's part of high school history..."What ended the great depression?" (in the US, for me) Some think FDR and his public works, some think industrial capacity increase for WWII, some think victory in WWII

Heading out to a tangent now but the cause is very unlikely to be victory of WWII as the economy was effectively restored to pre-GD times by the end of 1943. My personal opinion is it was a combination of the other two factors you mention; FDR's public works and WWII.

I don't think merely spending a money, even an epic amount of money, is itself going to unify what is a very divided nation.

I think you're right. Given recent accounts, the public seems to believe Obama can walk on water and gives orders directly to God, hope is already there. The next thing to do is to stimulate the economy (regardless if its truly creating jobs or not) by putting people back to work; and is some cases, back to work much sooner. Ultimately, it doesn't matter if it creates jobs or migrates jobs, the point is, it does so sooner such that cause and effect creates new jobs sooner by circulating money sooner through all levels of our economy. With the Great Black Hope, creating just that, the two may be a modern re-formalization of what ended the GD. And it doesn't hurt we *already* have *three* ongoing wars.

Needless to say, unless Obama completely screws up, assuming history can serve as a road map, it would be almost impossible for the economy not to recover.

Re:Bad economics

[afidel]

Actually what you are doing by spending money today is increasing productivity, as unemployment rises your economy wide productivity numbers HAVE to plummet as those people are still consuming resources but are not contributing significantly. Tapping future work to keep current productivity high is a good idea because the economy is NOT a zero sum game.

Re:Bad economics

[daemonenwind]

You actually contradict yourself, and reality, quite a bit.

If you have a corporation, you use that corporation as a tax shelter. The higher the tax on your income, the less you will claim as an official salary from your company. .....
which means....higher wages

You claim to increase your wages by decreasing your wages. Nice logic.

In truth, a small business owner will probably seek to shift their personal rewards to a more tax-advantageous status, like claiming part of the home as an office, handing over the car payment to the business, and structuring part of their income as a pre-tax benefit, like retirement investments and a medical expense account.

Or, probably more likely, they'll just decide that the tall demands of running a small business aren't worth the reward once Uncle Sam gets finished picking their pocket, and will fire the employees, sell off the assets and go work 9-5 for someone else.

In truth, you're not talking about a large-corporation executive who makes 1 million USD+/year, you're talking about a person who directly owns an S-corp with a dozen employees or fewer, and who's personal income appears, to the tax code, to be $150,000 - 800,000, even though this is actually operating income, which has little to do with his/her own personal wealth or cash flow.

This notion you have of who is wealthy and who is not has a couple of major problems. First off, people who own small businesses represent the bulk of people who the tax code considers to be earning between $200,000 and $800,000. Their real lifestyle, however, is middle-class professional, and is equivalent to a family making significantly less. Taxing these people, therefore, pulls the rug out from under your local landscaper, independent contractor, or dentist. And, what they'll turn around and do is fire people and contract their businesses because they can't afford to continue.

Second, of course, is that in the background, you assume to know what a "fair" level of income is and is not. I don't think you're qualified.

You then go on to claim that business owners who pay more federal income tax get it right back in the form of infrastructure improvements.

Tell that to the good people of Minnesota, who get only 19 cents of returning investment for every dollar they pay in federal tax. In fact, 31 out of the 50 states get back LESS than they send to Washington.
http://www.nationalpriorities.org/Publications/What-Came-to-Your-State-in-2005.html

When you consider where tax money goes (mostly social security, medicare and defense), you'll see the flaw in your reasoning. It can't possibly be spent $1 for $1 to improve ANYTHING. Due to bureauocracy and centrally-planned objectives, government entities spend money less efficiently than anyone else to begin with!

You continue, claiming that investment in small business caused by high personal tax rates creates more credit for everyone.
Huh?
If I own a landscaping business, how exactly does my buying a new core aerator create credit for everyone? It doesn't. You're confusing stock purchasing and venture capital with basic capital expenditures. To borrow a phrase, I don't know one competent business person who would do that.

The trouble we have is that no one IS saving. So claiming you have to take money away from people who are hoarding it is silly, because no one IS hoarding money.

Your entire post bases from one grand assumption: Someone, somewhere, is sitting on a pile of cash like Tiamat sits on a pile of gold. The problem is, it's not true in the slightest. This entire ride-up has been driven by negative saving. That's right, we - as individual citizens - have run the economy up by spending faster than we can make money or, recently, even hope to repay it. There must eventually be a reckoning, and that is now. People stopped spending because they finally hit the consequences of living beyond their means. Now, we must live beneath our means for a while....and it's quite a swing.

Re:Bad economics

[shaitand]

'And you'll still be left, with the $100, somewhere in the system, unless it's been exported overseas. (joy)'

Which is exactly why a service based economy is for the birds. Particularly for a nation with the largest pool natural resources on the planet. I spend a hundred dollars and you clean my floor, we haven't created value, we've just shifted it around. I spend $100 on a hammer, the $100 shifted around but somewhere down the line another hammer will be produced. Leaving the nation with $100 + a hammer. That is a net increase.

Service-based economies are great for countries with limited national resources (that is why Finland has one of the best educational systems in the world, you can always train people to supplant a service based economy) and for banks, who benefit from money shifting around as much as possible. And nothing keeps money more fluid than service-based economies.

Re:Bad economics

[jbolden]

Further, considering that the government is NEVER as efficient at allocating capital as the private market is

Do you have any evidence for that?

Re:Bad economics

[shaitand]

All of this pretends creating jobs is a magical and wonderful thing. In an ideal economy no jobs would be needed, machines would do the work and wealth would just be distributed to citizens who merely invested it in their choice of machine warehouses.

Net Value is what must be increased. Our economy has gone astray in a number of areas. A service-based economy is a great choice for a poor nation with limited resources because it is cheap to educated individuals to perform services. A service-based economy is great for banks which siphon off money as its exchanged, the more fluid money the better banks do and service is fluid as can be (banks don't increase net value). Refining and utilizing natural resources is what increases value. Clean a floor and get paid $100 and you've moved $100 around. After the fact you still have one floor and $100. Make a blanket and sell it for $100 and you've turned $20 of raw materials in $100 worth of raw materials leaving you with $100 and $100 worth of materials, or a net value gain for the nation of $80. When as a nation you have a largest pool of national resources in the world, this is the only way to go.

The U.S. shouldn't be investing in IP generating ventures, IP is artificial value that depends upon regulation to maintain its artificial scarcity. A scarcity that our competitors will not honor. The U.S. should be investing in its own manufacturing and resource infrastructure. Stop taxing the production and profits from materials that qualify for a "Made in the USA" tag and eliminate taxes on the pay of workers who make said products.

Re:Bad economics

[afidel]

Except we are risking low double digit percentages of the annual GDP, barely more then the percentage drop we will have if unemployment hits Depression levels, it's a good gamble.

Re:Bad economics

[shaitand]

'People sitting around doing nothing is wasted capital. Even if you have to borrow to get them to do work, you have produced something greater than your investment.'

Not all work creates value. Everything you do is work, including what you do at home. Unless you have those people creating value with those jobs then you are wasting capital by employing them as well.

Re:Bad economics

[Austerity Empowers]

Only a little over half the country that showed up to vote had faith in him as a person, and even then only more faith in him than his competitor. In my opinion, this division is itself the root of our problem.

I'm not sure his charisma is enough to "fix" anything, but certainly gives him an edge in creating a reality that we might reject from someone else.

Re:Bad economics

[Ant P.]

$30 billion for building, bombing or bailing. Your logic is that they're all equal in the end.

That is what caused the current mess, nothing else: fucked up people who think the only thing that matters in the universe is money.

Re:Bad economics

[shaitand]

Risk is relative.

The goal of private industry is to line their own pockets. For them risk is about whether or not they will profit on the venture.

The goal of the government is not to realize a profitable return on their investment for the government but for the people at large.

Someone else making profit is simply a lost opportunity for a corporation. At worst it is increased taxes for government.

Re:Bad economics

[steveo777]

Well, on one hand, I think that any jobs should be given to the harder working, more qualified person, but on the other hand I think that full US citizens should be priority because, well, we do have to take care of ourselves. While our deficit may be almost immeasurable, and seem irresponsible, we do stimulate a good deal of world economy. So when our country is in crisis, we should be hand picking ways to keep some of that money in-house.

On the other hand... well, if you have an H1B odds are that you got it because you deserve a specific job a bit more that some of us around here. Personally, I'd be more for us not paying illegal immigrants and such before we worried too much about the 150,000 or so H1B holders.

Re:Bad economics

[jbolden]

Thank you for a reasonable reply.

1) I disagree about the Republicans doing well. I'm of the opinion that modern Republicans are just go-slow socialists, and modern Democrats are go-fast socialists. It didn't use to be this way, but I think both parties are catering to an ignorant populace that just wants grain out of the public treasury. They just differ on moral issues.

I just meant doing well in terms of the elections. That is Republicans have managed to shift America's balance of investment towards the private sector and create a deficit in public investment.

2) Maybe so, but I don't think it's up to the government to redistribute it. I think that should be left to the private sector.

This is the key point in Keynesianism. The free market is not going to be able to allocation idle resources quickly. There is a demand shortage, so this capacity is quite literally available to a player like the government that operates outside the system "for free".

I agree that the government could invest wisely, but looking at the current balance sheets convinces me that that won't happen. Building roads and other infrastructure is a good use of money, but I'm afraid most of the Keynesian boosters will go towards social programs which won't return the investment.

Do you mean social investment or increased consumption? It sort of sounded like you meant social programs which are consumption not investment oriented. The issue of what is the proper allocation between consumption and investment is tangential to this whole debate about stimulus.

1) I'm not sure what these conditions are.

The conditions under which money is effectively idle are conditions where investment capitol exceeds investment demand. This causes the price of investment to drop (i.e. lower interest rates). Under normal conditions or over long enough terms lower interest rates will create investment demand (i.e. lower prices boost demand). But investment demand is determined by real interest rates for risk so if:

1) People are pricing risk high
2) We have low inflation or worse yet deflation

You can have a situation where nominal interest rates are low but real interest rates for borrowers are high and thus there is a structural investment shortage, the money is sitting idle.

The easy solution is for the government to just borrow that money up and directly invest.

2) If this money is fiat, doesn't that mean it's creating inflation?

It could or deflation. Oversimplifying a lot:
too much money in the system as a whole = inflation

too little money in the system as a whole = deflation

Government determines the amount of money in the system.

3) Ok, I'll give you that, but for every fiscal Clinton there are a dozen fiscal Obamas. The balance is way, way out, and I don't think our population has it in them correct it and shun addictive spending.

I agree. And if that were even among top 5 problems right now I'd be in favor of reigning in spending.

Re:Bad economics

[shaitand]

'no americans will do hard work for $10/h -that is why illegals take that work, not because they work under min wage'

That is a myth. I would gladly do steady full-time hard work for $10/hr at this point. Maybe not in California where the cost of living is ridiculous but there are no shortage of places in the midwest where labor rates are inexpensive in the U.S.

We have the minimum wage for a reason. Stop blaming the minimum wage and stop claiming the illegals are harmless. Actively pursue them, brand them, and send them home. Make Mexico agree to imprison them if we catch them twice or we suspend NAFTA. There are immigration procedures in place for those who wish to foreswear their allegiance to Mexico, learn English, and work under the same rules and terms as other Americans. Neither California nor any other part of the southwest are the rightful homes of Mexicans or other illegal immigrants.

The solution is not to pay U.S. workers low wages or to forgive the use of illegal labor. Enforce our borders, increase taxes on imports, grant tax-breaks to U.S. manufacturing. Ultimately, corporations can not leave the U.S. as a result of these things because the U.S. controls the largest pool of natural resources in the world.
 

Re:Bad economics

[jbolden]

Our economy is not being run in a Keynesian fashion. Starting with Carter we moved away from Keynesian economics and by now we are highly non Keynesian.

Re:Bad economics

[wizardforce]

Carter's administration. Window fallacy. Japan's failed attempt to spend its way out of recession. You can not create anything without saving something. If a business makes no profit there is no money to expand no matter what "demand" exists. THe same is true of personal economics, people make money from saving their money not from spending everything they have. Now lets assume that everyone saves but doesn't invest- what occurs? consumption decreases, prices fall until consumption rises [cheaper gas sells better you know] it regulates its self. When government attemptz to remove capital from one area to feed another the result is usually a negative one. Take a look at the (former) soviet union which Keynes felt to comment on Keynesian economics' positive results while the reality was that the soviet economy was crippled. The simple fact is that people generally tend to wish to improve their own situation with whatever means available. Investing, saving, curbing wasteful consumption etc. Inevitably having left over capital was responsible for the advancement of civilization since peopel could expand and do more things, creagte more food, research etc.

Re:Bad economics

[OeLeWaPpErKe]

First I do not say illegal labour is the only thing to blame. The leftist "fair lending" CRA idiocy is the single biggest cause of the current problems.

Second if that thing about americans is true then unemployment benefits are too high. Hell I once asked a playboy photographer if he'd do his job for free, and even he said "no way in hell". People don't work because they like it, they work because they have to. If you change the situation so they don't have to, of course economic activity goes down. The problem is whatever effect is making work optional.

Lowering the minimum wage will enable a number of industries in the US to de-automate, or at the very least postpone it a bit. It will create lots of jobs that are actually helping the economy.

Having the government "create jobs" not only doesn't help the economy. It ALSO damages those who actually do work to make the economy better.

Re:Bad economics

[Hugonz]

It reallocates jobs using government coercion and taking money by force..

There, fixed it for you.

Re:Bad economics

[Hugonz]

People sitting around doing nothing is wasted capital.

It's called people doing what they want with their own bodies. No one has the right to *get them* to work.

Re:Bad economics

[CaptCovert]

... unless it's been exported overseas. (joy)

And therein lies the largest crack in any argument regarding the efficiency of private business spending. It is much easier for a private business to spend money outside of the US (and thus push money out of our economy) than it is for the government to do so. If the same % the US gov't spent on foreign aid was a cap that Dell had to stick to, it wouldn't have a financial dept. as we know it.

At least with a government project, we can be reasonably certain that a majority of the cash remains within our own economy, instead of being placed in the hands of the 'responsible private sector'.

Re:Bad economics

[Hugonz]

Here: http://www.lewrockwell.com/rothbard/rothbard180.html

Re:Bad economics

[Hugonz]

If you want to use fitness metaphores, you will not get a six-pack from reading Economics in One Lesson, but you might as well rid yourself of the idea that sweating will burn fat.

Re:Bad economics

[Cornelius the Great]

That was sort of a tongue-in-cheek way of saying that any type of investing can carry risk, even with all of the due diligence that retail investors (ie- people like me who aren't worth more than $10m). There are always going to be freak cases of dishonest fund managers (Madoff) and corporate management (Enron, WorldCom, etc) who lie and cook books to make it seem like going long with their securities is a sound investment.

I'm not saying that investing in blue chip stocks with solid financials and a bright outlook is akin to throwing money into fly-by-night companies that trade on the pinks/OTC and rarely (if ever) send 8K reports to the SEC. But investing still carries risk, and it's not farfetched that even your retirement may someday get wiped out by sneaky accounting and shady fund managers.

Investing in anything that carries any risk whatsoever is a gamble.

Re:Bad economics

[Creepy]

Not necessarily - it could create jobs if the commodity created by those employed by it sell a product that makes money. In this case, it would need to sell the product to foreign countries at a higher rate than the initial cost or else it doesn't recoup the investment (it takes the investment out of infrastructure).

    The US has no money, so if it wanted $100 it needs to borrow it from foreign countries and pay interest on it, so a stimulus is, in effect, the same thing as putting $100 on your credit card - you have $100 to spend now, but you eventually have to pay, say, $120 back to the lender. That number also scales by inflation, so high inflation isn't in your favor (as it can be with fixed interest rates - think a mortgage - if you pay $100000 and you pay at a 6% fixed rate but inflation is over 6% over the life of that loan, you effectively pay less than the value of the home at the end of the loan).

Since that $100 is invested in business, it is possible the spending from that borrowed money returns its investment over time, just like when a business person takes out a loan to build his or her business.

On the other hand, if the money is squandered, the lenders may lose faith in our ability to pay the loans back because said business is failing (this is similar to the so called high yield "junk bond" investment - once it starts failing, it spirals downward quickly), and it may cause hyperinflation when the entire monetary system collapses.

Re:Bad economics

[cayenne8]

"You would have to replace where the payroll taxes would have gone to: social security, medicare, unemployment insurance..."

I was only talking about the Federal income tax that is withheld...not the SS or medicare parts. I believe only the employer pays the unemployment insurance...

Re:Bad economics

[neomunk]

I still don't understand your answer to the GPs very valid points. I understand how your IDEALIZED version of this is supposed to go, but what about those real life consequences the GP mentioned?

Re:Bad economics

[Tanktalus]

Really? If, say, I offer my services at exactly the same cost as you're offering, I have a 50-50 chance of getting zero (assuming all else is equal). That means, a 50% chance of being REALLY short. In probabilities, that averages out to 50% of the pay. However, if I offer my services for a 10% discount, it "averages out" (for me) to 90% of the pay. A much better option. For me.

Of course, not everything is equal. So, if I'm not as good at the job as you are, I need to offer those services for MUCH lower for your employer to think s/he's getting a better ROI by hiring me instead of you.

The only problem here has been management's continued insistence that developers are interchangeable, and not realising that the new foreigner actually isn't as good as you are, even if only for cultural reasons (the Indian culture being, objectively speaking, vastly different than the standard American culture - I'm not saying one is better than the other, only different), which makes integration much more expensive, and not considered into their ROI projections.

Free market still lets me offer my services for whatever rate I deem reasonable, subject to being accepted by a client who is willing to pay whatever they think is reasonable, given appropriate negotiations. If you don't like it, join/form a union.

Re:Bad economics

[shaitand]

not all jobs are equal. Personally, I'd rather count small businesses with lifetimes over 5yrs created than jobs.

Re:Bad economics

[cdw38]

OK, not NEVER. But, as various planned economy experiments throughout history have demonstrated, the free market is, on the whole, a much better allocator of resources than the state (for example, East vs. West Germany...).

I should have said "...on average, the government is not as efficient at allocating capital..."

My underlying point is that unless the government is, on average, more efficient at capital allocation than the free market, the return on $1T borrowed (even though a large portion of it will be "borrowed" from the Fed, or created out of thin air) and spent by the government today will not offset the price of the loaned capital (interest rate), resulting in a net loss to the economy, over time.

Re:Bad economics

[T.E.D.]

Lots of folks here have various problems with H1B's (as you can see from the large number of responses).

However, for the purposes of this discussion the biggest problem is indeed that envelope stuffed with cash going overseas. Stimulating the economy is all about getting cash flowing around. Sending money overseas siphons some off out of the (US) system. It helps stimulate the economy in Equador (or wherever), which I suppose is cool too, but hardly the effect we are trying to achieve.

Now personally I think it is still a win for us to get skilled workers in from other countries. Hopefully you will decide to stay and perhaps even become a citizen one day. One of this country's biggest advantages has always been that we drew in the best, brightest, and most ambitious people in the world. I'll risk the monetary bleed-off. Hope to see you here.

Re:Bad economics

[shaitand]

'which means (excluding trade for now)'

You can't exclude trade and ignore offshoring in the modern globalized economy. The jobs aren't here because they have been sent overseas. They have been sent overseas to lower costs and increase consumer spending. The result is that on a national level our wealth is being transferred not from one U.S. Citizen to another, but overall wealth is being siphoned from the U.S. to third party nations. The more spending, the more that is siphoned away.

You really can't have greater net savings than net investment when individuals have no excess income to save or invest.

Re:Bad economics

[Tanktalus]

That's not how it really works.

If I offer my services for, say, 1% less than you, the employer may come back to you and offer another 1% less than that. And, if you agree, they may come back to me for a further price reduction. And this might go on until we get, say, 10% less than the original price and someone bows out.

Instead, I may offer 5% less, and that may be too much for you right off the bat to counter with (or the employer may decide that this is good enough), and I'll be making 5% more than the scenario where I start out with only a 1% discount on my wage.

By risking an extra 4%, I might save myself an extra 5%. And the headache/stress of a bidding war.

More likely, I just want to cut the interview process short by eliminating the employer's desire to look at further, possibly better ROI, candidates, to further improve my chances of getting the job.

After all, we're not talking about which store can get you the latest blockbuster movie on Blu-Ray for the cheapest where all copies are really the same. We're talking about highly subjective "purchases" where candidates are NOT the same, and where those candidates really want to improve their own lot in life, often FROM ZERO to 60-90% of the going rate - that's huge for them.

Re:Bad economics

[DragonWriter]

Well I'd presume the plan to resolve high debt:gdp in a fiat system is what it usually is. Debt is in nominal dollars while gdp is in real dollars.

That's both false and not even sensible; the ratio is always calculated using current (i.e., nominal) values for both, and is a unitless value. Nominal vs. real is only a distinction that matters when you are comparing values in $ across different years; since the ratio is a unitless value, not one in $, the issue doesn't arise.

 

Re:Bad economics

[jbolden]

Good answers lets address them:

Carter administration was the end of the period where monetary stimulus was being applied during inflationary recessions. Keynes would have advocated something similar to what Volker did. So I'd score this was as pro Keynes. What it contradicted was neo-Keynesian ideas about having to use Keynesian means in inflationary recessions.

Window fallacy -- Not a Keynesian concept

Japan's failed attempt to spend out of recession -- They didn't kill the deflation problem via. monetary stimulus. Also Keynes didn't advocate worthless public works projects. Things like direct equity injections would have been better.

So in 2 of the three cases you don't have Keynesianism failing you have it not even being implemented. And one is just some sort of Keynesianism taken to an extreme.

Re:Bad economics

[thePowerOfGrayskull]

It's not like the United States has a safe with trillions of dollars that can be distributed or invested in some central planning scheme. The trillions of dollars which are being offered represent money that the US government doesn't have.

All money is money that the US government doesn't have. We have not been out of debt since sometime the Depression. The debt has not decreased ever, except for two brief periods in the 60s and 40s. Even during Clinton's much-lauded 'budget surpluses' our debt was increasing year over year.

Re:Bad economics

[CodeBuster]

Investing in anything that carries any risk whatsoever is a gamble.

If you want to take it to that extreme than every choice that you make in your life, even whether or not to get out of bed (or not) in the morning, involves risk. If you choose NOT to invest in anything then there is risk. There is risk either way. The rational response it to take steps to minimize the risk and maximize the return and investing is one way, perhaps the best way, to do that. My concern is that people who believe the "investing is gambling" mantra will NOT invest their money and then demand to be taken care of when they are old as if they are entitled to a share of my savings.

Re:Bad economics

[jbolden]

Good article. Here is how I would counter:

1) Keynes does not require the aggregates to be constant I don't know Rothbard got that idea. They can be any function with bounded variation

2) Our means of statistical collection have improved quite a bit since the 1930s the things Rothbard is saying we can't determine we do determine quite accurately on a regular basis.

3) Rothbard is incorrect regarding Keynes and employment & wages. He is correct if you assume 0% productivity growth i.e. no investment.

Re:Bad economics

[denzacar]

How about just getting off of that xenophobic high horse and looking into what you are saying.

Paying taxes is the cost of doing business.

It's a bit protectionist, but if there are no employed people here to pay taxes the whole house of cards falls apart.

You first throw away paying taxes as "a common thing". You have to do it anyway so it is nothing special if an H1B visa holder is paying them too.
Then, you go on about how important tax paying actually is.

If you can't afford bread, you won't be paying taxes, or buying things from local producers.

Are you implying by that last line that an H1B holder will have his food imported from the country of origin - if he or she can not afford to buy it locally?
Or that they will start growing their own food in parks start hunting it in the zoo?

You will be contributing money to a big pot that *I* get to say how it's spent.

Then what do YOU have against it?
You get a free ride.
Someone else brought his hard earned education and working potential into your country, yet can't get any benefits he does not work for (you as a born citizen are entitled to those benefits - such as unemployment checks), provides service through the work he/she does, and spends most of the money earned on local services again.
Plus - pays for those benefits you get to use but he/she does not through the taxation of his/her wage.

I suggest you read up on some basic economy about how money and profit are made and about work resources.
You should realize then that for the economic boost (legal) foreign skilled workers are far more profitable FOR THE COUNTRY AND GOVERNMENT than hiring locals.
They leave their entire work in the country, use and pay for local resources and pay local taxes - yet get 0 return from those taxes.
Local worker would do the same - only he would receive that tax money back through various social programs.
Plus he would get more than the actual amount of money invested - cause that money would be enriched through the work of teachers (education), scientists (government sponsored research), farmers (governments sponsored farming programs), social workers (unemployment aid), all those people that worked building the infrastructure (you like your paved roads I presume?) etc.

H1B holder gets none of that. They bring their own education, get no social benefits and yet they add to that money pile you mentioned.

Problems start to occur when YOUR government forgets that "For the people..." part and starts acting like its a business - just going "For the profit" instead.
So, instead of investing those taxes in schools, hospitals, research, social aid etc. - they invest in more money making.
And best way to do that is to get more educated workers from outside and degrade local education (they are not going to hire a educated local anyway) and social programs.
Cause it is cheaper to just import that educated work force, right?
And if there is a problem down the road - we will just buy the solution for that cheaper somewhere else too. Or we will charge it on our platinum Government Credit Card.
In other words - instead of investing in stronger economy all those past years the government will come up with a "lets dump money on it" bailout plan. Money borrowed from banks and other countries.
Who again demand more money back, which calls for more quick profit and... I think it is obvious where this is going.

All that time - it is YOUR government that makes those decisions - and guess who voted for it and gave it power to do so?
Not those H1B visa holders. They can't vote.

When was the last time YOU contacted YOUR government representative?
Citizenship does not mean just enjoying the benefits. There is that "By the people..." part as well.

Re:Bad economics

[DragonWriter]

The Fed's balance sheet was spent on the first bailouts, and the US is now printing money to cover the current bailouts. The government is manipulating M1.

Wrong. The US government is borrowing and spending money, not printing it, for all of the bailouts (most of which are really under the umbrella of one bailout, the TARP program.) The Fed, distinct from the government, has also extended some $2+ trillion in additional loans as part of its own bailout contemporaneous with the other bailouts, which is manipulating M1, but is entirely separate from any bailout approved by Congress.

The Fed effort is pretty hard to unravel as to where the money has gone and what effect it has had, but it seems likely to me to be a very bad idea (and it is probably the proximate cause, or at least a major factor, in the collapse of the M1 multiplier.)

You're confusing the issue by implying that they are not directly related. Manipulation of M1 leads to an even worse trend on the second graph.

Simply repeating that claim does not provide any reason to believe its true. There is no rational reason to expect that the M1 multiplier (which isn't a measure of [a] the stimulative effect of anything, or [b] any effect of government debt or spending) would have any effect on the average stimulative effect of additional government spending.

I love how people like yourself, Bernanke and Paulson concede under pressure that deficit spending is disturbing, but at the same time hold a Keynesian attitude of printing money to "stimulate" the economy.

I'm not anyone like Bernanke or Paulson, and I'm not conceding anything under pressure. Nor I am conceding, or even claiming, that deficit spending is disturbing. What I'm saying is that properly-directed deficit spending has a substantial utility under certain circumstances (including, relevant to the present discussion, responding to a recession), but that that utility is undermined by a high debt:GDP ratio. Consequently, it is generally desirable for government to reduce the debt:GDP ratio during expansions (either by reducing the debt outright or by increasing it at a rate slower than the rate of expansion), and only engage in substantial deficit spending (that is, deficit spending such that the debt:GDP ratio is increased) when it is necessary to respond to an emergency such as a recession.

Nor have I (nor Keynes, to my knowledge) advocated printing money, specifically, to stimulate the economy. What I've advocated is fiscal, not monetary, stimulus, which includes borrowing money (and could conceivably include targetted taxes, though generally that's counterproductive compared to borrowing, as well) to support increased short-term spending. Keynes did encourage both monetary and fiscal stimulus, but not printing money, AFAIK; instead Keynes favored easy money policies such as reduction in interest rates. In my view, the evidence is pretty clear that monetary policy is somewhat useful in smoothing minor economic fluctuations, but its pretty clear that the present crisis has gone beyond what any monetary policy can do much to deal with, at best, monetary policy can avoid making things worse (and I'm not particularly convinced that the Fed is even meeting that bar.)

There's only one correct attitude during a recession: liquidate bad debt and expose fraud.

This is certainly an article of faith in some circles, but there is neither evidence nor even any coherent theory supporting it.

Re:Bad economics

[jbolden]

There is just barely enough Federal income tax from low wage earners to get to $800b. There is no way to get that much fairly.

On the other hand if you were to raise the deductions, you could pull a nice chunk of the $800b off fairly.

Re:Bad economics

[jbolden]

No you aren't understanding.

Assume have an economy with a debt of 2k at 7%. a gdp of k and 100% growth in GDP (say 97% inflation and 3% real growth).

debt:gdp
Year 0: 2k::k = 2
Year 1: 2.14k::2k = 1.07
Year 2: 2.23k : 4k = .57
etc...

Re:Bad economics

[DragonWriter]

All of this pretends creating jobs is a magical and wonderful thing.

No, it is based on the fact that, in the real world, creating jobs is a good thing. Neither "magical" nor "wonderful" are relevant.

In an ideal economy no jobs would be needed

No, in an ideal world no jobs would be needed, but since such a scenario would not involve scarcity, it would arguably not even have an economy, which is a means by which limited resources are distributed.

machines would do the work and wealth would just be distributed to citizens who merely invested it in their choice of machine warehouses.

Certainly, there is some attraction to such a pure-capital economy (though I wouldn't call it ideal.) But its not the real world, nor is it something realistically attainable in the short term. Consequently, in the short-term, dealing with the actual consequence the actual recession has for actual people, creating jobs is a good things.

Inasmuch as it is possible for people to even begin to approach the kind of life they would have in your proposed pure-capital utopia, they need investable capital -- i.e., money to invest beyond that necessary to spend for self-maintenance. For most people that haven't inherited large sums of money or won the lottery, that means they need a job. So, even if we accept that what you propose is the ideal economy we should be striving for, we need people to have jobs now so that they could have capital to invest in the "machine warehouses" if those ever get built, or in real productive enterprises which actually exist in the interim.

Clean a floor and get paid $100 and you've moved $100 around. After the fact you still have one floor and $100.

You are presuming that a clean floor has the same value as a dirty floor, which is exactly the same mistake as assuming that a block of gold ore has the same value as the gold it could be refined into which has the same value as, say, the spacesuit helmet visor screen that could be produced from the refined gold.

Also, you have $100, and the person who paid you to clean their floor has a clean floor that used to be a dirty floor; and clearly, the clean floor is worth $100 more than the dirty floor to them, otherwise the exchange wouldn't have taken place.

Make a blanket and sell it for $100 and you've turned $20 of raw materials in $100 worth of raw materials leaving you with $100 and $100 worth of materials

Wrong. Make a blanket and sell it for $100 and you've turned some quantity of raw materials into $100 of finished product, leaving you with $100, and the person who bought the blanket with a product worth $100 to them. In either case, the person paying you has received something worth $100 to them, and given $100 to you.

If services didn't produce value, no one would pay for them.

Re:Bad economics

[jbolden]

The reason I wanted to ignore trade is that trade has nothing to do with under stimulation.

We have a floating currency so
trade deficit = balance of payments defecit
There is no wealth to siphon off. The only thing you can do with dollars is:
save them
invest them back in the US
buy US stuff
buy US labor

That is right now people want lots of little green pieces of paper and trade labor/goods for it. That's a plus for the economy as a whole though it can be quite destructive to individuals. We are talking in Keynesian terms so we look at the economy as a whole.

Re:Bad economics

[wellingj]

Assuming the government uses the money wisely.
When was the last time you saw someone who stole money use it wisely?

Re:Bad economics

[DragonWriter]

The point is that private enterprise is much better suited to wisely spend money than is government.

That article of faith has little evidence.

Central economic planning by the government never works.

This is no more true than say that systems without central economic planning by the government never work; all successful economies feature a wide range of relatively free enterprise to which some regulation applies but where government does not make detailed allocation decisions, and some degree of government direct planning and participation in the economy. And certainly there is evidence that the exact kind and degree of government involvement that is desirable varies by conditions.

Certainly, complete central planning is not desirable, but no one that I am aware of is arguing for that.

Another example would be two headlines here on slashdot. I think they were from this summer, tho perhaps earlier. First: CA bans incandescent light bulbs, mandates CFLs. A few days later, we were treated to this: Researcher gets efficiency of incandescent bulbs up to match that of CFLs.

Since neither of those events actually occurred, the only thing I can think of that that is an example of is why you shouldn't trust Slashdot headlines as a source of reliable inforamtion (assuming that even the headlines are accurate.)

(Several things related to that have actually happened in the last couple years: the EU decided to phase out incadescent lights by 2012, a California lawmaker proposed a similar rule in California that never passed, GE announced work on high efficiency incandescent (HEI) lights which it said could eventually match CFL efficience, GE abandoned work on the HEI lights to focus on LED lights, which, while currently more expensive than CFLs, are already more efficient.)

The trillion plus we've spent so far should be proof enough that gov't spending is NOT the way to go here.

If one assumes that all government spending is exactly equal and that the only choice is whether or not the government should spend money rather than whether it should and, if so, how it should, that would make some sense. Though it still fails to consider it against alternatives.

In the real world, it makes even less sense, since there is a real question of how funds are spent, and plenty of reasons to think that, of the spending options available to the government, those that it has chosen are particularly poor.

Re:Bad economics

[DragonWriter]

I really just wanted to read the discussion and not get involved - but one comment I have not seen is simply this:

Any "Stimulus" from money being spent is going to have 0 impact on the US or the creation of US jobs.

Then you haven't read the discussion very well, since that comment, inaccurate as it is, has been made many times.

Let's face facts here people - unless the money is spent on "American produced goods and services" the money will go everywhere other than the US.

What you just said is that unless the money is spend in the US, it will be spent somewhere other than the US. This is, of course, rather trivially true, since all the stimulus proposals made have involved spending money in the US, its also pretty irrelevant to any actual proposals on the table.

For example: John Q. Public runs on down to Walmart and says, "Geez that there TV and blueray player looks good - Im gonna buy that with this here stimulus check" Where did the money go?

To Wal*Mart's shareholders, to the local government to which Wal*Mart pays sales taxes and property taxes (or, if the property is leased, to the property owner and then to the government to whom they pay property taxes), to the companies to the Wal*Mart store pays for utilities and other services, to the Wal*Mart stores employees, and to Wal*Mart's shareholders, and to whoever made the product.

China, Korea, Japan, etc...

Well, yeah, a few of the above categories include people in China, Korea, Japan, etc.

So let's face it - People don't think. You want a stimulus package that creates jobs and boosts America's economy - Hand out a voucher only redeemable at "X" American companies (not an American Subsidiary of X Global Company or better still - MADE, PRODUCED, DELIVERED, CREATED in the U.S. of A.). Forget handing out the cash, otherwise your stimulating someone else's economy.

How about if the government just hires people legally authorized to work in the US to build infrastructure in the US? Seems a lot more productive of public value than handing out vouchers.

Re:Bad economics

[wellingj]

Yea, we should have the slaves unite to build us a pyramid. Once the project is underway the slaves could then buy alcohol and pacify their fears, and keep working on the glorious pyramid. Sounds awesome.

Re:Bad economics

[Catmoves]

Um, just one thing you forgot. That $100.00 you mentioned has not been attacked by our care-less Congress. In the future it will be lucky to be worth $10.00. Such is progress under our spendthrifts.

Re:Bad economics

[DragonWriter]

No you aren't understanding.

That's because you were abusing the terminology and not saying what you meant.

(Which you still failed to do, but at least now its easy to figure out what you meant; you simply meant debt increasing less rapidly than GDP growth, which has nothing to do with one being "real" and the other being "nominal".)

Which, you'll note, is exactly what I said should happen.

This is, of course, not what has always happened in the past (contrary to your description that what you were describing is the way things are always done). Quite often the debt has expanded faster than the GDP growth even during expansions (and, though rarely, the debt has sometimes even gone down in absolute terms.)

Re:Bad economics

[Viv]

The leftist "fair lending" CRA idiocy is the single biggest cause of the current problems.

Heh, I keep hearing that meme, but when I ask actual bankers about it, their comment is, paraphrased: "Bullshit."

I attended a talk by a rather prominent community banker (who also sat on the Fed Board), who basically said that nobody ever made an unsound loan because of the CRA, and that this is just a bunch of politicians making hay.

Read the CRA some time. Notice that there are ironclad defenses against its provisions, one of which is, paraphrased, "unacceptably risky loans."

Additionally, when I look at the data surrounding sub-prime loans and MBS's, I have to call "Bullshit."

You want to know the biggest contributor? MBS' themselves. MBS' immunize the originator against the riskiness of loans; if you're just going to turn around and sell the loan, it doesn't matter if the debtor can't pay. So, all that matters is (1) finding someone to take out a loan and (2) finding some sucker to take it off your hands.

This is made even easier when the bond ratings agencies work for you -- which they did. The MBS issuers paid the ratings agencies, and guess what? They got good ratings. And if they didn't get good ratings, they paid someone else.

Contrast this with the pre-MBS loan process, in which a bank actually held a mortgage to maturity. It really matters if the debtor can pay in that case.

Now toss in a bunch of banks who are levered up using these MBS pools as security for the leverage. The market goes south a bit, and they have to unwind the leverage. But wait, they can't -- now everyone knows that the MBS ratings are trash, and because nobody can value them, nobody is willing to buy them. Hooray, sell at a deep discount. Wait, your equity in the margin account just went down in value because of that discount? Margin call! Sell more MBS' at a discount. Wait, your equity in the margin account just went down because of that discount? Margin call! ... Repeat until bankruptcy or bailout.

Seriously, quit with the CRA drum-banging. You're wrong.

Re:Bad economics

[DragonWriter]

The trouble we have is that no one IS saving.

Actually, the US savings rate has gone up in the recent economic crisis.

So claiming you have to take money away from people who are hoarding it is silly, because no one IS hoarding money.

Saving isn't the same as hoarding. But people are hoarding, too, by keeping less money in time deposits and more in demand deposits, by extending less credit (especially in the case of banks), etc.

Your entire post bases from one grand assumption: Someone, somewhere, is sitting on a pile of cash like Tiamat sits on a pile of gold.

You seem to be confusing "money" with "cash". Cash is a form of money, but not the only or even the most common form of money. Putting money in places where it doesn't enable creating as much more money as where it was previously (keeping more in demand accounts and less in time deposits), not creating additional money (via extending credit) when you have the capacity to do so and were previously doing so (as US financial institutions have recently been doing), etc., all are forms of hoarding in a system where most money exists in the form of notations of account and is creating by private lending in a fractional reserve banking system.

Re:Bad economics

[zappepcs]

Excellent post.

As someone who has not only applied to work in countries outside of the USA, but actually have worked in countries outside the USA I believe that I have a fair understanding of what I'm saying. Having been on both ends I have seen just exactly what other countries H1B type programs look like. Believe me, it's easier to get work in the USA more often than not compared to other countries. There is an imbalance that has been guided by poor governmental decisions. I don't blame the applicants or H1B visa holders. I dislike any sense of entitlement that they seem to have. Trust me, they have no reason to have any. No such thing exists the other way around.

The last time I contacted one of my government representatives was yesterday. Why doesn't matter. I expect the same canned form-letter reply as always. I think less than little of that particular elected official. The next time I contact anyone about government it will be by attending a campaign for liberty inspired meeting. It is MY government, and I take that duty seriously.

The solution to many problems lay in fixing the one in front of you the hard/right way rather than import some cheap quick fix. We'll see what 'yes we can' can do for us. I'm not holding my breath since he's in all the same clubs as Bush and Clinton. In either case, yes, I am doing what I can to change the way our government is run.

Whether an H1B visa holder is spending money here or not, it does take a job from a citizen. Argue semantics if you wish, but the free market will redistribute qualified workers as necessary to meet the requirements ... unless poor legislation allows businesses to import cheap, quick answers for the problem. Using an H1B visa is tantamount to saying Fuck Americans, we don't want to pay you a good wage or train you or ... blah blah. It's fairly unpatriotic IMO. There are obviously cases where there simply is no one else that is qualified. I'm not saying there are no qualified H1B visa holders. It's unfortunate but true that an American with a lot of work experience, quality reputation and skills is overlooked for the chance to hire an H1B visa applicant with no experience or skills per se that has a degree. The quality of their work is no better, sometimes worse than the skilled American who did not get the job. I've been in this situation also. Remember that a degree is simply a piece of paper. Skills are formed and proven in the workforce. If you graduate at the bottom of the class, you've still got a degree.

My original post and intent in all posts in this thread is that US tax dollars used for bailout (unconstitutional) should benefit citizens first. If there is any left over... hmmm there shouldn't be leftovers. Citizens should get the benefit for that since the debt will be hanging over our heads for many years to come.

This has devolved into a discussion about H1B visas. The original was that I wanted all the bailout money to stay in the USA, to benefit only USA operations.
There is much to be said against foreign workers whether they are in country or work is outsourced to a foreign country. India isn't doing so good right now, and that outsourced phone support sucked so bad that Dell has offered (at a cost) tech support with native English speaking reps. Then we can talk about just why in the hell the IRS is outsourcing work to a foreign country. This can go on and on. All I wanted was that the bailouts stipulate that the money is to be spent only in the US etc. and not to benefit foreign countries.

Taking care of business at home first is not xenophobic BTW. Hope that helps clear it up some.

Re:Bad economics

[jbolden]

Hold on. I'll agree with you on average. But there is an issue here:

Assume because of a non economic factor that company A has a cost of capital of 5% and B a cost of capital of 10%.

Then most likely B has all sorts of internal investment opportunities which would yield 6-9% available. Assume that factor were to go away. Even if B did a bad job and picked suboptimal investments (say the 7% investments) and A did a perfect job picking only 5% investments B could still allocate capital more efficiently.

In the USA we have had an excess of private investment capital, and a shortage of public investment capital because of Republican policies. That means the government doesn't need to be as good to still generate return in this environment.

Re:Bad economics

[iphayd]

Roman empire, British empire, median empire, achaemenid empire, seleucid empire, parthian empire, sassanid empire, to name a few more. Anyone want to get into fallen Asian governments?

Re:Bad economics

[Shakrai]

Instead, you are struggling day to day WITHOUT government food or housing, either unemployed or not making enough anyway.

Lots of people are struggling. I've struggled for years. Part of that is due to choices I've made (not finishing my 4yr degree) and part of is due to events beyond my control (being born in area that has been economically depressed since the 70s). That doesn't mean I think it's the role of the Government to take money away from someone who isn't struggling in order to make my life easier. You apparently disagree.

Re:Bad economics

[XDirtypunkX]

The whole point of stimulus is that the spending isn't happening currently (because people are scared of spending). As Keynes pointed out, in the long term, we are all dead.

Re:Bad economics

[Prof.Phreak]

So, borrowing $100 now is not the same as borrowing $100 in the future.

Unless you're `investing' for investing sake; like spending money on make-work projects, 'cause you simply have to throw money away---which a lot of this stimulus will turn into. Ditches and roads/bridges to nowhere... etc.

I've seen how government IT works, and... most of the time, it's a major waste of tax payer money... and they want to throw -more- in that direction!

Re:Bad economics

[rtb61]

Now just to be picky on the whole issue. Government can actually spend large sums on stimulus packages with out spending any additional money. So rather than blowing things up and trying to kill people ie. spending huge sums of money of high profit arms manufacture that money could more effectively be used upon building up domestic civilian infrastructure and, increasing it's usability and functionality which, naturally enough will enhance the future economy.

So rather destroying tax payers funds in one pointless war after another and having a military that seems intent upon inventing threats and demanding ever more destructive and expensive technology, spend in upon areas of the economy where it provides lasting returns. So you spend less of missles, bombs and their 'delivery systems, and the arms manufacturers suffer major profit drops and some people end up out of work but that same money ends up employing far more people in other areas of the economy and that provide real lasting benefits.

Re:Bad economics

[mjwx]

The U.S. shouldn't be investing in IP generating ventures, IP is artificial value that depends upon regulation to maintain its artificial scarcity. A scarcity that our competitors will not honor. The U.S. should be investing in its own manufacturing and resource infrastructure. Stop taxing the production and profits from materials that qualify for a "Made in the USA" tag and eliminate taxes on the pay of workers who make said products.

The US could never compete with Asia on manufacturing. What the US needs is more investment in high tech industries (R&D, Software development and design, Hardware design and chip fabrication, biotech, nanotech and so on). But unfortunately the high tech industries requires a large pool of educated labour, the US has killed itself here by hampering education and creating an environment hostile to science. If you look back at the heyday of the US from the 60's to the 80's it was primarily bought about by the development of American scientists in the 30's to the 60's. Technology takes up to 25 years to go from introduction to everyday use, this is why the US is only beginning to feel problems from the reduced education. Ironically enough many of those scientists in the 30's and onwards were German and European, they came to the US because it was a place welcoming to science and new ideas as well as an escape from the political insecurities of Europe. The real irony is that the reverse is now true.

Education in itself is an industry, Australia makes a small fortune off students who come here to study (but cant work and must pay full course fees upfront, a lot of tax paid, very little tax spent even with our socialised health care and what not).

Service based economies rarely work, most economies in the third and developing world are manufacturing based and the US could never compete with the costs Asia is able to maintain.

Re:Bad economics

[shaitand]

'The US could never compete with Asia on manufacturing.'

You are forgetting a very critical point, it is primarily the U.S. the consumes and utilizes the goods in the first place. With no taxation on nationally produced goods and high tariffs on imports, it will be economical for Americans to purchase quality American made goods again relative to cheap imports. It really doesn't matter for the moment if Canadians or Europeans would use said goods.

The United States holds the largest pool of natural resources in the world. Ultimately, because resources are scarce, all we have to do to remain the wealthiest nation is to utilize those resources and limit the amount of sharing we do with the rest of the world.

People talk of the Utopia of the 60's and 70's but they forget that in the 50's any high school dropout who was willing to work hard could own a home, a quality vehicle, and support a family on a single income. I don't care what any Harvard MBA economic theory you apply, in reality, the economy hasn't been anywhere near that strong since.

Re:Bad economics

[wizardforce]

keynesian economics postulates that you can drag a country out of a depression through spending, in order to discourage "idle money", the idea is to keep money circulating rather than "horded." The problem is that money is representative of work already done, things already produced. BY using government intervention to stimulate demand, you aren't stimulating production, you're causing inflation. That is of course the idea- prices increase enough to make producing that product worth while... it is of course wrong. the more expensive something is the less of it is consumed. the cheaper something is to produce, the lower the price and more that is consumed. production creates its own demand in an otherwise efficient system. Now on to the hypothysis that intervention on the part of the state can help things along- how is this theoretically done? *jobs through government projects- to do what? *adjust inflation rates... higher rates to control inflation, lower to make the cost of loans artificially low... the problem is that interest rates are representative of the risk of the borrower- higher rates discourage all but near emergency loans, low rates encourage less productive tasks be financed through loans. why don't the feds lower the rates all the time to encourage the creation of wealth through investment/expansion via loans all the time? 1) deflation is the "enemy" it encourages saving and discourages wasteful spending 2) it causes excessive inflation, the large increase in the supply of money devalues it, destroying wealth. The economy is in a state of equilibrium, always- and like chemistry tipping the balance to one side [supply or demand] will shift back toward equilibrium whether it be a crash [like the one we're in right now, the market shedding idiots' money from malinvestment] which reminds me, how are those stimulus checks workign for the economy? not so well. turns out that subsidizing businesses doesn't help the economy after all, who would have thought. but really, if you think of the economy much like a chemical or biological system, it becomes much clearer why keynesian economics fails. you can't debase the cellular currency [ATP] and expect a happier, more productive cell. a cell can't increase demand its way out of starving to death, it can produce its way out though. the easier it is to produce something the more of it is made and if it's too difficult to create a supply, it doesn't matter how much demand there is- there isn't going to be any more widgets because of it. likewise, a cell can't be forced to replicate its self without fault nor can an economy be made better off by forcing things to be built when no one is otherwise bothing to do so- the reason is that people acting mostly in their own self interest, thus using resources to increase their wealth in a relatively efficient manner, government on the other hand has no such incentive. there is little in the way of correction if the government makes the bad decision which it so very often does, most manifest in the former soviet union... failure is paid through higher taxes, in the private sector failure is paid through the collapse of that inefficient business to be replaced by another more efficent one. artificial selection worked for biology the last 4 billion years, it's working in economics as well. which is a very big example of how an economy whether it be human created or biological is capable of regulating its self and generally why screwing with the system does not benefit the system in the long run.

Re:Bad economics

[mjwx]

2 words,
cheap labour. If it wasn't already cheaper to manufacture in Asia they wouldn't be doing it.

You are forgetting a very critical point, it is primarily the U.S. the consumes and utilises the goods in the first place. With no taxation on nationally produced goods and high tariffs on imports, it will be economical for Americans to purchase quality American made goods again relative to cheap imports. It really doesn't matter for the moment if Canadians or Europeans would use said goods.

Nope, because you will need to pay the minimum wages of the people you employ. Tax is a small part of manufacturing, well below the cost of materials, wages, complying with safety regulations, costs of operations. In addition to this if you cut taxes down to zero on locally produced goods and by some freak of nature it becomes cheaper then importing many manufactured products then you will end up with less tax income in the system which means you will need to make up that shortfall.

The reason that it makes more sense to import manufacured goods (nails, toasters, frying pans so on and so forth) is that manufactured goods are produced so cheaply overseas that with the cost of shipping and a higher tax rate then locally produced goods it is still cheaper.

Lets take Processors for example, AMD has two main fabrication sites, Israel and Germany (1st world nations) this is where microprocessors are fabricated (requires highly trained professionals) but AMD processors are assembled in Malaysia (a developing nation, although a rich one) as this job can be done without specialised education. Why doesn't AMD just pay for Germans (or Israeli's) to assemble the processors and save on freight. I'll answer my own question, because the wage and operating costs for employing a German or Israeli is an order of magnitude above that of employing a Malaysian to do unskilled tasks.

If the US wants to compete with Asia in terms of manufacturing it needs to be able to replicate those low costs, this cannot be done via tax, in fact you'll find that corporations pay most of the tax in Thailand not individuals. In order to compete you'll need to cut the minimum wage down to Asian levels (Lets argue with Thai standards, 400 Baht per day which is US$10 and that's for a good job). So can you say that American workers will agree to be paid in a day what they are currently making in an hour? The only way to compete in this fashion is to become a third world nation.

The United States holds the largest pool of natural resources in the world.

Not true actually, Russia and Australia hold more natural resources then the US. Probably a few others I don't know about. It doesn't come down to the raw volume, in order to be isolationist you need to produce every single resource you'll need. There isn't a country on earth that can do that, which is why entire empires were built on trade.

Australia is the largest producer of Iron ore in the world but we don't smelt a drop of it here, why? Its too expensive. Its cheaper for us to sell it to countries that have that infrastructure and buy back the finished steel. We don't have a manufacturing economy, we have two main sectors, 1. primary producers 2. high tech services. In my opinion Australia should focus on attracting more high tech companies to Australia, we already have the education infrastructure.

Ultimately, because resources are scarce, all we have to do to remain the wealthiest nation is to utilise those resources and limit the amount of sharing we do with the rest of the world.

OK, here you fail economics. First off, the US has an abundance of some resources and a total lack of others. So if the US ceases trading with other nations you will quickly find a shortfall in many critical resources. Secondly, an isolated nation will lose the benefits of modern technology as you will not get the innovations developed in oth

Re:Bad economics

[daemonenwind]

Egad, you've shifted "people" and "institutions".

"People" are not hoarding anything. In Q3 2005, the personal savings rate went negative. Now, 3-4 years later, the ARMs are adjusting and the piper is being paid.

"Banks" are holding money borrowed from the US Treasury against expected losses on badly-made loans. So to say they're hoarding is wrong, because it implies there is money they would lend, but aren't. Instead, the Citibanks and Chases of the world are trying to shore up their reserves to get back to standard, federally-mandated levels.

Even so, other institutions (like the Federal Banks in England, EU, USA, Japan) are pumping in money like crazy, buying troubled assets, and loaning money for peanuts. In any other time, a 0 to 0.25% funds rate would be disgustingly inflationary. Let's hope that gets ratcheted back up as fast as the banks recover - otherwise, say hello to our old friend Stagflation again.

And some banks, such as US Bank, didn't get deep into the mess to begin with and are perfectly happy to loan money to qualified borrowers. So I still say, Bunk. There is no "hoard".

The other part of the problem is, you can't make people want to borrow money. It's as much a demand problem as anything, with consumer confidence at historic lows. Individual consumers aren't any more interested in buying houses when values are slipping than banks are in making low-down-payment loans on them.

Yes, private lending does create money. It was creating money too fast and too easily, when nothing-down, interest-only loans were being made on a stated-income basis. That may as well be the definition of overspending, which of course is what you seem to be arguing against, since it was a main point. In sum, you can't create money via reserve-ratio-based lending if no one wants to borrow.

And, while personal savings rates did spike all the way up (ha) to 2.5% of disposable income in Q2 2008, it's fallen back down to just over 1% in Q3. We don't have Q4 numbers yet. None of those numbers are impressive, and even 2.5% is still very low.
http://www.bea.gov/briefrm/saving.htm

Keep in mind, also, that what was once "saved" is now 40% gone with the stock market collapse. It's not "hoarded", it's just gone. So there's that to contend with also.

People listening to talking heads like to echo the phrase, "frozen credit markets", as if it was a way to grab a suit at some bank and shake them for not making loans. But implying that lenders are just altogether refusing to lend from some massive, secret reserve is specious. You do, after all, have to have a reserve from which to loan - even when working reserve ratios.

They're just not willing to dive into Lake Stupid with the stated-income, interest-only mortgages for 105% loan-to-value anymore. Especially not on a depreciating asset like a house. And yes, that is a contraction from a year ago. But "hoarding"? Try "return to common sense" instead.

Re:Bad economics

[Yuuki Dasu]

For you, sure, it's a winning proposition. Get the jobs preferentially for your lower pay requirements, and either live frugally to bring back home as much money as you can or else just trust the fact that you have American experience to gain better jobs back home.

Don't expect American workers in those markets to thank you for it, though. Whether the market should truly be that open or not is a different story, but generally speaking America doesn't approve of job competition being too cutthroat for permanent US residents to compete.

Finally, H1B is officially supposed to allow businesses to bring over workers to meet a shortage of skilled labor in a field, not to drive labor costs down in those markets. H1B holders are supposed to receive a salary competitive in the field.

Re:Bad economics

[N1AK]

Your point about economic isolation simply isn't true, because although their are some compelling arguements for limited use of tariffs to protect internal markets, their will be a very large number of goods where buying globally is economically beneficial.

The first example that comes to mind is textiles. The cost of (non-branded) clothing now is incredibly low, almost entirely due to the low costs of production in countries like China. If you were to block importating to make a domestic textiles trade viable then the cost to consumers would rocket, doing this effectively makes everyone poorer due to higher cost of living and any wage rise to counter this would raise the price of other goods and services domestically, while also making America less competitive in other markets.

Additionally, creating a volume textile industry with the need for say 500,000 workers is allocating American workers to an extremely low value industry with no export potential. In a less regulated economy these workers could be employed in a higher value industry. The fact of the matter is that a good life in America relies on getting a good job, and this in part relies on peoples abilities and education, if your competing for jobs that a Chinese factory worker can do more cost effectively you've a big problem.

Now I'm happy for America to try economic isolationism, after all I don't live there, but I don't think it'll benefit you economically.

Re:Bad economics

[jbolden]

keynesian economics postulates that you can drag a country out of a depression through spending, in order to discourage "idle money", the idea is to keep money circulating rather than "horded."

The problem is that money is representative of work already done, things already produced.

Be careful here. This is a major difference between Austrian economics and Keynesian. For Keynes money is just a medium of exchange, in terms of what is available it is just goods not "work already done".

BY using government intervention to stimulate demand, you aren't stimulating production, you're causing inflation.

I think you mean monetary intervention, otherwise you are arguing the government doesn't act like any other player in the system.

That is of course the idea- prices increase enough to make producing that product worth while...

No that is not the idea. The idea is that real prices on the product are essentially flat while real prices on components particularly labor decrease. That is it reduces the friction in structural adjustments. In other words it is easier for some wages to rise than for some wages to fall, so if the "free market" needs to shift wages around the there will be less friction in an inflationary environment.

Now on to the hypothysis that intervention on the part of the state can help things along- how is this theoretically done? *jobs through government projects- to do what?

Public investment projects. Things like: roads, electricity grid, airports, IT infrastructure like fiber optics or government software, durable military goods.

*adjust inflation rates... higher rates to control inflation, lower to make the cost of loans artificially low... the problem is that interest rates are representative of the risk of the borrower- higher rates discourage all but near emergency loans, low rates encourage less productive tasks be financed through loans. why don't the feds lower the rates all the time to encourage the creation of wealth through investment/expansion via loans all the time?

There are 3 components to a interest rate:

1) Base rate on short term money
2) Duration risk (i.e. the yield curve is sloped upwards, the borrower not having to renew has to pay more)
3) Default risk

When the Fed sets the short term interest rate they are setting rate 1. That is a risk free rate.

1) deflation is the "enemy" it encourages saving and discourages wasteful spending

Excluding trade, there cannot be net savings in an economy.

it causes excessive inflation, the large increase in the supply of money devalues it, destroying wealth.

How is wealth destroyed? It is transferred from one person to another perhaps but the "stuff" in the economy remains the same and the productive capacity remains the same.

As for the biology metaphor, if you want to think of the economy as a body; then deflation is a heart attack and Keynesianism is chest compressions.

Re:Bad economics

[hesaigo999ca]

I prefer this to lets say the package to help the big car companies.
The problem there with giving over 750 billion dollars, is that you have no more control on how it is used.
But offer every person owning a car to have a trade in program of value of their car + 10000$...
this means they WILL be buying a car very soon in order to get that money. This stimulates the car industry in keeping the flow of production. The other way around, you have no one buying cars, and the big wigs give themselves a bonus, people pay out of their taxes with nothing in return, where as a bonus like this is paid by the tax payer but GOES to the taxpayer.

I did the math ...if let's say you take the 250 million people in the US, and say half are kids...
you are down to 125 million, and of that you have only half of that that have licensed cars...
75 million * 10000 bonus for buying a new car (american made of course).... then WOW you have 750 billion dollars....I prefer anything that gives back to the people instead of the companies.

Re:Bad economics

[Hognoxious]

It's called people doing what they want with their own bodies. No one has the right to *get them* to work.

One, some of them might want to work but can't find a job.

Two, they might not want to work, how about if I don't want to pay to support them?

Re:Bad economics

[DrgnDancer]

It's part of the government's job to take risks that private industry can't or won't. It has the resources of the entire GNP behind it and has no desire to make a profit. It has always been the ideal risk taker, which is why it often completes the most ambitious projects. The Moon landing, the Manhattan Project, D-Day, the national Interstate system... All very risky projects that no company could have or would have taken on. The government can and does. Often it succeeds, if only by pure ability to throw resources at a project.

Re:Bad economics

[rgviza]

Not to mention all the bridges that are on the verge of collapse...

Go ahead, lay some fiber instead of fixing our crumbling infrastructure. Won't do us much good as we plunge 200ft into a river.

Sure the casualties will be limited. I guess killing a few people and losing a transportation artery for a few months is worth being able to get porn faster.

Re:Bad economics

[PingPongBoy]

I say give it a chance. Tie the stimulus payouts to goals, not just jobs.

Are there any goals that have always been begging for labor, which was not available in boom times?

If the answer is no, a recession is just what we need. The work is all done, so let's take a holiday.

Does massive unemployment in an educated workforce mean the education isn't being used? Companies don't want their employees to use too much education because advanced theories make hiring difficult as well as cost more when things don't work. Something has to be done to encourage hiring large numbers of people to do advanced things where failure is a greater possibility. Schools do little to prepare people for failure, but that is where the real jobs are going to be.

The world is increasingly automated, and in many sectors there is overcapacity due to shortsighted investments aimed at squeezing the last penny out of a trend of housing construction, and due to the bothersome possibility that there really is nothing better for the economy to do than to permit more people to live in greater luxury. Automation is used to reduce failure, but people can't compete with machines in the years to come. Machines are going to get better. People have the edge in doing work where failure is possible. In certain tasks machines are more suited for failure, but the sheer variety of tasks involving failure give people the advantage, for now.

So do people really lack demand or desire for other endeavors? An average person may see a future of daily work just to pay for children, shelter, transport, retirement. It matters little what job is done as long as the pay is as high as possible for each person's abilities and opportunities. Typically people are in good health and enjoy working infrastructure and government so who is going to look for more than a plum job?

It's natural for such a situation to come to an end. We need to identify particular collective desires and challenges. A few years ago, I was surprised to hear of biotech and pharmaceutical stocks taking nosedives because of failures. Those kinds of companies were big investment targets, and appeared to earn tons of money. Clearly, investors want quick returns. Medicine has always been full of challenges. It's just that people are scared of losing money.

Economics is about choices. Many people have avoided unsecure jobs, but the world is not ready for everyone to have job security. That kind of world has to be built, not just waited for with a 50-year mortgage. Individuals can try to find a challenge of their choice or else before long they would be forced to take a bunch of unpleasant challenges. Some inspired people will find success in some of the hardest problems. There has to be many failures.

Re:Bad economics

[stewbacca]

Sounds a lot like the current state of Social Security. I'm all for investing in the future, but I think you are accurate with your statement. Many of these jobs will be created in the goverment sector (or working for the government as contractors) which, sure, creates new jobs, but new jobs that are ultimately paid for by taxpayers instead of customers.

Re:Bad economics

[cayenne8]

"There is just barely enough Federal income tax from low wage earners to get to $800b. There is no way to get that much fairly."

Hmm...the feds seem to consistantly get $22K-$28K off me a year...if I could keep that, it would be a significant amount. That type of cut would definitely hit the middle class, wage earner. I'm not talking about targeting giving money to those that don't pay taxes, or just the poor. I'm talking about the middle class...the people Obama speaks of making less than $250K...those wage earners.

Re:Bad economics

[jbolden]

Look at the figures, this is public data. There aren't enough of you paying $25k.

Re:Bad economics

[shaitand]

'The first example that comes to mind is textiles. The cost of (non-branded) clothing now is incredibly low, almost entirely due to the low costs of production in countries like China. If you were to block importating to make a domestic textiles trade viable then the cost to consumers would rocket, doing this effectively makes everyone poorer due to higher cost of living and any wage rise to counter this would raise the price of other goods and services domestically, while also making America less competitive in other markets.'

That is the theory used to support globalized production but fortunately we have seen both in action now and don't have to guess at the reality. The reality is that shipping all that production overseas has siphoned wealth off the U.S. economy, that has devalued the dollar AND drastically lowered the quality of the goods we purchase. Today citizens are poorer than ever and only advances in technology have offset the drastic reduction in the quality of the few goods they can afford to purchase.

You can reasonably compare this with locally owned stores versus a Wal-mart. Wal-mart contributes as little as possible back to the local community with welfare wage jobs. It puts all the local stores that pay living wages out of business and in the end utterly destroys the local economy.

Just because the population is stupid enough to purchase the cheapest crap you put in front of them doesn't mean producing the cheapest crap possible and sending profits overseas is beneficial to the United States.

'Additionally, creating a volume textile industry with the need for say 500,000 workers is allocating American workers to an extremely low value industry with no export potential.'

The industry is undervalued, but I'd certainly call employing 500,000 of the unemployed Americans and eliminating our 300 billion dollar trade deficit a good start. It wouldn't be 500,000 though, in the United States technology would be used in place of labor.

I used to work at a U.S. sports clothing manufacturer. They make most of the gym clothing used by high schools in the United States. The entire facility is operated by about 20 people. All of them make enough to drive new vehicles, own homes, and feed their families. Even the most menial job in the United States should pay enough that you can say that.

'The fact of the matter is that a good life in America relies on getting a good job, and this in part relies on peoples abilities and education, if your competing for jobs that a Chinese factory worker can do more cost effectively you've a big problem.'

The fact of the matter is that the vast majority of Americans don't have a good education and our economy has been ignoring that segment since the 1950's. High school graduates and dropouts need to be able to make living wages in order to support our economy.

The U.S. remains the largest bastion of natural resources in the world, that and not our economic policy is what made us the wealthiest nation in the world. We've stopped using them. The only thing we produce now it technology and technology is expensive to produce and cheap to copy. Corn and Steel not so much.

Re:Bad economics

[shaitand]

'2 refrigerators'

who has two fridges? Why?

'3 TV's
DVD's Game Consoles
PayTV (you may call this cable)
Computer
Internet
Multiple telephones'

This is the result of improved manufacturing technologies and technology in general. Their prevalence has little to do with an improved economy.

'First off, the US has an abundance of some resources and a total lack of others.'

Which resources is it you think the U.S. lacks? There are things we consume more of than we produce, but I'm not aware of anything the U.S. doesn't produce. Russia has fewer resources than the U.S. along with Europe but not by far.

Australia... I've never heard of Australia as a large resource powerhouse I was under the impression that is mostly barren terrain of a single type. As opposed to large nations in temperate climates. Within the United States we have tropical, swamp, desert, plains, volcanic regions, all types of water bodies, mountains, and cold mountain regions. All with a range of weather conditions appropriate to producing virtually anything that can be produced in that type of terrain.

I have no doubt that asian labor is cheaper and that this increases the profit margins of individual companies but as far as our economy at large is concerned we have to factor in that purchasing goods and services from Asia and abroad costs us 300 billion. 300 billion could pay for a lot of local manufacturing at reasonable wages.

Re:Bad economics

[DragonWriter]

Egad, you've shifted "people" and "institutions".

Institutions either are persons (if you are talking in the legal sense), or are simply facilities through which people act (if you are talking in the practical sense); in either case, everything done by institutions is, in fact, done by people.

"People" are not hoarding anything.

People, in fact, are. In the manners I've already described, which include both direct individual actions and actions through institutions. Merely repeating the claim that hoarding does not occur will not make it true.

Instead, the Citibanks and Chases of the world are trying to shore up their reserves to get back to standard, federally-mandated levels.

False, because they are already above the federally-mandated levels.

Even so, other institutions (like the Federal Banks in England, EU, USA, Japan) are pumping in money like crazy, buying troubled assets, and loaning money for peanuts.

Yes, that's what they are doing to banks. However, the money supply is not expanding the way you would expect with these actions that are being taken to get banks back in the business of pumping money out, because the banks are hoarding money, which is why the ratio between M1 and the broader measures of the money supply have taken a precipitous drop.

The other part of the problem is, you can't make people want to borrow money.

People want to borrow money; over the last year, almost every private lender of student loans has pulled out of the market as part of the general withdrawal from lending. The number of people seeking loans didn't significantly drop, just the availability.

Keep in mind, also, that what was once "saved" is now 40% gone with the stock market collapse.

Uh, no. You seem to think that all, or even most, savings are invested in stocks. This is incorrect.

People listening to talking heads like to echo the phrase, "frozen credit markets", as if it was a way to grab a suit at some bank and shake them for not making loans.

I don't know anything about your fantasies about what "people listening to talking heads" are thinking, but "frozen credit markets" are a fact, and have nothing to do with whether or not there is a way to grab a suit at some bank and shake them for not making loans. (In fact, there is a way to do that, but it doesn't help the problem, and is likely to get you in trouble for, among other things, assault and battery.)

The observation of frozen credit markets and hoarding is directly relevant, though, to evaluation of policy responses to the crisis. For one thing, the observed behavior should make it pretty clear that neither the kind of monetary stimulus being pursued frantically by the Fed, nor the kind of bank bailout that has been pursued under, e.g., the enormous TARP boondoggle, are going to do much good no matter how much money you pump out to banks through them, so they aren't the right areas to focus on in terms of government policy.

But implying that lenders are just altogether refusing to lend from some massive, secret reserve is specious. You do, after all, have to have a reserve from which to loan - even when working reserve ratios.

There is nothing "secret" about the reserves that aren't being fully utilized. The fact that interbank loan rates fell to near zero well before the Fed moved the target rate to 0.0-0.25% is evidence that there is an extraordinarily low ratio of demand to supply for overnight loans to meet reserve requirements, which itself is evidence that banks are, in general, operating substantially farther from the limits imposed by reserve ratios than is normally the case. Or, IOW, that banks are, in fact, hoarding their reserves.

Re:Bad economics

[big_paul76]

"Krugman? Seriously? That guy is still stubbornly refusing to acknowledge the failure of the philosophy that he has been espousing for years. You know, the one that created the economic mess we're in right now.

Why even when Keynesian economics has been proven a failure do people keep trying to claim it works?"

Uh, just pointing out that this isn't actually an argument, this is basically one step above name-calling.

If you wanna say that a guy who just won a Nobel prize is philosophically wrong about his chosen field of study, you need, um, an actual argument.

Re:Bad economics

[big_paul76]

Actually, you wanna blame somebody, blame Alan "I never met a bubble I didn't like" Greenspan.

Re:Bad economics

[jbolden]

They didn't kill the deflation problem via. monetary stimulus. Also Keynes didn't advocate worthless public works projects. Things like direct equity injections would have been better. So no I don't think this is disproves it at all.

Re:Bad economics

[DragonWriter]

You are forgetting a very critical point, it is primarily the U.S. the consumes and utilizes the goods in the first place. With no taxation on nationally produced goods and high tariffs on imports, it will be economical for Americans to purchase quality American made goods again relative to cheap imports.

You mean, like the Smoot-Hawley Tariff Act, the mere discussion of which was, at least arguably, a significant contributing factor to the crash of 1929, and the actual passage of which was a significant factor in the following Great Depression.

Lets not try that again, okay?

The United States holds the largest pool of natural resources in the world. Ultimately, because resources are scarce, all we have to do to remain the wealthiest nation is to utilize those resources and limit the amount of sharing we do with the rest of the world.

This theory is called mercantilism. It was a pretty big driving force in the 16th through the late 18th century, but its currency in economic thought has been rather on the decline since Adam Smith published An Inquiry into the Nature and Causes of the Wealth of Nations in 1776.

People talk of the Utopia of the 60's and 70's

Which people, exactly, talk about that? The 1970s were one of the worst periods in the US economy in the post-WWII period.

but they forget that in the 50's any high school dropout who was willing to work hard could own a home, a quality vehicle, and support a family on a single income.

Its impossible to "forget" something that isn't true. Some high school dropouts who were willing to work hard may have been able to do that, but most, even if willing to work hard, would not have been able to. Even moreso if they were (among other things) black, hispanic, or female.

Re:Bad economics

[wizardforce]

Excluding trade, there cannot be net savings in an economy.

provide proof supportive of your conjecture.

How is wealth destroyed?

the answer is in your next sentence:

It is transferred from one person to another

bingo. it's a stealth tax on those who save [rather than spend their capital irresponsibly] and a subsidy for loans.
Now you contend that transferring wealth from one person to another can't destroy wealth, I beg to differ- the transfer of wealth from an efficient source of production to one that isn't will no doubt decrease efficiency, the transfer of wealth from a profitable enterprise to one that has since run its self into the ground no doubt destroys wealth wouldn't you say so? the cheaper the loans the more likely it is that bad loans will be made... take a look at the current home financial bubble that has just collapsed as a fantastic example of how wealth can be destroyed by bad loans made possible through artificially low interest rates. more loans doesn't equal a better economy, after al bad loans don't create anything.

the "stuff" in the economy remains the same and the productive capacity remains the same.

how do you figure? how does eroding currency out beneath people's feet, encouraging more but not intelligent lending do anything other than destroy wealth????

As for the biology metaphor, if you want to think of the economy as a body; then deflation is a heart attack and Keynesianism is chest compressions.

oh really? what happens to businesses in a deflationary event? as currency becomes stronger, businesses tend toward savings rather than funding less productive activities, they cut costs through several different means or die off. people adjust their spending toward that which they require rather than that which they want but do not need. it's a good thing to shed that which is not as efficient. it is not a good thing to expect constant, never ending growth when resources, trade and lack of saved capital does not allow. it is not a good thing to freak out every time the market adjusts its self as it did in 2007. deflationary events are normal and neccessary! you can't just keep pumping inflation based expect capital into a system and expect those deflationary events to go away! it's the result of people realizing housing prices were ridiculously out of balance and selling like they should have. it's the result of banks making stupid irresponsible loans that lost them billions and not having the capital and being a lot more selective about whom gets the loans they do give out. what did the government do? bailed the banks out. where did the money comes from? other banks. who is paying for it? you and i. it isn't free money, it's coming from somewhere and keynesian economics rests on the belief that by bailing out these banks we can make more money from these loans than what it takes to pay the debt down. but the first problem is that these banks made those stupid decisions that got us here in the first place, handing them money isn't going to be spent well... the second is that you're effectively taking money from one bank that could be used to loan and transferring it to a different bank in order to make it so that that bank could make a loan... wtf? why exactly does it make sense to take moeny from a bank that actually has money left and transfer it to idiots that lost theirs by making a ton of bad loans????? why is it that a very sick bank deserves to live while banks that didn't make stupid loans are then bought out by the idiots that destroyed their capital? what reason do these banks have to alter their behavior if they know that there is always going to be a safety net there to protect them in case they screw up again like they have *at the beginning of the depression *at the savings and loan bailout *now *the future??? ther

Re:Bad economics

[Hucko]

True, but they don't have the right to benefits of welfare. (I'm not opposed to welfare per se, but bludgers are a different kettle.

It can't all be digital

[Ristoril]

The Internet isn't very useful if the delivery guy can't bring your ThinkGeek toys to you because the roads are broken.

Re:It can't all be digital

[Anonymous Coward]

Two words: Giant catapults!

Re:It can't all be digital

[electrosoccertux]

The Internet isn't very useful if the delivery guy can't bring your ThinkGeek toys to you because the roads are broken.

You have a point. The roads aren't broken though. They're better than ever. In the last 10 years infrastructure spending has increased 50%. I'm sure you can find some town somewhere where the roads need to be relaid. Find that in 2000 towns and we can talk about roads being broken. As it is, it's perfectly fine.

Oh, and for goodness sakes we don't need to spend it on schools; funding is not the problem. We need to move to move to a voucher system. Re-localize schooling. Give parents the power to get involved. Good schools would flourish and kids would get better educations, bad schools would die. This alone would increase future GDP more than any spending measures.

Re:It can't all be digital

[JoeMerchant]

Where I live, the roads work better than the municipal WiFi.

High numbers

[east coast]

30 billion spread across 1 million workers comes out to 30k a year for one year. This is to say nothing of the administrative costs.

Sounds like a pie-in-the-sky figure to me. Even with modest returns my guess is a lot of those 1 million jobs will be depreciated in less than a year.

Re:High numbers

[moderatorrater]

You're assuming that the money will be alone and that it won't be used for something sustainable. Let's say, for instance, that the government were to give money to a car company to build a factory. It's not likely that the government will give more than 60% of the money necessary to build the factory in the first place. Then, once that factory's built, it will be able to support itself by building cars that wouldn't have been built otherwise and is self sustaining.

In the same way, the government can give Verizon (or similar) 60% of the cost to wire California with fiber to the house. It's enough to convince Verizon to undertake the project in the first place and to gather funding from other sources so that they can complete it. Once complete, they're providing a service that wasn't there beforehand, and is well worth buying. The project after that would be sustained by the subscribers, and it could be sold for less money per month since Verizon doesn't have as much money to recoup. Not all of the jobs which were created for that project will stick around, but more jobs will be created due to the higher available bandwidth in the area.

Re:High numbers

[DragonWriter]

30 billion spread across 1 million workers comes out to 30k a year for one year. This is to say nothing of the administrative costs.

Administrative costs create jobs, too; also, spending can create jobs with a greater total salary than the amount of spending, since each dollar can be spent more than once. The stimulative effect in the domestic economy of spending isn't just a product of the amount of money spent, but of the velocity of money in the domestic economy (how many times each dollar is spent in the domestic economy) resulting from that spending.

Re:High numbers

[L0rdJedi]

The project after that would be sustained by the subscribers, and it could be sold for less money per month since Verizon doesn't have as much money to recoup.

Hahahaha! You think Verizon is going to sell the service for less just because they got some money from the government? Hahahaha! They will more likely keep the cost the same and the rest is profit (they'll make even more money faster). The cost to maintain the infrastructure will be the same anyway, so why would they lower the end cost? All a govt infusion will do is get the infrastructure built quicker.

Like many, I'd rather see physical infrastructure updated/maintained sooner than digital infrastructure. You can't even deploy the digital stuff if your physical stuff isn't in good condition.

Re:High numbers

[moderatorrater]

Hahahaha! You think Verizon is going to sell the service for less just because they got some money from the government? Hahahaha! They will more likely keep the cost the same and the rest is profit (they'll make even more money faster).

That's why I said it *could* be sold for less, not that it should. Besides, what are they going to do with the extra money that they earn? If they want to continue growing their profits, they'll turn around and use it to build infrastructure in places that don't have it yet.

And I agree with you that the physical infrastructure should be taken care of before the digital infrastructure. But I also believe that the digital infrastructure is generally in much worse shape than the physical infrastructure and that it's hurting the country in a lot of ways.

Re:High numbers

[powerlord]

In the same way, the government can give Verizon (or similar) 60% of the cost to wire California with fiber to the house.

Sounds like a worthwhile goal.

It's enough to convince Verizon to undertake the project in the first place and to gather funding from other sources so that they can complete it.

Except that Verizon already received lots of money to provide for an upgraded infrastructure. They essentially just squandered (or squirreled) the money away. I don't see them having any incentive to actually do what they say this time.

Once complete, they're providing a service that wasn't there beforehand, and is well worth buying.

Okay. Good idea.

The project after that would be sustained by the subscribers, and it could be sold for less money per month since Verizon doesn't have as much money to recoup.

Which would also give them an "unfair advantage" against any other competing operators (cable, CLEC, etc.), and if not regulated will most likely result in Verizon charging the most they can get away with. The less per month is only how much the system actually costs THEM to put in place and maintain, not how much they'll charge US.

Not all of the jobs which were created for that project will stick around, but more jobs will be created due to the higher available bandwidth in the area.

You lost me completely on this one. Why would the creation of a higher speed network automatically translate into more jobs created in an area?

It MIGHT mean more people telecommuting. It also might mean more people running bittorrent at faster speeds. Additionally considering the onerous terms of most ISPs, the most likely outcome of this is one major thing: more profit for the telco.

Re:High numbers

[timeOday]

I agree with you that the physical infrastructure should be taken care of before the digital infrastructure.

Here's a little article about tradeoffs between investing in infrastructure for privately-owned cars, public transport, electricity grid, information infrastructure, etc. A pertinent fact from the article is that "Obama has set a six-week deadline for getting his economic recovery plan passed." If that is true, a lot of decisions will be made very quickly.

Re:High numbers

[encoderer]

The real fallacy is that you're thinking all the money will only be spent once. That's not the case at all.

Re:High numbers

[nine-times]

In the same way, the government can give Verizon (or similar) 60% of the cost to wire California with fiber to the house.

My only objection is, if we give Verizon 60% of the cost to wire the country with fiber, then they better damn well do it. They had better be transparent to the government about how that money gets spent, and they had better to transparent to consumers (who are now in the position of also being "investors") about network availability.

I'm under the impression that we already subsidized Verizon to build a fiber network, and they've barely scratched the surface as far as availability. Hell, I can't get FIOS, and I live in NYC. Worse, Verizon won't tell me what areas they're servicing with FIOS or why. Building a few blocks in any given direction have FIOS, but they won't put it in my building, and they won't tell me where I have to move to be able to get it.

When you get down to it, the Internet is infrastructure, and should be considered public infrastructure (like streets). If a private company is building streets, deciding not to build streets outside of major cities, and deciding arbitrarily not to pave streets to certain buildings even in major cities, and they're in a position to be secretive about which streets they're building and where those streets go, then I think you have a problem.

Ultimately, though, I don't have a problem with a private company building and maintaining the Internet, but I think it should be pretty heavily regulated (like power companies). The whole thing should be pretty transparent.

Also, I kind of think that you shouldn't be legally allowed to be both the person building the network and the company providing service on that network. In other words, if we're paying Verizon to lay the cable, then that network should be completely open to any Internet, voice, or TV provider. If you don't want to bar Verizon from providing those services completely, then they should at least be barred from giving themselves special access above what other providers have.

Re:High numbers

[GiMP]

For reference for those wondering what the parent means: Multiplier effect

do the math.

[hypergreatthing]

30k a year for an IT job? I'll pass.

Probably less than that. They would create a IT czar, give him all the money, then hire indians to do the IT work at 2$ an hour pay rate.

Re:do the math.

[geekoid]

Incorrect interpetation.

It's nt just directkly IT jobs, it's all the support people.

You mkae 70k.
You are putting most of that money into the economy. The goods you buy support industries that hire people that make much less then you, and things that are used briefly. Like getting a pipe fixed. That plumber may make 100K, but you only pay him for the hour he was there.

Re:do the math.

[Average]

With the layoffs out there there are *plenty* of IT people who will work for $30k or $35k if you won't. Maybe not in California or New York. But, if work could be outsourced (badly) to India, it can be outsourced (with better oversight) to Sioux City or Tuscaloosa. $35k, plus a part-time-working spouse, means you can afford a $100k house (which is perfectly believable in most of the country), pay off reasonable student loans, and eat. People will take that. Plus, you're working indoors in a nice office, not busting your back in the cold.

Yeah, it's Walmart wages. There are people lining up for those jobs, too.

Not "punywage"

[Stile 65]

"punywage" is a bad tag for this.

This would also create jobs (at least in the short term) indirectly, as those who get the high-paying jobs directly related to this "stimulus" will demand additional production and services to fill their personal needs, which will create other jobs, and so on. In this way, each dollar invested in this infrastructure will actually be spent multiple times.

Of course, the way this is financed is inflationary and backed by the public debt, etc. etc. so in the long term, we'll have to pay all that back and then some.

Re:Not "punywage"

[thepacketmaster]

Doing the math of dividing $30 billion by 1 million would mean an average of $30,000 per employee. However, I don't think that $30 billion would simply be going to salaries. Obviously hardware, software and services would be involved, since this is about building a new infrastructure. Finally, just because this new infrastructure is being built by stimulus money does not mean that the services it provides would be free, so the incoming revenue would go towards the salaries. So from the brief description of this stimulus I think it's impossible to tell what the wages would be.

Re:Not "punywage"

[HeckRuler]

I believe the whole "indirect jobs" thing is why people are calling this a broken window fallacy. Building infrastructure is good, it get's us something. It embiggins us. Breaking a window just so you can pay someone to repair it gets us nothing. But the jury is out about whether or not giving money to people to go spend as they see fit actually gets us anything. It sure boosts retail sales. But it sounds like trickle-down theory to me. Paying someone to wax your yacht does nothing. Giving money to a crack-fiend does nothing. Giving money to a middle-class 9-to-5er to buy a huge new TV.... probably does nothing, other get get him a TV.

I have Animal Farm on the brain

[cvd6262]

All I can envision is a digital windmill-with-servos that will cut our workweek in half. Of course, when an earthquake or tornado interferes with the creation of this new infrastructure, we will blame the terrorists and simply work harder to complete it on time. Once done, it the government will lease it to providers who will sell access to those who built it.

And pigs will walk on their hind legs with whips in their trotters.

I've got to read something more upbeat.

Re:I have Animal Farm on the brain

[AioKits]

Not to worry my friend *sips koolaid* Four legs good, two legs better.

A million jobs

[Profane MuthaFucka]

in INDIA. That's the part they left out.

Re:A million jobs

[4D6963]

Yeah, because broadband is really all about consumers calling the hotline in India, not installing equipment or nothing.

Re:Or...

[Stile 65]

You mean $350 trillion.

350 million people times $1 million per person = $350 trillion.

Re:Or...

[ducomputergeek]

Giving 350 people $1M each = $350M. Now you could give 350M people $1 each, for $350m but that won't even buy something on the value menu at a fast food joint after sales taxes.

Re:Or...

[JeepFanatic]

Wouldn't 300+ million Americans each receiving $1 million be a bit more than $350 million? Like 6 zeros more?

Re:Or...

[qwertphobia]

In what country is there a total of roughly 350 citizens?

Bad assumptions

[StikyPad]

On the other hand, upgrading roads and bridges keeps us from falling into sinkholes and ravines en masse.

At any rate, this is a false dichotomy, and there's every indication that Obama plans to focus on improving both forms of infrastructure.

Re:Bad assumptions

[KlomDark]

Both need to be done. But strong safeguards need to be set up to ensure that this money then stays in America, and continues the economical feedback loop that has been so badly broken by all the offshoring. Without it, we are draining our economy into the waiting mouths of other countries.

We, at least temporarily, need some strong nationalism to get our economy back on track.

Any executive that is trying to make a quick buck by siphoning more money to another country needs to be quickly taken out and shot. That mindset is what has been eroding America.

We can get back to saving the rest of the world after we've saved ourselves. Otherwise we're all gonna starve.

Re:Bad assumptions

[MBGMorden]

All true, but it's complicated. It's not just the executives that have done this, it's the American people too (and the "free market").

People buy what's cheapest. Witness the huge sucess that is Walmart, selling a store full of cheap, imported stuff. It's not high quality, but it kinda sorta gets the job done, and it's cheap. Basically, the consumer is outsourcing their production of goods out to a foreign country when their purchasing decisions too.

And US executives feel that pressure. If Executive of Company A wants to stay in business, when Company B is outsourcing, then he has to make some hard choices. He has to either outsource his labor too, or reduce his local wages down to a similar level (which the unions will never have). If he does neither, his products end up being the ones that cost $0.25 to $0.50 more in Wal-mart. People leave those on the shelf while they grab the cheaper "Made in China" version right next to it. Eventually his company goes bust and the products aren't even on the shelves anymore. That's what's pretty much got us into the situation we have now: all the products are imported because the domestic companies have either caved in and outsourced or gone out of business.

In essence, many aspects of the free market don't do well unless you're a backwoods poor nation (like the US started out as - it worked well back then because domestic stuff was cheap compared to imported stuff which were seen as luxuries. All the working man's money stayed in the economy and we prospered).

Basically, we either need to accept a free market and the cyclic economy that it brings, or we need some serious government regulation. To start, I'd say that if a company outsources a position then the difference in the wage they pay and the local wage should be paid to the government in taxes. Imported goods should be HEAVILY taxed. Enough to make them more expensive than locally produced items. That ensures that the novelty or luxury items that can only come from a specific location can still come in, but for simple commodities local production and sales become the primary ones.

What will be hard to accept though is that most people's purchasing power WILL go down. We simply can't afford to buy as much crap from Wal-mart if such policies are in place (then again, we might finally realize that it's more cost effective to buy one $100 DVD player that lasts you 15 years than a new $35 one every 2-3 years as they break). We might also see the re-emergence of REPAIRING things rather than throwing them away as soon as they break. It'll upset some people sure, but that is the only way to STABILIZE the system.

All in all, our economy as it is is flat screwed. No amount of dumping money back into the system will help it if we don't change some of the things that let everything get this messed up in the first place.

Re:Bad assumptions

[Cernst77]

We might also see the re-emergence of REPAIRING things rather than throwing them away as soon as they break

Damn right. How many times have you opened the screws and stripped off the "ZOMG your gonna fubar your warranty - no user servicable parts inside!" only to find that a rubber band belt has stripped off, a capacitor has popped, something came unsoldered or otherwise disconnected or ran off some predefined gear-run track (like a sliding door etc) simple repair and it works like a charm. Now with all these throw away $20 devices no one even bothers to get more life out of them anymore. They end up in the landfill making the environmentalists scream bloody murder.

your math is a bit screwy

[Shivetya]

If they really want to stimulate the economy they could just have the proposed two month tax holiday, as in no income taxes for two months.

However this doesn't work because

a. They don't want people who actually pay taxes to realize just how much they are paying.

b. People who don't pay taxes won't like not getting money and they are the most reliable voting block money can buy

c. It goes against the whole class warfare construct that politicians work so hard to keep

The simple fact is that the the word stimulus needs to be replaced with "payoff" as all we have seen is payoff to the politically connected. If anything this has become the biggest transfer of American's money transferred to the political class in history.

Letting the American taxpayer keep their money, in the form of reduced income taxes and reduce capital gains taxes, would do more to jump start the economy than any government attempt otherwise. Remember, when the government spends the money they do it to reward those they like and force others to change to become more liked, no necessarily better.

Re:your math is a bit screwy

[Jeff Hornby]

Because having a bunch of people buying televisions made in China, cars made in Japan and taking vacations in Mexico is going to help the American economy how?

In the mean time, Social Security payments will also have to stop. All government employees will have to take a two month unpaid leave. In fact all government spending will have to stop. That would probably have some effect on the economy but I can't figure what it would be.

Re:your math is a bit screwy

[cat_jesus]

How exactly would this help the people who don't have jobs now?

Bush tried the type of stimulus you're talking about several times and it just made things worse.

Face the historical facts, the conservative ideology simply doesn't work in reality.

Re:your math is a bit screwy

[pete-classic]

And the Soviets proved that Leftist ideology doesn't work in reality. But on a far, far grander and more terrible scale.

Consider that there may be no perfect, or even no "good" system. If that's the case, why not maximize liberty?

-Peter

Re:your math is a bit screwy

[OnlineAlias]

Taking in too little money has never stopped the government from spending. I can't see how it would stop them now...

Re:your math is a bit screwy

[shmlco]

"Letting the American taxpayer keep their money, in the form of reduced income taxes and reduce capital gains taxes..."

As said above, that money will in most cases simply get exported when the "American taxpayer" uses the extra cash to buy a new flatscreen TV. Which was really what was wrong with Bush's "stimulus check".

At the very least, spending money on infrastructure means that, when we're done, we have something HERE to show for our dollars.

Re:your math is a bit screwy

[DragonWriter]

If they really want to stimulate the economy they could just have the proposed two month tax holiday, as in no income taxes for two months.

There's considerable reason to expect that such a tax holiday would mostly result in more saving, and not stimulus at all; jobs for people that would otherwise out of work get more spending to happen; one time payouts that are heavily weighted to those with the most income to people that have income streams in a time of economic uncertainty just get the recipients to put money away to shelter themselves better against the uncertainty.

They don't want people who actually pay taxes to realize just how much they are paying.

Which is why they require everyone paying taxes to fill out and sign forms every year which detail exactly how much is being paid. Its the "rub it in your face so you don't notice it" plan.

WTF?

People who don't pay taxes won't like not getting money and they are the most reliable voting block money can buy

Likelihood of voting is actually positively correlated to income, generally, so this is wrong.

It goes against the whole class warfare construct that politicians work so hard to keep

Why is it that policies that disproportionately reward the rich (or harm the poor) aren't considered "class warfare", while those that do not, whether egalitarian or disproportionately rewarding the poor or harming the rich are considered "class warfare"?

Letting the American taxpayer keep their money, in the form of reduced income taxes and reduce capital gains taxes, would do more to jump start the economy than any government attempt otherwise.

This isn't true, even if you limit government attempts to temporary reductions in taxes assessed on income. The rationally expected stimulative effect of reductions in those kind of taxes would be highest in a temporary suspension of payroll taxes, and lowest in a temporary reduction in capital gains taxes, and in between (and still low) in a temporary reduction in income taxes, simply because of the distribution of the burden of each kind of tax and the mean propensity to spend of the people paying that burden.

Who Pays?

[TonyXL]

Who Pays?

brokenwindowfallacy???

[4D6963]

Who tagged it brokenwindowfallacy? It's no broken window fallacy. In the broken fallacy nothing is gained from breaking the window and replacing it. Here we invest into an infrastructure, to end up with something better you can make better business with. It's called an investment.

Re:brokenwindowfallacy???

[u38cg]

OK. Instead of breaking the shopkeepers window, you mug him, take his wallet, and use the contents to have another, extra, window put in his shop. Now he has an extra window to display his produce in and entice passers by. Is this good for him y/n?

Re:brokenwindowfallacy???

[nine-times]

Right. The old "war is good for the economy" line is more of an example of the broken window fallacy. Or rather, there's some kind of fallacy floating out there-- and I'm not sure whether it could be considered a "broken window fallacy"-- that "it doesn't matter what the economic activity is; any activity is good activity." That's the mindset that gets us into wars, or convinces people that borrowing money we don't have to buy crap we don't need is "good for the economy".

Building necessary infrastructure is a good counter-example to the broken window fallacy. Value is added into the system and good infrastructure actually improves economic conditions. It encourages investment, stabilizes operations, and allows businesses to operate more efficiently.

That's not to say we should build useless infrastructure for the sake of economic activity. The "bridge to nowhere" wouldn't provide value, and therefore it could be argued that it's an example of the broken-window fallacy. But ubiquitous broadband Internet (with speeds on the scale of FiOS, not just DSL), is something we need in order to stay economically competitive with the rest of the world.

Re:brokenwindowfallacy???

[thrillseeker]

It's an investment when the person voluntarily providing the money decides where he wants to spend it - it's legalized theft otherwise.

Re:brokenwindowfallacy???

[4D6963]

Let's see, "mug him and take his wallet" = taxes? Let me guess, libertarian?

Re:brokenwindowfallacy???

[4D6963]

Please step over there with the rest of the angry libertarian ideologues. "OMG you take my money and build an inner city school/hospital with it, you bastards! Whaaa, whaa!!". I mean seriously, what the fuck is it you want, to be given a list of all the things the government needs money for and tick what you agree to pay for? Also, if you could do that and decided not to pay for road maintenance, but still used roads, would that make you the last of greedy selfish bastards?

Re:brokenwindowfallacy???

[mattwarden]

Wow, I hate to be a typical slashdot commenter, but:

Bzzzt. You're wrong.

An investment is something you do when the benefits outweigh the costs. If that was the case here, it would have been on the books before the decision to "create jobs."

This is being done to "create jobs". The logic is: we need jobs, so we might as well do something that has some value and isn't a total loss.

Creating jobs in a partially useful area is a LOSS MITIGATION STRATEGY not an INVESTMENT.

The whole idea of "creating jobs" is ridiculous. If "creating jobs" is what it sounds like, then why doesn't the government always do it? And why don't we blame government when there is a rise in unemployment?

IF the government is paying for this with tax money (that it doesn't have), then this is just a wealth distribution tool (otherwise where are the wages coming from to pay these currently unemployed people?). IF the government is paying for this with debt and inflation (more likely), then this is just a temporary fix that increases the long-term consequences.

Let's call "creating jobs" what it is: floating more debt and printing more money into the economy and at the same time keeping people busy and superficially happy, with no concern for the long-term consequences. Deciding to do more stuff than was planned in order to create new jobs is by definition doing things where the benefits don't outweigh the costs for the "investment".

When do we stop deciding to screw over the country to temporarily relieve the difficulties of the minority few?

Re:brokenwindowfallacy???

[harl]

The default tax rate is 0. The only reason people pay taxes is that people with guns will come and take the money if you don't. How exactly is that not mugging?

Re:brokenwindowfallacy???

[4D6963]

You raise good points, and I guess I have to agree with you. Except with the last line. Is it really such a bad thing? As you pointed out, it's a temporary relief, the result of the investment don't actually matter that much. But when we're at the peak of a crisis, don't we indeed need a temporary relief to distribute the impact in time, so that we don't pay the full price now but pay some of it when we'll be a bit better off, economically?

Re:brokenwindowfallacy???

[smoker2]

Is voting compulsory then ?

The government are given powers by the people to act on their behalf. This includes taxation.
No theft involved - you agreed to the deal when you voted.

Re:brokenwindowfallacy???

[4D6963]

Oh I see, so if we don't take your money as taxes to build hospitals, schools and roads, then you're gonna do it yourself, out of your own pocket? I so totally believe you.

Re:brokenwindowfallacy???

[Crudely_Indecent]

libertarian

You say that like it's a bad thing.

"mug him and take his wallet" = taxes

Try not paying your taxes and see who shows up at your door, armed. IRS is worse than a loan-shark.

Re:brokenwindowfallacy???

[4D6963]

Cry me a river. Oh no, the government will demand me money so we can sustain our way of life by having infrastructure, health care, free education, garbage collection and so on.. You reap the benefits of the taxes you pay, even if the richer you are, the less you reap. Poor people reap the most compared to what they pay, because they're poor.

Not wanting to pay taxes when you're not poor is basically saying "fuck off poor kids, that's my money, you gotta get your own". Which is logically defendable, but arguably also makes you a heartless greedy egoistical apathic bastard.

Re:brokenwindowfallacy???

[mattwarden]

I don't know. That seems to be the majority view. I wish I was more formally educated in economics, because there must be something fundamental I don't understand that everyone else does. In my view, if you take out $x in debt now to temporarily relieve a problem and pay it back over y years, you are going to pay much more than $x. And if what you got for $x wasn't even worth $x to begin with (back to the cost-benefit analysis), then isn't that a huge loss for the economy over the long-term?

I just see this country's wealth being eroded by foreign debt interest. And I see individual's wealth being eroded by domestic inflation.

But, like I said, I am not a formally educated economist.

Re:brokenwindowfallacy???

[4D6963]

OK, all of your point are defendable, but the "Be successful" one, come on now you're just trolling.

Re:brokenwindowfallacy???

[4D6963]

OMG, how fucking full of shit must you guys be. You focus on what happens when you don't pay your taxes, while completely avoiding the question of why you should pay taxes. If you don't want to pay for none of what the government spends money on move to the fucking jungle, they don't have roads that require tax money to be maintained there.

Unless you want to choose which chunks of road you use to pay maintenance for?

Re:brokenwindowfallacy???

[mrlibertarian]

It's no broken window fallacy. In the broken fallacy nothing is gained from breaking the window and replacing it.

I agree. No wealth is being destroyed here.

Instead, the fallacy here is that people are focused on creating jobs, rather than wealth. The point of all economic activity is to allocate resources in order to create wealth (i.e. goods) -- not to create jobs. When someone says they want a job, what they are really saying is they want an income which they can use to purchase goods. Thus, the scarcity of paying jobs is the result of the scarcity of goods.

So, the government can certainly create jobs, but that is pointless if the job creation scheme results in a greater scarcity of goods than we would otherwise have. The market is already dedicated to maximizing profit (i.e. maximizing the production of goods), so if the government is taking money away from the market through taxes, and spending that money on whatever project appears to create the most jobs, clearly 'profit' is not the government's highest priority.

Here we invest into an infrastructure, to end up with something better you can make better business with.

Sometimes spending on infrastructure is the most efficient way to use resources, and sometimes it's not. How do you know what you should do? You just have to figure out the course of action that is the most likely to maximize profits (not jobs). However, if you can't calculate profit and loss because the government has partially or fully nationalized the industry, then you will run into the economic calculation problem.

Re:brokenwindowfallacy???

[timeOday]

Right. The old "war is good for the economy" line is more of an example of the broken window fallacy.

I'm convinced this largely comes from overgeneralizing the World Wars. The reason those were a financial bonanza for the US was because our competitors were destroyed (physically, not just financially), while we were relatively unscathed. Life is good when you get rich selling stuff to countries after bombing the crap out of their factories. But the net effect on all countries across of the world was just what you would expect - financial carnage. A couple generations of people were poor most of their lives (not in the US though - if that's all you care about).

Re:brokenwindowfallacy???

[Culture20]

In the broken fallacy nothing is gained from breaking the window and replacing it.

There is _something_ gained: It keeps the window breakers and window makers busy, improving their crafts and keeping them from revolting.

Re:brokenwindowfallacy???

[Bender0x7D1]

An investment is something you do when the benefits outweigh the costs.

An investment is something you do when the PERCEIVED benefits outweigh the PERCEIVED costs.

When the economy is doing well, the perceived benefit of the government getting involved can be less than the perceived cost of it. That is, they might make more jobs but that will screw up the system, resulting in a net loss. However, when the economy is in the toilet, the perceived cost may be lower and the perceived benefit higher.

Example: Let's say there is a town with 10 people in it. If 9 out of 10 are unemployed, there is only 1 job at risk but a potential gain of 9 jobs. If 9 out of 10 are employed, there are 9 jobs at risk and a potential gain of only 1 job.

Re:brokenwindowfallacy???

[nine-times]

Well it also is true to some extent that wars generate economic activity. When we go to war these days, it means more jobs for some people somewhere to build tanks and guns and stuff. But when the war is over, you have a bunch of guns and tanks and stuff that aren't much use for anything other than starting a new war.

If you put the same amount of money toward building infrastructure, you get the same economic activity (basically), but when the whole thing is over, you have useful infrastructure. It's a much better deal.

Wars also sometimes have the peripheral benefit in that sometimes we build factories and infrastructure for the benefit of the war, which then go on to be useful after the war too. Factories that built tanks can be converted to build other things, after all. On the other hand, it would be cheaper to just build the factories to build those other things in the first place.

Re:brokenwindowfallacy???

[mattrumpus]

The bit you're missing is the point of spending $x. Investment is different to simply buying something. You invest to increase your stock of productive assets. For example, borrowing to build a rail line that enables people to move goods more cheaply may result in increased economy activity, more business are profitable now than they were before the rail line. The tax take goes up, I easily pay off the $x over time, even though I pay an interest premium on it.

The problem really is borrowing to pay for a non-productive asset. Something that doesn't add to your, or societies, capability to make more "stuff" (which could be services too). This is why household debt is such a problem, it will have to be paid from future production, but the nature of what people spent the debt on (that awesome plasma say) does nothing to help them or society pay that debt.

Does that make sense?

IAAE

Re:brokenwindowfallacy???

[shmlco]

Further, ubiquitous FiOS-level speeds would enable brand new businesses and business models. It's a game changer.

Re:brokenwindowfallacy???

[HardCase]

Roads. Fire protection. Police. A thousand other services that make the quality of your life what it is. You don't work for free and neither do the people who do those jobs.

Yours is a typically short-sighted view of taxes, particularly regarding education. If you don't think that you've never benefited from school taxes, ask your doctor where his undergraduate degree came from. Or the pilot of the next plane you fly on. Or the architect who designed your house. Oh, you say, I just meant direct benefits. Well, sorry, pal, we don't differentiate between direct and indirect benefits. You pay to send your neighbor's kid to school and you get the indirect benefit of a more educated citizen. It seems odd that your private education didn't cover the value of benefits such as that.

Now if you want to argue that tax money may not be spent wisely, I might agree with you on that point. Narcissism doesn't really serve us all that well.

Re:brokenwindowfallacy???

[mrlibertarian]

But when we're at the peak of a crisis, don't we indeed need a temporary relief to distribute the impact in time, so that we don't pay the full price now but pay some of it when we'll be a bit better off, economically?

What you have to understand is that there is just one pool of resources. We depend on that pool of resources to grow the economy. Every time the government pulls resources from that pool for the purpose of "relief" (i.e. consumption), we have fewer resources for growing the economy (i.e. investment).

For example, let's suppose that you lost your job. In order to give yourself more time, you start depending on credit cards. That strategy has a chance of paying off because you a relying on someone else's savings (i.e. the credit card company). But what if you couldn't rely on someone else's savings?

Suppose you were a restaurant owner, and you were running out of money. In order to save on your heating bill, you could burn all of your tables and chairs in the fireplace, telling yourself, "I'll buy more tables and chairs when I'm in a better position to afford them." The problem is, now your customers don't have anywhere to sit, so they don't come anymore. You tried to consume your own savings to give yourself some time, but you hurt your business by doing so, which means it will take even longer for you to get back on your feet.

Similarly, the government slows down the economy's recovery every time it tries to give people "relief". As mattwarden explained, the government's so-called investment is really just consumption (or "relief") disguised as an investment. Yes, it's better to pay people to build roads than to do nothing, but that doesn't mean resources are being used as efficiently as possible.

Re:brokenwindowfallacy???

[nine-times]

An investment is something you do when the benefits outweigh the costs. If that was the case here, it would have been on the books before the decision to "create jobs."

Even according to this, building useful infrastructure sounds like an "investment". Unfortunately, we've under-invested in our infrastructure for several decades, an in recent times somehow magically expected the "free market" to take care of keeping our bridges from falling down.

Building good and useful infrastructure is an investment, and one that happens to have a side benefit of "creating jobs".

Re:brokenwindowfallacy???

[qw0ntum]

Nope. I can only speak for myself, but I pay taxes because I would like government services (police protection, roads, legal framework for business, etc).

Re:brokenwindowfallacy???

[4D6963]

You only want to pay for what you use. Right. Let's say that you're wooden house in the ghetto catches on fire. But you're broke, like, short of $2. Should the fire department let your house burn to the ground because you can't pay for what you use (their fire extinction services) or should you go into personal bankrupt to repay them?

But the other person makes a better case than I do. If you want a free-for-all society, your country won't be the most powerful or influential in the world, nor even the 30th. Why? Because then only the kids whose parents could afford them a decent education would get a decent education, and of these kids, only some of those who got a decent education will be able to make enough money to afford their own kids a decent education, until you're back to a situation like in the 16th century where only the rich elite knows how to read and write. That's just one example. You'll let people die of cancer or even the flu just because they can't afford the cure on their own, which their could with universal health care provided with your tax money. There's so many examples and reasons why no taxes would mean the downfall of your civilisation.

What country has abolished taxes? None? Why? Because a country needs taxes to work, it's the most obvious thing in the world.

Re:brokenwindowfallacy???

[4D6963]

I didn't bother to read the entirety of your ideological drivel, but do you know what added value is? The point that salaries are less than the value created by the employee, which is why companies hire people and pay them salaries?

Re:brokenwindowfallacy???

[Crudely_Indecent]

I'm trolling, and yet, you're unable to name ONE successful government program.

So, who's trolling?

Re:brokenwindowfallacy???

[4D6963]

What you fail to understand is that while it's costly not to use that money being used for that investment, it's an investment, money gets returned on this, but don't get it wrong, you don't just get money returned by having a larger infrastructure, but you also save money by not having to pay jobless people who produce nothing at doing nothing.

You lose money by borrowing money, you get money back by the benefits of your investment into infrastructure, so far the benefit of the investment depends on if you'll get more money back on from the investment than you lost on the debt interests, but wait, there's more that doesn't instantly springs to the eye. You save money by keeping people afloat, that means by keeping them employed, you make them keep producing value, not only do you do that, but you also give them experience and skills, with which they produce more value (which is why more experienced people make more money), but not only that, you also allow them to invest more in the future, by allowing them to send their kids to better schools than they would if they were broke and unemployed, which in return will make people who'll produce more wealth, and so on...

Re:brokenwindowfallacy???

[nine-times]

Not only that, but it would make it cheaper for many existing businesses to operate in the US. Let's say I need a 20 Mbps connection for my company, and lets say right now it costs me something like $5k a month. Meanwhile, Verizon FIOS 20Mbps symmetric connections are something like $100/month?

Not only is that some decent savings, but lets say you're starting a new business, and you have the option of locating your business in a country where your internet connection will cost you $5,000/month or in a country that's providing the same connection for $40/month, where are you going to invest in setting up shop?

Having good infrastructure is imperative if we want to stay competitive with the rest of the world.

Re:brokenwindowfallacy???

[Dragonslicer]

The only reason people pay taxes is that people with guns will come and take the money if you don't.

Yeah, you can just live someplace with no government or laws, where people with guns can come and take your money.

Re:brokenwindowfallacy???

[skorch]

If you have ever gone to see a doctor who went to public schools growing up, then you have benefited from school taxes. If you live in a neighborhood with other people who have jobs rather than in a street full of vacants full of squaters and crack-houses, then you have benefited from school taxes. If you happen to live in one of those neighborhoods anyway, and have felt the desire to call the police for whatever reason, then you have benefited from taxes.

Basically, if you interact with anyone else in society, and depend on those interactions for any reason, then you benefit from public education, whether you went to public school yourself or not. The benefits of living in an educated society where all members therein are capable of operating on a certain intellectual level are innumerable, and they are what make the cumulative difference between standard of living today and that of the Dark Ages. You can only conceive of the direct benefits to yourself because small minded people think small.

Re:brokenwindowfallacy???

[4D6963]

Every "business as usual" program always works. Sorry troll, that's all I'll throw at you for food today.

Re:brokenwindowfallacy???

[Crudely_Indecent]

Full of shit, perhaps.

Gasoline taxes pay for road maintenance genius.

That type of tax is known as an Excise Tax also known as luxury tax. You don't have to pay that tax if you don't buy gasoline.

I will be driving anywhere I want on any chunk of road I choose, because I pay for gas and as a result I pay the excise tax used for roads. Thank you very much for illustrating your lack of knowledge of this subject.

These projects will be paid for with money collected from Direct Tax

Now, lets tackle your statement regarding why I should pay taxes.

Of course, I should pay taxes to pay for two wars that I'm opposed to. I should also pay taxes to fund bail-outs and bonuses for bankers and auto-makers. You would argue that I should pay taxes that are sent to foreign countries.

Do you realize that we (The USA) fought against British taxation and won independence as a result? Perhaps you should move to the jungle where you can build the socialist utopia of your dreams. I'll stay in the USA, the last known address of freedom.

Re:brokenwindowfallacy???

[Crudely_Indecent]

Road maintenance is paid for by the Gasoline Excise Tax.

http://en.wikipedia.org/wiki/Gas_tax

Since you're into name-calling, lets just label you appropriately. I'm not sure if I should classify you as Liberal or Socialist. Lets call it both.

Re:brokenwindowfallacy???

[Whorhay]

Interstate highway system? Granted some have benefited more than others but I can't see where you could argue that it has not been of benefit to pretty much the entire population.

Re:brokenwindowfallacy???

[Crudely_Indecent]

Greater than half of the cost of the Interstate Highway System was paid for using collected Excise Taxes. That is, the people buying the gas paid for most of the roads.

Should I pay direct taxes to fund the NTSB if I don't travel? What about direct taxes paid to the department of education if my children are in private school? How much of my direct tax is sent to Israel or Egypt as foreign aid?

Re:brokenwindowfallacy???

[Rycross]

The post office. You're welcome.

Re:brokenwindowfallacy???

[Whorhay]

Whether or not you travel yourself, go to public schools, or ever visit Egypt, those spent tax dollars benefit you in some small way. That isn't to say that you gain directly from those things though. For instance: If you live entirely off the grid and craft, grow or raise everything you use you might never gain from the things taxes are spent on. But as soon as you take advantage of something so simple as produce grown by a local farmer you've benefited from a slew of tax funded programs all at once, because odds are that farmer relied on equipment and supplies he didn't make himself. The inefficiencies of government spending are inherent to every society. Societies exist to improve the overall quality of life of it's members. That can't be accomplished evenly, not even in a perfect world. The Governments job should be to provide as many of these programs as efficiently as it can without going bankrupt. Most of the problems we see today are from mismanagement and the attitude of entitlement to a freeride. Foreign Aid is a humanitarian effort to hopefully improve other societies so that they can better participate in the Global society.

Re:brokenwindowfallacy???

[Repossessed]

Because normally the government can't create jobs. More jobs-->higher wages-->outsourcing-->lessjobs-->less wages

Right now however, there's mass unemployment, and mass panic, businesses are going under because people are afraid/unable to spend, and businesses won't hire because they don't need workers, and even if they did, they need to save in case things go further south. Right now more jobs creates more spending, which helps break the economic problem, even if the long term job creation is nil, fixing the economy fixes job shortages.

Assuming of course the job creation is significant enough to break the psychological barrier to spending, which is a long shot.

Re:brokenwindowfallacy???

[Crudely_Indecent]

The same post office that paints mailboxes to look like R2D2?. Lets see, who paid for that?

Or do you mean the post office that spends $8000+ on a hotel room for one of its execs?

Certainly, you're not referring to the USPS that uses its budget to unseat a senator.

Re:brokenwindowfallacy???

[Rycross]

I'm talking about the post office that routinely delivers my letters, even after changing my address twice in a month. I'm talking about the post office where I can put a cheap stamp on a letter and drop it off in a box along the street, and be 99% sure that it will arrive in less than a week.

Yeah so there's some wastes of money. Its not perfect. So what? You can't tell me with a straight face that CEOs and corporate owners don't pull all of the same crap, and indulge in far worse. And yes, YOU pay for those CEO indulgences too, through higher product costs.

Something doesn't have to be perfect to be efficient and useful. The post office is efficient and useful. Its certainly good enough for all the companies that I do business with to deliver bills and documents to me.

But that isn't all that works well for me. I can drive anywhere in the United States easily and safely due to our road system. The much maligned DMV has been extremely efficient and well run in places that its been well funded (as in, the one DMV that was a hellhole was chronically under-staffed). I can eat out at restaurants with reasonable assumption that I'm not going to get food poisoning. I know what side effects any medications can have. Food I buy isn't likely to contain poisonous materials. NASA has done significant scientific research on a shoe-string budget. I went through a publicly funded education that enabled me to go through college and receive a well-paying job. I could go on, but while the government does a lot of shitty and wasteful things, it also does a lot of wonderful and efficient things.

Re:brokenwindowfallacy???

[Crudely_Indecent]

For some of us, the government takes far more than it gives. Unlike the unwanted house guest, if the government wants more, it takes it. The unwilling are jailed.

I pay social security that I'll probably never see. Unemployment taxes are levied against me although I've never (and will never) participate in that program. My taxes go toward Medicare that I don't qualify for. I'm not a bank or auto-maker, so I'll never see that money. I don't recall visiting Israel or purchasing any Israeli products.

Seriously consider the programs started by the government and the effect they had on the industry they were meant to affect. Since you mentioned farm subsidies, take a closer look.

Re:brokenwindowfallacy???

[fabs64]

Ah yes, but the people with guns were given permission to do so by the voting public. So get the fuck over it already you goddamn misers.

Re:brokenwindowfallacy???

[Wildclaw]

Wow, I hate to be a typical slashdot commenter, but:

Bzzzt. You're wrong.

An investment is something you do when the benefits outweigh the costs. If that was the case here, it would have been on the books before the decision to "create jobs."

Sorry, but govermental economics has a lot more to care about a lot than simple business economics. Private businesses don't have to care about unemployed people who don't produce anything. Goverments do.

The cost for the goverment to putting people to work is actually very low as they would have to deal with those people in one way or another. Unless those people were about to be employed by the private sector of course. But that is obviously not happening right now, which is why the goverment is taking action.

It is therefore not strange that the goverment goes in the direction "Lots of unemployed -> Need to create jobs -> Come up with productive jobs that could be done" unlike businesses that goes like this "Can earn more money by doing more->Hire worker to do more". Goverments have to worry about the whole population, unlike businesses that only have to worry about themselves.

The whole idea of "creating jobs" is ridiculous. If "creating jobs" is what it sounds like, then why doesn't the government always do it?

Because most of the time the demand for people is high enough in the private sector that unemployment is low enough so the goverment doesn't have to get involved. No need to spend effort creating jobs when the free market delegates jobs more efficently.

And why don't we blame government when there is a rise in unemployment?

Goverment usually is blamed if the unemployment goes to high, as they should be there to catch the slack when the market is having a downturn.

this is just a wealth distribution tool (otherwise where are the wages coming from to pay these currently unemployed people?)

Yes, it is resource/wealth distribution, but with the added benefit of producing something for the goverment (and society), which makes it much preferable to pure welfare measures.

If the private sector and free market were capable of keeping people employed and working with decent income it wouldn't be nescessary. But unfortunally the free market is very dysfunctional when it comes to societal needs.

increases the long-term consequences.

Putting people to productive work isn't usually be bad for a country as a whole, unless those people could be put to more efficent work elsewhere. But, as the private sector is in a big slump that doesn't seem to be the case.

When do we stop deciding to screw over the country to temporarily relieve the difficulties of the minority few?

Screwing over the country? As I have said above, I can't see what part in putting people to productive work involves screwing over the country.

Also, one final bonus thing. The unemployed are a pretty decent part of the minority. Especially if you include nearby family that can be affected. Too high unemployment can cause unrest and crime. And don't think for a second that those in power won't do everything they can to keep down civil unrest and crime.

Re:brokenwindowfallacy???

[4D6963]

So? Does that somehow make you a martyr?

Re:brokenwindowfallacy???

[mattwarden]

Here's the problem. If that's the case (meaning, if these are investments that pay off better in the long run), then we would have already decided to do them. But they aren't. These are "investments" we only decided to do when we needed to "create jobs". This is only a good thing if "creating jobs" makes up for the amount of value we needed in order for this investment to make sense (benefits greater than costs). The problem is that no one can actually make a coherent argument for why "creating jobs" ends up making up that missing value. That's why they use the term "create jobs", because it sounds like such a good thing.

But then I go back to: why doesn't the government always create jobs?

Re:brokenwindowfallacy???

[4D6963]

It's still a tax, right? Or are some taxes okay and not some others? And actually, spot on, I'm both a liberal and a socialist (the western European capitalist kind, not the Marxist kind)

Re:brokenwindowfallacy???

[4D6963]

So all taxes are bad, except the one that are part of what you buy, like the gas tax? How does that work for health and education? Why be so vehement about giving a financial participation to the infrastructures and services you benefit, directly or indirectly from? And yeah sorry I didn't know about the gas tax, I'm actually French, and I don't drive.

Re:brokenwindowfallacy???

[mattwarden]

> Even according to this, building useful infrastructure sounds like an "investment".

Then why didn't we do it already?

> Unfortunately, we've under-invested in our infrastructure for several decades, an
> in recent times somehow magically expected the "free market" to take care of
> keeping our bridges from falling down.

This is absolute hogwash. The government decides when to invest in roads and bridges.

> Building good and useful infrastructure is an investment, and one that happens to
> have a side benefit of "creating jobs".

Doing good and useful stuff is good and useful, you say? Profound.

The problem is that you have to show that it is good and show that it is useful and show that those benefits are a net gain after subtracting the costs. And, yes, I'll even let you throw in some voodoo about how "creating jobs" creates value in the equation, if you show your work.

People like you are quick to call belief in the free market a belief in "magic", but then you can't explain how the government spending money it doesn't have or that it takes from its citizenry creates new wealth. That's the real magic... a group of people who don't produce anything creating wealth for its citizens.

The secret is that all government can do is move wealth around, and in so doing a portion of that wealth evaporates in bureaucracy. You can't tell me you don't see a problem with that in the long run.

Re:brokenwindowfallacy???

[Wildclaw]

but wait, there's more that doesn't instantly springs to the eye. You save money by keeping people afloat, that means by keeping them employed, you make them keep producing value, not only do you do that, but you also give them experience and skills, with which they produce more value (which is why more experienced people make more money), but not only that, you also allow them to invest more in the future, by allowing them to send their kids to better schools than they would if they were broke and unemployed

Excellent post.

Most slashdotters grasp business economics fairly well, but goverment economics is on another level. For a business, an unemployed person is unimportant. For the goverment, every unemployed person is a burden. You gave most of the reasons why in your post, except maybe increased crime with rising unemployment.

Re:brokenwindowfallacy???

[mattwarden]

> Right now more jobs creates more spending, which helps break the economic problem

Why does more spending fix the problem? All we need is more spending, more debt, and less savings, right? Yes, that has done wonders for us and will have no long-term consequences and will not increase the burden on a social safety net that is already underfunded by ~$50 trillion.

http://i.l.cnn.net/money/2008/10/15/news/rainy.day.fortune/barr_SAVINGS_RATE_graphic.gif

Re:brokenwindowfallacy???

[mattwarden]

> Goverments have to worry about the whole population, unlike businesses that only
> have to worry about themselves.

This is a good point.

> Because most of the time the demand for people is high enough in the private
> sector that unemployment is low enough so the goverment doesn't have to get
> involved. No need to spend effort creating jobs when the free market delegates
> jobs more efficently.

You ducked the question and contradicted yourself. You said that it is cheaper to employ people than deal with their unemployment. So why wouldn't the government work to maintain near 0% unemployment? Even if unemployment is only 3%, according to your logic it would be in the gov'ts best interest to bring that lower.

If "creating jobs" has no downside, then I'm pretty pissed at the gov't that we have any unemployment at all.

> If the private sector and free market were capable of keeping people employed
> and working with decent income it wouldn't be nescessary. But unfortunally the
> free market is very dysfunctional when it comes to societal needs.

What are you basing that on? You just asserted it with no explanation. You also ignore the possibility that "creating jobs" may hurt the economy more.

The free market is dysfunctional when it comes to societal needs? You mean like improving everyone's standard of living? I would consider that a societal need.

You don't seem to be very on-board with capitalism.

> Putting people to productive work isn't usually be bad for a country as a whole,
> unless those people could be put to more efficent work elsewhere.

Again, you just assert that. Ignoring that you called the work "productive", the point I made is that the benefits of this work do not outweigh the costs. You make the point that there is a hidden cost of unemployment. Ok, let's show that this hidden cost is enough to justify us doing work that we wouldn't otherwise see as beneficial enough to justify the cost.

Re:brokenwindowfallacy???

[mattrumpus]

Oh, I see what you mean. Well, here's the thing. Sometimes the economy finds itself in what's called a "less than full employment equilibrium", a recession. The big problem is that the business sector will not produce at full capacity because there are less people with sufficient income to purchase the output. Their lack of production (and sales) means that people who could be working for them aren't. Taken in aggregate, these people who aren't working are the ones who don't have sufficient income to buy the stuff. Chicken and egg situation.

if the state steps in and spends on a big infrastructure project, all of a sudden those people who were sitting idle are now working and earning an income. They spend that income, stimulating business activity. Now, thanks to something called the multiplier, this actually generates more business activity than the amount the gov spent on the make work project, as the funds go round and round the economy. The idea being that when the stimulus is ended there is demand in the economy for more workers, the ones who were working on your big project.

So the state has got the economic engine running again, and you've got some infrastructure which will help you to be even more competitive. This is what they mean by "create jobs" not the directly created jobs, well they play those up, but in an economic sense its the new employment generated by the stimulated activity that's really important.

As to why gov doesn't do it all the time. Well they do sort of. In the US military spending is a big pump primer for the economic system. Also, welfare is sort of like an auto stimulus. As people are put out of work, due to a downturn, gov spending rises automatically, propping up demand and hopefully preventing further unemployment. Lastly, the economy is a complex beast, sometimes it fixes itself, sometimes it doesn't. This latest downturn is going to give us lots more real world data to play with, especially since different countries will tackle it in different ways. Come back in about 5 years, I'll be able to give you a better answer then :)

Re:brokenwindowfallacy???

[JohnHans]

I think you need to read some Keynesian economic theory. The fact is there are times when the spending of business and consumers collapse (for a wide variety of reasons). This situation can lead to a depression as the decline in spending is self re-enforcing, I.E. I spend less, you lose your job, you spend less and the next person loses their job. So, having the government at this time use it's credit to borrow can break this cycle just long enough to start a cycle in the reverse direction.

Re:brokenwindowfallacy???

[nine-times]

> Even according to this, building useful infrastructure sounds like an "investment".

Then why didn't we do it already?

Because we've been short-sighted and stupid. Lots of people put off investments, even good investments, in order to have more money in the short term.

Why is it that some people spent tons of money on big-screen TVs without putting any money into their retirement fund? Same reason.

Also, when communism fell apart in Russia, we seem to have taken that as some kind of a sign that "pure free market capitalism" is the end-all be-all of economics, and there has been a diminished political will to spend money on anything that can be labelled as "public".

Doing good and useful stuff is good and useful, you say? Profound.

That's not what I said. I said it was an "investment" by your own definition. But yes, I will say that good and useful things are good and useful, since you seem to be unable to grasp the idea.

The problem is that you have to show that it is good and show that it is useful and show that those benefits are a net gain after subtracting the costs.

You doubt that infrastructure is good and useful? Like... roads, electricity, water, sewage systems... these things aren't useful, or aren't worth the cost of building them? Are you seriously claiming that infrastructure doesn't have any economic benefit? Maybe you're a genius with some obscure and unexplained theory, but I don't know anyone who would agree with you.

Infrastructure may not generate wealth all by itself, but businesses are more likely to invest into areas with good infrastructure, good infrastructure allows businesses to operate more efficiently, and good infrastructure creates new business opportunities. For example, companies aren't going to put their offices someplace with no electricity, it's cheaper to run a restaurant with clean running water, and the car industry simply wouldn't exist if there weren't good roads.

Re:brokenwindowfallacy???

[mattwarden]

> Why is it that some people spent tons of money on big-screen TVs without
> putting any money into their retirement fund? Same reason.

Don't oversimplify. There's a pretty strong argument that buying the TV is a better decision than putting money in your retirement account.

> You doubt that infrastructure is good and useful? Like... roads,
> electricity, water, sewage systems... these things aren't useful, or
> aren't worth the cost of building them? Are you seriously claiming that
> infrastructure doesn't have any economic benefit? Maybe you're a genius
> with some obscure and unexplained theory, but I don't know anyone who
> would agree with you.

This is going to come off bad, but seriously what is the deal with people like you thinking that the only qualification for a spending effort is that there is positive value in it? I just don't get it.

It's like if I tried to tell you that no one would ever purchase a coach plane ticket because the first class ticket is obviously a superior product. You'd turn around and tell me that it is a matter of how much more expensive the first class ticket is and how that marginal cost compares to how the person values the marginal benefit. Why do you understand microeconomics when we're talking about the private sector but then naive (pardon the euphemism) when we start talking about government?

> For example, companies aren't going to put their offices someplace
> with [poor infrastructure]

If you're looking for a better return on investment as far as attracting companies, take a closer look at the tax code. Just a hunch but if you ask the last 100 companies that left the US why they left, they're not going to say poor infrastructure.

Re:brokenwindowfallacy???

[Wildclaw]

You ducked the question and contradicted yourself. You said that it is cheaper to employ people than deal with their unemployment. So why wouldn't the government work to maintain near 0% unemployment? Even if unemployment is only 3%, according to your logic it would be in the gov'ts best interest to bring that lower.

Good question. From my understanding, this is because there is a diminishing return on lower unemployment. When unemployment is low, most of it is actually people between jobs. If goverment efforts are implemented to reduce it too much, it will start to affect the availibility of labor for the private sector. Especially, since it is difficult to predict the exact movements of the job market. Also, with a low unemployment, most people don't stay unemployed very long, reducing the bad side effects of unemployment. Goverment projects also have a tendency to lose efficency over time so creating permanent budgeted items may not be the best idea. Also, you don't want to keep the same people employed permanently as the goal should always be to get them into the private sector that is better at determining what the people want. It s a very good question though which sometimes occupies my mind.

If "creating jobs" has no downside

I never said no downsides. For every worker you still have to pay him (although after deducting the cost of keeping him unemployed, which includes welfare, increased crime rates, worsened family situations, less work experience and some other things), provide him with working tools and material (fortunally cheaper in recessions) and come up with actual productive projects to work on (public infrastructure is popular because it is something that helps everyone and doesn't require very much vision). Fortunally

The free market is dysfunctional when it comes to societal needs? You mean like improving everyone's standard of living? I would consider that a societal need.

Yes, the free market has some very good parts. Which is why I like it very much. It doesn't solve everything however. What it mainly misses is when individuals fall out of the system via unemployment for a longer time. There are four options. You can let them starve. You can provide welfare of some kind. You can help them find a job in the private sector. Or the goverment can give them a temporary work of some kind until they find something better in the private sector.

Assuming a civilized western society and a deep recession like the one we are entering now this is basically reduced to two options, welfare or goverment created work.

You don't seem to be very on-board with capitalism.

I am somewhat of a middle walker. There are good and bad things with most ideologies. Also, my comment on the free market doesn't mean that I think it is a bad thing. It is one of the better economical ideas in existance. Very good for distributing limited resources. I just don't think it can fix everything.

the point I made is that the benefits of this work do not outweigh the costs. You make the point that there is a hidden cost of unemployment. Ok, let's show that this hidden cost is enough to justify us doing work that we wouldn't otherwise see as beneficial enough to justify the cost

Yup. That is the big question that can debated back and forward. But I feel like we are atleast coming to terms on what we disagree on.

Re:brokenwindowfallacy???

[4D6963]

Oh yeah I forgot increased crime. The ramifications tend to be pretty deep with that sort of issues, it's hard to see it all, even when you even try. I've found that when taking all these consequences into consideration the nice and altruistic "what would Jesus do" approach converges with the even the most cynical and down-to-Earth approach, i.e. "let's fight poverty because miserable people make me a sad panda" converges with "poor and unemployed people are a burden/produce much less wealth than they could, let's invest in their education/welfare", so when things get too complicated I think it's safe to ask yourself what would Jesus do.

Re:brokenwindowfallacy???

[u38cg]

I was exaggerating to make the point, but if you start from the point of view of asking yourself why governments exist, what gives them legitemacy, and what gives them the right to levy taxes on you, then you are pretty close to coming to the conclusion that taxation is theft. I tend to the utalitarian in my thinking, so I accept that taxation and government does have to exist and keep on existing, but it's worth asking yourself *why* the government has a right to take your money, that you worked for, and spend it on something that has no relevance to you.

Re:brokenwindowfallacy???

[tehcyder]

Let's see, "mug him and take his wallet" = taxes? Let me guess, libertarian?

No, sociopathic, immature, narcissistic nut-job. Oh, wait...

Re:brokenwindowfallacy???

[nine-times]

It's like if I tried to tell you that no one would ever purchase a coach plane ticket because the first class ticket is obviously a superior product

But we're not talking about a choice between a functional product vs. a luxury product. We're talking a choice between investing in infrastructure without which economic growth will be hindered vs. not making that investment. So if we must go into bad metaphors, it's a bit more like asking, "You have to get across the country in under 10 hours or you'll lose a few thousand dollars. Do you buy a thousand dollar plane ticket?"

Out Internet infrastructure is falling behind the rest of the world. Out bridges are falling down. Our electrical grid can't handle alternative energy sources. Most of this stuff has failed us yet (aside from a couple bridges literally falling down and some electrical grids suffering blackouts and brownouts), but we haven't been spending the money that's needed to maintain and upgrade this stuff, so it's going to fail sooner or later.

Re:brokenwindowfallacy???

[mattwarden]

> I think you need to read some Keynesian economic theory

I've read it and rejected it. How's Keynes been working out for you lately?

> having the government at this time use it's credit to borrow can break this
> cycle just long enough to start a cycle in the reverse direction.

That's an interesting reading of Keynes. So you mean to say that as soon as we're out of the slump, government should stop using its credit to prop up the economy?

Re:brokenwindowfallacy???

[bbasgen]

Your analogy implies taxation spent on something useless, thus producing an obvious answer. This analogy shows ignorance of the current economic problems: credit is frozen, people are not spending, and taxes will be *cut*. Thus, using *future* tax money (e.g. debt) on useful investments (infrastructure, etc) is a pretty good thing for those of us in the present. It is debatable how good this will be for future tax payers: generally contingent on how well private companies and governments do on making useful investments. To date, the banks haven't been holding up their end of the bargain...

Re:brokenwindowfallacy???

[harl]

Government and laws do not require an income tax.

Re:brokenwindowfallacy???

[Whorhay]

I didn't specifically mention farm subsidies though I can see where you think I might have. I was simply reffering to you obtaining something from another person who did take direct advantage of infrastructure and such funded atleast in part through government programs.

By the way I don't in general approve of the farm subsidies. I'm sorry if someone wants to farm as a way of life they'll need to be more productive doing it than they were previously if they want to do it for a living.

It seems your base line complaint is that you are paying for more than you actually benefit. That's a perfectly understandable gripe to have. My point is that you are probably getting more out of it than you think, even if it is still less monetarily than you put in. And saying that you will never take advantage of something like unemployment or medicare isn't valid because you don't know what situation you will be in within even the next few months that could leave you with no other alternatives.

Abolishing government programs enmasse just because they are often poorly implemented and managed is throwing the baby out with the bathwater. We as a society need to be more involved in what our government does with our resources. Luckily we have a system that allows for that even if it's getting worse and worse from neglect.

Re:brokenwindowfallacy???

[harl]

No they weren't. I was born into it. I had no choice on the matter.

Re:brokenwindowfallacy???

[harl]

Your position is predicated on the belief that people can only succeed on government handouts. I reject this and find it insulting.

Re:brokenwindowfallacy???

[4D6963]

Are you stupid? No, seriously, are you? What gives a government? What gives it the right to take taxes? You live in a fucking democracy, you dimwit! If there are taxes in every democracy on Earth it's because that's what the people want. And in true democracies people have the government they want, hence their true legitimacy. Takes Barack Obama, you voted in droves for him, because you guys thought he is the one guy to lead you, thus you give him license to do anything he said he'd do when you were deciding who to choose. Therefore he can take legitimately all the taxes he said he'd take during his campaign cause you guys agreed with him. People want taxes, because they're necessary. You can't be stolen if you agree someone to take your money. That's not theft, that's giving. Now obviously there will always be some gits who won't agree, well these can just sod off.

Re:brokenwindowfallacy???

[harl]

Your whole post is a straw man which ignores my position.

Your final paragraph is logically invalid. You claim because something has never happened it can never happen.

Please show me where I advocated for the abolishment of taxes.

Re:brokenwindowfallacy???

[mattwarden]

> "You have to get across the country in under 10 hours or you'll lose a few
> thousand dollars. Do you buy a thousand dollar plane ticket?"

You're still ignoring the real decision. It's not really the case that you "must" get there in 10 hours. If you aren't there in 10 hrs there will be consequences that can be valued at $x. Should you buy the ticket? Well, that depends. Is $x more or less than $1000.

My metaphor isn't a bad metaphor. It makes no difference if it's a "luxury version" vs a normal version of the same product we're talking about or instead a decision between spending your money on investment A or investment B.

Again, no idea why people think the rules of microeconomics just don't apply when we're talking about government spending. It's ridiculous, and in my opinion leads to the bankrupt, overleveraged state our government is currently in.

Re:brokenwindowfallacy???

[phlinn]

And if I decline to vote the government still taxes me. There is no way for me to leave the system voluntarily. Don't get me wrong, if I had a choice in the matter, I would voluntarily pay taxes in exchange for government services. But it really should be an explicitly signed contract for every citizen upon becoming an adult, with an option to opt out. Otherwise, it's a group of people in a geographical boundary giving powers to the government to act on everyone else within those boundaries.

I'm also willing to accept the existence of free-riders on some of those goods. The morally viable responses to someone free riding on a service are to:
1. stop providing the service. Not something I want to do with roads for instance.
2. Somehow exclude the non-contributing individuals from benefiting. Generally costs more than just allowing them to free ride, and up front checks are a problem.
3. Charge them after the fact. Police services, for instance, could check after the fact whether a particular beneficiary had in fact been part of the system, and justifiably take taxes afterwards. Easier than option 2, but rather difficult to manage.
4. Allow the free riders and stop worrying about them as an inconsequential minority. My favorite option really.
Note that the current system of compelling everyone to be obedient citizens is NOT compatible with truly equal rights, as it sets up one group (probably a large majority) as having explicit rights to control another group. If A has the right to use force against B, but the reverse isn't true, then A and B do not have equal rights.

Re:brokenwindowfallacy???

[nine-times]

It's not really the case that you "must" get there in 10 hours.

Like I said, it's a bad metaphor, but it's a metaphor of your choosing. Both first class and coach class get you from point A to point B equally well, so there's no translation (and besides, a airplane ticket doesn't really count as an "investment" unless you're specifying some return on the money you've spent). If I was claiming that the government should give me free booze and slippers while they build infrastructure instead of just building infrastructure, then your metaphor might begin to make sense.

...leads to the bankrupt, overleveraged state our government is currently in.

Yes, yes, it's the communists to blame for our current economic state. All those communists who've been running the government for the past several decades, spending so much money on infrastructure that we're now in trouble. It couldn't be that we've been spending our money badly and stupidly.

Re:brokenwindowfallacy???

[mattwarden]

> Like I said, it's a bad metaphor

I think you're just convincing yourself of that because you don't want to think.

> Both first class and coach class get you from point A to point B equally well

That has nothing to do with it except that you changed the situation to be "I'm buying a ticket because I have to get to point B or I lose $x". All I said was that there are two competing products, one of which is superior but costs more. In your world, the consumer always buys the superior product because only the benefits are relevant. I'm pointing out how silly this is.

> a airplane ticket doesn't really count as an "investment" unless you're
> specifying some return on the money you've spent).

You can draw all the arbitrary lines and classifications as you want. An "investment" is a transaction like anything else. You buy something for $x and you reap $y benefits from it. I buy a stock if I expect to reap more benefits from it than I pay out. I buy a HD TV if I expect to reap more benefits from it than I pay out. The only difference is the former calculation is easier to talk about. But it's the same thing, and my "bad metaphor" shows exactly that. The monetary value of the difference between a coach ticket and a first-class ticket on the exact same flight is quantifiable. Most people would not buy a first class ticket at current marginal costs, but if offered a first class seat for an extra $5, most people would take it. There is positive value offered by the first-class seat; it's just not enough to justify the marginal cost.

> If I was claiming that the government should give me free booze and
> slippers while they build infrastructure instead of just building
> infrastructure, then your metaphor might begin to make sense.

Alternatively, if you'd spend half as much time thinking about the metaphor as you do thinking about ways to dismiss it, then my metaphor might begin to make sense (to you).

Good luck.

Re:brokenwindowfallacy???

[nine-times]

In your world, the consumer always buys the superior product because only the benefits are relevant.

No, in my world, there are situations where refusing to spend money can end up costing you more than if you spend money. In my world, there is such a thing as "investment", where you spend money specifically because of the return.

You can draw all the arbitrary lines and classifications as you want.

I'm not drawing arbitrary lines-- you are. Does this sound familiar? "An investment is something you do when the benefits outweigh the cost"

Now, maybe you've somehow convinced yourself that an investment is *anything* where the benefits outweigh the costs, but I was giving you more credit than that. I was presuming you meant that an "investment" was something where you get back a benefit in the same kind of the cost, but with a greater return. So a financial investment would be something that costs you money, but that you're expecting to ultimately get a return of more financial benefit than the money you put in.

That would be sensible, since that's what "investment" means. HDTVs and plane tickets are not, under most circumstances, financial investments. They're more likely just expenditures-- you've spent the money on something, and that money isn't coming back to you.

I'm really having a hard time believing that anyone could be so short-sighted as to believe that building infrastructure is not a worthwhile investment. I mean, you could argue about exactly how much money should be spent on which infrastructure, but there are no credible economists anywhere who believe that building infrastructure isn't economically important, or that the government shouldn't have a part of planning/building infrastructure.

Re:brokenwindowfallacy???

[mattwarden]

> No, in my world, there are situations where refusing to spend money can end
> up costing you more than if you spend money.

Good, then we are in agreement! The same rules apply to government microeconomics as they do in private sector microeconomics.

> you've spent the money on something, and that money isn't coming back to you.

Money is a quantification of value. It is a commodity. If you buy an ounce of gold for $853.90, you have not gained or lost anything except transaction costs. If you sell an ounce of gold for $853.90, you have not gained or lost anything except transaction costs. Whatever you bought, you could immediately turn around and convert it back into dollars, minus transaction costs. It's called an economy.

So it doesn't matter at all if somehow the return on your "investment" is in the form of dollars, gold, bread, enjoyment, or pig farts. Wealth is independent of its form (that's not to say all forms have the same transaction costs, though).

So, yes, it is you who is being arbitrary with your classifications of investment vs. purchase and wealth in enjoyment vs. wealth in time vs. wealth in dollars vs. wealth in whatever else. These are not radical ideas. I suggest you read an econ book instead of arguing fundamentals with me.

> I'm really having a hard time believing that anyone could be so short-sighted
> as to believe that building infrastructure is not a worthwhile investment.

I'm having a hard time believing that after all this discussion you think that's anywhere near what I'm saying. Let me try to break this down: all I'm saying is that someone needs to show that the benefits outweigh the costs. My strong guess is that they DO NOT because if they did, the plans to do them would probably already be on the books.

> no credible economists anywhere who believe that building infrastructure isn't
> economically important, or that the government shouldn't have a part of
> planning/building infrastructure.

There are no credible economists anywhere who believe that first class tickets don't have value over coach class tickets.

Do you get it yet?

Re:brokenwindowfallacy???

[nine-times]

So it doesn't matter at all if somehow the return on your "investment" is in the form of dollars, gold, bread, enjoyment, or pig farts. Wealth is independent of its form (that's not to say all forms have the same transaction costs, though).

Maybe you're playing dumb, but it's obviously not that simple. If you spend $10 on a hamburger expecting to sell it back in a year for >$10, then you're obviously stupid. If you spend $10 on gold and expect to be able to sell it for >$10 in a year, I might be on to something.

When I spend $10 on a hamburger, it's generally not for the sake of investment. I'm going to eat it. When I buy a TV, I'm buying it so I can use it, not so I can sell it in several years for more than I payed. Wealth isn't independent of form.

Like I said before, maybe you're some great misunderstood genius. If so, you can mock me when you win the Nobel prize in economics for your incredible ideas which everyone else on the planet thinks is nonsense. In the mean time, I'll settle for listening to people who make a modicum of sense according to any conventional thought.

Let me try to break this down: all I'm saying is that someone needs to show that the benefits outweigh the costs. My strong guess is that they DO NOT because if they did, the plans to do them would probably already be on the books.

Well by that logic, no one should have ever made any laws or built any infrastructure ever because, if it made sense to do it, it would have already been done. Great! Lets all live in caves!

Of course for any given project, you have to justify the cost. Do you think you're the only person who's ever thought about that? I mean, seriously, you've been arguing all this time that fixing our bridges is equivalent to buying everyone booze, and you're saying now that you were just saying that you should be doing a cost/benefit analysis before fixing a given bridge, and you expect to be taken seriously?

Re:brokenwindowfallacy???

[u38cg]

You're missing the point a little. I don't disagree that a democratic government is probably the best we can do, but here's the point. Imagine a bunch of people living in caves. There is no government, no taxes, the only rules are avoiding getting beaten over the head with a mammoth femur. How do you get from there to a state where it is morally and ethically correct that people I don't know and haven't agreed anything with can take my money in return for providing services that I may or may not want? In essence, what's the difference between a government (democratic or not) and a protection racket?

Re:brokenwindowfallacy???

[mattwarden]

Getting tired of this, but I'll give it one last shot...

> When I spend $10 on a hamburger, it's generally not for the sake of investment. I'm
> going to eat it. When I buy a TV, I'm buying it so I can use it, not so I can sell
> it in several years for more than I payed. Wealth isn't independent of form.

You're drawing arbitrary lines between investment and purchase, like I said before. The time aspect is irrelevant, except that you have to worry about inflation and fluctuations in market value. You're still stuck on "money" as some magical wealth holder that is superior to anything else. Just like you don't have to sell money in order to realize its value, you don't have to sell the TV in order to realize its value and you don't have to sell the hamburger to realize its value.

> Like I said before, maybe you're some great misunderstood genius. If so, you
> can mock me when you win the Nobel prize in economics for your incredible
> ideas which everyone else on the planet thinks is nonsense. In the mean time,
> I'll settle for listening to people who make a modicum of sense according to
> any conventional thought.

I know it's a common tactic around here to act like what someone is saying is so crazy and outside the norm that it can't be right, but the fact is that I'm not saying anything profound; this is all common economic theory and incredibly fundamental. In your twisted world where you don't understand how an economy works, no one would ever buy anything because they would lose an amount of wealth equal to the price of the good.

> Well by that logic, no one should have ever made any laws or built any
> infrastructure ever because, if it made sense to do it, it would have already
> been done. Great! Lets all live in caves!

You are being disingenuous. I said the plans to do them would likely already be on the books.

> Of course for any given project, you have to justify the cost. Do you think
> you're the only person who's ever thought about that?

No. But when it comes to government spending, for some reason I seem to be in the minority.

> you've been arguing all this time that fixing our bridges is equivalent to
> buying everyone booze and you're saying now that you were just saying that you should be doing a
> cost/benefit analysis before fixing a given bridge, and you expect to be
> taken seriously?

You are either being disingenuous or you are a complete idiot.

Re:brokenwindowfallacy???

[4D6963]

It's not logically invalid. That it has never happened despite people like you pushing the idea means that the idea is widely considered unviable.

You don't want to abolish taxes? Then what, tell me.

Re:brokenwindowfallacy???

[4D6963]

You're a moron. But I'm bored, so I'll bite. Let's imagine that one of your fellow homo prehistoricus stands up and says "Let's have a democratic constitution, law enforcement, currency, taxes, universal health care, and a space program" and everybody goes "Yay that's a plan let's do it!". Fin.

Re:brokenwindowfallacy???

[harl]

Again do not put words in my mouth. Show me where I said I wanted to abolish taxes.

It is exactly logically invalid. Not A means only that. You cannot say because something has never happened it can never happen.

Re:brokenwindowfallacy???

[nine-times]

you don't have to sell the hamburger to realize its value....no one would ever buy anything because they would lose an amount of wealth equal to the price of the good.

You're assuming that people are at all times driven by no desires other than to accrue wealth? People buy hamburgers so they can eat them, not to hoard them as "wealth". Upon consumption, their value goes to approximately zero. If they're not eaten, they spoil and their value goes to approximately zero. Buying hamburgers is consumption, not investment.

Good god, no wonder our economy is in such bad shape. We have maniacs like you running around pretending to understand how things work.

Re:brokenwindowfallacy???

[mattwarden]

Removing a negative and adding a positive is the same thing. I guess that is a pretty "maniac" way of seeing an economy working, though.

Your problem is your narrow view of what "wealth" is, your ridiculous focus on government currency as the only measure of value, and your utter misunderstanding of what money even is (which makes your focus on it even more amusing).

The consumer purchased the hamburger because the consumer received as much or more enjoyment and sustained life from the hamburger than the consumer would have received from the money itself or anything else the consumer could have used the money for. This is not a loss of wealth; it is a conversion of wealth from paper government currency to enjoyment and sustained life.

This is how microeconomics works. These are not my ideas. Perhaps if you have a local community college you could take a Econ 101 course and understand things like demand, prices, and opportunity cost.

Re:brokenwindowfallacy???

[nine-times]

Your problem is your narrow view of what "wealth" is, your ridiculous focus on government currency as the only measure of value

No, I focus on the ability to trade it for something as "value". If you're a resteraunt buying a bunch of hamburger meat, then that might be an investment. If you're buying a hamburger to eat and you eat it, that is not an investment. On that level, consumption of that hamburger does lead to a loss of wealth-- I had $10, I've eaten my hamburger, and now I am $10 poorer (and less any return an investment of that $10 might have earned).

I know you apparently think it's all the same thing (because you took Econ 101 at a community college and never proceeded to anything more advanced?) but wealth can be created and destroyed. It's not a zero-sum game. If it were a zero-sum game, then it wouldn't matter what we spent money on, and your whole argument that the government was going to waste money would become eve *more* baseless.

Re:brokenwindowfallacy???

[4D6963]

There's something quite amusing going on here. On one hand you say that it's not because something didn't happen yet that it couldn't happen and work well, but on the other hand, you try to argue that you're not for the abolishment of taxes because you haven't said it yet. Therefore allow me to use your argument and say that it's not because you haven't said yet that you're for the abolishment of taxes that it means you're not for it. But regardless of that I asked a very simple question which requires a simple answer, if you're not for the abolishment of taxes, then what do you want?

Re:brokenwindowfallacy???

[harl]

For the last time. Don't put words in my mouth. Please show me where I stated I was for the abolishment of taxes and that I said it would work well.

   

Re:brokenwindowfallacy???

[mattwarden]

That makes no sense. If the thing you're trading didn't already have value, then you wouldn't be able to trade it. It doesn't matter if you actually trade it or eat it or throw it away.

> I had $10, I've eaten my hamburger, and now I am $10 poorer

My comment before that you obviously didn't understand was that if this were true, no one would ever consume anything. The economy does not function if what you say here is true. You don't earn money because your employer would be poorer for paying you. You don't buy stuff because you would be poorer for doing so. Your employer doesn't make money because no one is buying their products.

I really don't know how much clearer I can make this. Your understanding of economics doesn't work even in the most trivial sense. I have to believe you understand this at this point and are just arguing for the sake of arguing.

Re:brokenwindowfallacy???

[nine-times]

> I had $10, I've eaten my hamburger, and now I am $10 poorer

My comment before that you obviously didn't understand was that if this were true, no one would ever consume anything.

That's only if you assume that people always behave in such a way to optimally accrue wealth without any other consideration, which they obviously don't. Along with everything else, wealth isn't wealth without expenditure-- which is to say that if you never intend to spend your wealth, then it effectively has no value. If I take all my riches and throw them into a vault, never to see the light of day ever again, then with regards to the economic context, I may as well have destroyed it all.

I don't know where you took your Economics 101, but if they taught you that wealth cannot be transfered, created, or destroyed, then they did a terrible disservice to your education.

Or if you still disagree, then tell me why we should be at all concerned with the government spending money, since they'll always get something back of equal value in return? I mean, really, this is silly.

Re:brokenwindowfallacy???

[mattwarden]

> That's only if you assume that people always behave in such a way to
> optimally accrue wealth without any other consideration, which they obviously don't.

Um, no. Actually, it's only if you assume that our economy doesn't run on the fuel of people constantly doing things that decrease their overall wealth.

> then tell me why we should be at all concerned with the government
> spending money, since they'll always get something back of equal
> value in return

You shouldn't be concerned, as long as the government is getting "back" what they should be getting back for the dollars they are giving to rich business owners. But just because they are getting *something* back, doesn't mean that's the case. That's where this discussion started. You may not remember what we were talking about before you started just trying to find one sentence in my response that you could think of an objection to.

Re:brokenwindowfallacy???

[nine-times]

You shouldn't be concerned, as long as the government is getting "back" what they should be getting back for the dollars they are giving to rich business owners

Oh, but according to your mindset, they would never spend the money if they didn't get something equally valuable in return-- because people don't do that. Right?

Oh right, I guess special rules apply to "the government" which give them magical abilities to do things the rest of us can't. They can "spend" money on roads with no return, but the individuals can't buy a hamburger without it being an "investment".

Re:brokenwindowfallacy???

[4D6963]

And for the last time, answer the damn question, what is it you want?? The status quo? Well you have it, what else?

Re:brokenwindowfallacy???

[harl]

I'm not going to play your games. You constantly put words in my mouth. If you care to address the position I clearly state and stop making up positions attributed to me I'd be happy to continue.

Until then:

*plonk*

Re:brokenwindowfallacy???

[mattwarden]

This is laughable. We've turned full circle. MY ENTIRE POINT is that the same rules SHOULD apply to government and it's completely illogical for government to spend when they don't get value for their spending. Incredible. I said this a number of comments ago:

"Again, no idea why people think the rules of microeconomics just don't apply when we're talking about government spending. It's ridiculous, and in my opinion leads to the bankrupt, overleveraged state our government is currently in."

Absolutely incredible.

Re:brokenwindowfallacy???

[nine-times]

MY ENTIRE POINT is that the same rules SHOULD apply to government

I KNOW. That's what makes it SO STRANGE that you're also arguing that THERE'S NO SUCH THING as loss or creation of WEALTH. WHY are we CAPitaLIZING thingS?

Yeah, I know, you used the word "microeconomics", which means you must be brilliant. Your arguments throughout this whole discussion have been inconsistent if not self-contradictory. Don't blame me for that.

Re:brokenwindowfallacy???

[mattwarden]

I never said there was "no such thing" as wealth creation or destruction. I said that's not how the private market operates, and that isn't how government should operate.

I don't blame you for my "inconsistent arguments". I don't even blame you for your ignorance, refusal to consider what I'm saying, and desire to argue for the sake of arguing. This is slashdot, after all, and there certainly is value in working on one's arguing skills. Keep it up.

Re:brokenwindowfallacy???

[nine-times]

I'm considering what you're saying, you're just saying silly things. In the simplest form: just because you buy something for $10 doesn't mean that you'll be able to turn around and sell it for $10 at any point in time. I know, you don't like money, so if you really want: just because you can trade 10 grapes to get an object doesn't mean you'll be able to get 10 grapes back by trading that object away at any point in time.

It's not hard. Really, buddy, I'm trying to make this as simple as possible.

Ok, if you don't believe me, try an experiment: go to McDonalds and buy a hamburger. Take that hamburger out onto the street and try to sell it to people coming into McDonalds for the same price that you bought it. Now do the same thing, but wait 1 day between buying it and trying to sell it, and see how much money you can get for the hamburger. Now eat the hamburger, and see how much money you can get from selling that hamburger. Report back when you've done all that.

If your hamburger hasn't lost any value at any point during that entire process, then you'll get to be right that there's no consumption going on and that the whole thing is a zero-sum game. And then, when you've succeeded in doing that, you'll have also proven that the government should be allowed to spend however much money they want on whatever they want, because nothing will have ultimately be lost.

Re:brokenwindowfallacy???

[4D6963]

OK, no, seriously, can you fucking stop whining and just answer the fucking question, I just want to know the answer to it, okay?

Re:brokenwindowfallacy???

[mattwarden]

Hey, thanks for explaining topics I have already explained to you. You are describing transaction costs. Anyway, I would only repeat my comments about how assets have value regardless of whether you sell them, so I'll let you take the next thing I've already explained to you that you objected to at the time but now act like you're telling me something I don't know. It's been real.

Re:brokenwindowfallacy???

[nine-times]

Wow, and I bet you also explained to me before how it made sense for the government to invest in infrastructure, and how hamburgers weren't investments. Please, explain more.

Re:brokenwindowfallacy???

[mattwarden]

I did, actually. I said I'm on board as long as government plays by the rules everyone else in the market plays by and only spends money on things where it expects the return will be the same or higher than the cost. I really don't see what the problem is what that statement (never have), and yet you took issue with it:

Me: "The problem is that you have to show that it is good and show that it is useful and show that those benefits are a net gain after subtracting the costs."

You: "Are you seriously claiming that infrastructure doesn't have any economic benefit? Maybe you're a genius with some obscure and unexplained theory, but I don't know anyone who would agree with you. "

And the rest of this discussion is me saying something completely reasonable and then you responding as if I had said something completely different. I said the benefits outweigh the cost. You said you couldn't believe that I thought infrastructure had no benefit. I'm sure this sounds like a reasoned response to you, but it isn't.

I also said that hamburgers aren't "investments" because differentiating between an investment and anything else is arbitrary. You think a stock is an "investment" because you don't understand how stocks get priced. You don't understand that the expected return is already priced in the stock. You haven't thought about how I wouldn't sell you a gold coin that is worth $800 today but I expect with 70% certainty to be worth $900 tomorrow. You don't understand that I would only sell it to you for $870. This idea of future returns making this an investment is from people who weren't paying attention in 7th grade when they went over expected values.

There are only two reasons that transactions happen. First, you as the buyer think I as the seller have undervalued my item in some objective sense. Second, you as the buyer have personal preferences that cause your personal valuation in the subjective sense to deviate from my personal valuation and/or the objective valuation. This is how the market works. You can argue with me that 2+2 really does equal 5, and I'm not really going to be able to counter that, but it's just an argument tactic and doesn't change the facts.

I go back to my original comment...

Me: "The problem is that you have to show that it is good and show that it is useful and show that those benefits are a net gain after subtracting the costs."

Congratulations, though, on taking a very simple point and turning it into debating whether the ocean really is blue.

Re:brokenwindowfallacy???

[nine-times]

Ok, so fine, let's just pretend that you actually said that it makes sense to build infrastructure from the outset, and then we can agree. I'm fine with that.

Re:brokenwindowfallacy???

[mattwarden]

Amazing how after all this you still have no idea what I'm saying. For your benefit, I'm going to assume you're doing it on purpose, because the alternative is much less favorable.

Re:brokenwindowfallacy???

[nine-times]

Yeah, I understand that it's beneficial for the ego to try to hurt the other person's feelings once you've been proven wrong. Nothing wrong with that. I'm just glad we agree about the importance of building infrastructure.

Re:Or...

[Joey Vegetables]

And from whom, exactly, would you get the $1 million per person?

Re:Or...

[El Torico]

Simple solutions don't create new Agencies and don't give bureaucrats more power and more money. The problem occurred because "civil servants" failed to do their jobs. The best way to restore faith in the markets would be to quickly convict those that committed these frauds, seize their assets, and ban them and the bureaucrats that failed to do their jobs from ever holding a position of public trust, in corporate management, or in finance.

MIcrosoft restructuring

[goombah99]

Microsoft is supposedly about to layoff 17% of it's worldwide workforce despite cash reserves. I wonder is perhaps they are positioning themselves to be more nimble in the new hire arena so as to profit from this transient IT burst.

After this has to be a burst. The whole point is for this kind of infra structure investment to lead to longer term efficiencies and ultimatle less redundant and incompatible IT make work. The only way it can actually lead to greater IT in the long run is if it somehow creates new opportunities in Health care that make more investment in health care a worthwhile thing. Right now, I think the evidence is that health care is saturated were paying more than socialized medicine countries but outcomes are not in aggregate better, they are only better in the individual but insubstantially few cases.

So this kind of investment if it's valuable should lead to more centralized and pre-packaged software solution and not to more IT jobs in the long run.

It will be like all the linesmen they need to put up the next generation grid. eventually the grid will be up and the extra help, particularly the experts in executing it, not needed. They will just need the maytag repairman and the telephone sanitizers.

After all who is actually ready to roll out IT systems that companies are willing to bet on? Microsoft. Sure the open source community has better solutions in the long run. But to roll anything out, no matter how clever, you need a bussiness model to back it. That's why haliburton and Bechtel and boeing keep getting the big systems integrator contracts. Not because they are so good at what they do. but because they have the scalable bussiness model to ramp up fast.

Microsoft thus needs a weight loss program. it's lethargic. But it is big and can do essentially every task and companies trust it even while IT folks grumble.

SO maybe this is their big comeback.

Fix the roads.

[snarfies]

I quote from the report, bolding mine: "An additional $10 billion investment
in health IT in 1 year would create as many as 212,000 new or retained U.S. jobs for a year."

Similar wording is on the other two prongs as well. I stopped reading at that point. The report is therefore saying that investing 30 billion could result in ZERO "new" jobs, it will merely allow the retention of existing jobs.

BTW, what good will your retained job will do you little good when you can't drive to the grocery store to buy food to eat due to the bridge to the store having collapsed? I'd rather see the old-fashioned boring infrastructure fixed/updated before the new-fangled stuff.

Re:Fix the roads.

[DrWho520]

If you invest in health IT, it will help all those people going to the hospital who were driving/walking on the bridge when it collapsed beneath them.

Re:Fix the roads.

[Aurisor]

I think "retained" in this case refers to jobs that one would have lost without the money. So yes, you could have zero "new" jobs, but saving the jobs of a quarter million people has a non-trivial benefit for the economy as a whole.

Re:Fix the roads.

[shmlco]

"The report is therefore saying that investing 30 billion could result in ZERO "new" jobs, it will merely allow the retention of existing jobs."

Picking one extreme. On the other it could in fact create an additonal 212,000 jobs.

Or, even worst case, and viewed from anther angle, it could prevent 212,000 jobs from being lost; stopping 212,000 people from hitting welfare and unemployment.

"I'd rather see the old-fashioned boring infrastructure fixed/updated..."

And I'd rather scale defense spending back a bit and do both. Once constructed, new roads and bridges aren't going to help much in maintaining our gloal competitiveness, nor are they likely to generate much in the way of future jobs and income.

Re:Or...

[geekoid]

Your math = Epic Fail.

Hint: there are more then 350 people in the US.

Why the Soviet Union Collapsed...

[ducomputergeek]

...was more to do with lack of physical infrastructure than anything else. They had the means to produce a lot of food, but a lot of it rotted out in the fields. They didn't have the roads and rail to get it from point A (field) to point B (processing plants) to point C (supermarket shelf).
   

Re:Why the Soviet Union Collapsed...

[DaveV1.0]

They also didn't have the trucks, trains, etc. to transport it.

Re:Why the Soviet Union Collapsed...

[keithjr]

Well, we solve that problem by paying farmers not to grow food. Thus, no rotting in the fields.

Re:Why the Soviet Union Collapsed...

[homer_s]

was more to do with lack of physical infrastructure than anything else. They had the means to produce a lot of food, but a lot of it rotted out in the fields. They didn't have the roads and rail to get it from point A (field) to point B (processing plants) to point C (supermarket shelf).

That was the consequence of central planning - something that a lot of people here seem to support.

Re:Why the Soviet Union Collapsed...

[DragonWriter]

That was the consequence of central planning - something that a lot of people here seem to support.

It was, more accurately, the result of maintaining a massive military and security apparatus in an effort to control the world (in, of course, a spending competition with the US) that its economy couldn't sustain indefinitely. It wouldn't have mattered much how the rest of the resource in the economy were directed in the long-term outcome, though the path to failure might have looked a little different.

Which is something the US might keep in mind as its military spending continues to equal or exceed that of the rest of the world combined.

The US Already Imports Tech Workers

[mb12036]

Who will take all the jobs that are created? Bridges and Roads can employ more American workers because they require trades and unskilled labor.

Re:The US Already Imports Tech Workers

[shmlco]

"unskilled labor"

Yeah, reward the uneducated high school dropouts...

No, good economics.

[plasmacutter]

You will get NO net jobs. Every penny spent on a "stimulus" must be taken from taxpayers, either directly or indirectly, either now or in the future, and that penny will NOT be spent creating jobs elsewhere. At best, you are taking away future jobs to support current ones, or, to state exactly the same thing in different terms, you are borrowing from the future to support unsustainable lifestyles now . . . which is exactly what got us into this mess to begin with.

Standard reaganomic bullcrap.

Taxing the INCOME of the wealthy to build infrastructure actually compels the creation of MORE jobs than just the infrastructure itself.

I know these things, several of my family members own and manage incorporated entities. The more pressure you put on their personal income, the more they will keep within their corporations, which are taxed far less, resulting in more re-investment (for the layman, that means JOBS AND EXPANSION).

In addition to that, using those taxes from the wealthy to invest in infrastructure provides subsidized infrastructure for yet more growth.. ironically for all the pissing and moaning that subsidy is to the businesses of the wealthy.

It's a win-win-win situation.
the economy is stabilized, jobs are created, and the wealthy get a major subsidy to their business for a little tap-dancing with their accounting.

Re:No, good economics.

[deKernel]

No it is not a win-win situation. What you are practicing is Robin Hood economics which teaches class envy. Saying that it is "Ok" to tax the rich more takes away the incentive for most people to advance since most "rich" people are not associated with a corporation: they are just employees of a corporation.

The system in the U.S. basically incentive-based, and you taking away the incentive because it is going into the pocket of the government and not in the pocket of the person working harder or taking the risk to advance.

Re:No, good economics.

[plasmacutter]

No it is not a win-win situation. What you are practicing is Robin Hood economics which teaches class envy. Saying that it is "Ok" to tax the rich more takes away the incentive for most people to advance since most "rich" people are not associated with a corporation: they are just employees of a corporation.

The system in the U.S. basically incentive-based, and you taking away the incentive because it is going into the pocket of the government and not in the pocket of the person working harder or taking the risk to advance.

what a fat load! it's obvious you didn't read a thing I was saying. Please read it again, and if you don't understand it call my gran and my uncle.

In addition, progressive taxation does not create wealth caps. You can still get as rich as you want, but you have to pay your fair share to society for the managment of the ever growing pool of resources you individually consume. (for example: why should the poor be forced to subsidize the greater value the rich get from police? After all, it's not the poor who are worried about people breaking in and stealing the tiffany glasswork. Let the wealthy pay their fair share for law enforcement)

Re:No, good economics.

[geminidomino]

Saying that it is "Ok" to tax the rich more takes away the incentive for most people to advance since most "rich" people are not associated with a corporation: they are just employees of a corporation.

That logic escapes me...

Job A: 100k taxed at 45% (numbers pulled out of thin air) = net 55k

Job B: 1M taxed at 75% = net 250k

I'd definitely want to advance for an extra 195k

Re:No, good economics.

[mc6809e]

Standard reaganomic bullcrap.

Taxing the INCOME of the wealthy to build infrastructure actually compels the creation of MORE jobs than just the infrastructure itself.

That standard reaganomic bullcrap is responsible for thousands of startups and IT businesses that got their startup capital and money from the income of the wealthy.

And the argument that building more infrastructure compels the creation of more jobs doesn't just apply to infrastructure. How many jobs did Google create, for example?

Google got its money from the income of the wealthy. Under a high-tax policy, that money would have instead gone to fund bridge-building or road construction.

Do you really believe that our economy is in the dumps because we don't have enough roads or bridges?

Re:No, good economics.

[plasmacutter]

That standard reaganomic bullcrap is responsible for thousands of startups and IT businesses that got their startup capital and money from the income of the wealthy.

No, they get it from investment, which may or may not be part of individual assets. Those wealthy enough to do this probably do it under an umbrella corporation, which is shielded from income tax.

And the argument that building more infrastructure compels the creation of more jobs doesn't just apply to infrastructure. How many jobs did Google create, for example?

Google got its money from the income of the wealthy.

No, google got its money from the income of google, and got its startup capital from a venture capital firm, which itself was incorporated and not subject to income tax. Try again.

Under a high-tax policy, that money would have instead gone to fund bridge-building or road construction.

Do you really believe that our economy is in the dumps because we don't have enough roads or bridges?

I think our economy is in the dumps because a certain philosophy dominant since the 1980's has allowed a minority of people to accumulate and hoard away a lot of capital while freezing or depressing the wages of the vast majority of the buying populace through offshoring and other means.

For a while, people used debt to "bridge the hard times", but the hard times never ended, and eventually their capacity to carry debt gave out, thus the mass defaults and credit crunch.

I don't care about accumulation of net worth. It's a fine and worth-while thing, but hoarding it rather than using it to expand the economy is quite another. In addition, no matter how much you over-consume when you have a fat wallet you won't make up for the consumer spending of hundreds of thousands of families with slightly more income than they have now.

You won't, for instance, buy 10 economy sedans on a million dollar salary, more likely 2-4 luxury ones. This is why there is value in cushioning the capitalist system through the concept of "mixed economy".

This involves regulation to prevent fraud and abuse, progressive taxation to prevent the kind of tar-paper no-plumbing shack vs 4 mile compound nonsense we have in the third world, and investment in infrastructure to act in the general interest of EVERYONE in the cases in which individuals --even captains of industry-- feel it too expensive or too unprofitable to act on their own.

Examples of major investments in infrastructure through tax-and-spend include:
the louisiana purchase, the transcontinental railroad, the interstate highway system, the arpanet->internet, the power grid, the entire city of las vegas, and much much more.

What's further, the biggest of these infrastructure projects through deficit spending followed by higher taxes was the new deal. When last I checked it worked. (and don't bother linking that van mizes crap.. the austrian school is to economics what intelligent design is to geology, cosmology, and biology)

Re:No, good economics.

[deKernel]

First off, nice tone there. I did read your comment, but my guess is that you did not understand what my comment was attempting to convey so I will give it a shot again.

While I do agree that the graduated tax system does not present a cap on your income, it does penalize you the more you make though. Now regarding your comment that the "rich" should pay their fair share, I am curious as to what their fair share is. Who says what their fair share is? You? Me? Who? What does represent "their fair share? 30%? 40%? 50% of their income?
The last time I checked, the top 50% of taxpayers pay 97% of total federal taxes, and the top 1% pay 39% of total federal taxes.

How are "the rich" more of a burden on such items as law enforcement? Are you telling me that the police don't protect your home? Your place of employment? Your car? When I was delivering pizzas to put myself through school, I saw a police presence far more in depressed areas than where "the rich" live. Where do most of the crimes happen?

It is a shame that you have fallen victim to class envy because if will hold you back from becoming a success in anything you desire. Now what I find ironic is that if you do end up fighting through to find our financial freedom, you will eventually see where I am right. You will see where you were one who took the risks and sacrificed, and you are the one who should enjoy the rewards of your success.

Re:No, good economics.

[plasmacutter]

Who says what their fair share is? You? Me? Who? What does represent "their fair share? 30%? 40%? 50% of their income?

And who measures who is lazy and who is not, You? Me? Who? What does represent "lazy" According to the third quote everyone who doesn't have money deserves whatever happens to them, even if the vast majority of it is beyond their control.

The last time I checked, the top 50% of taxpayers pay 97% of total federal taxes, and the top 1% pay 39% of total federal taxes.

and where did you check, the heritage foundation? LOL

It is a shame that you have fallen victim to class envy because if will hold you back from becoming a success in anything you desire. Now what I find ironic is that if you do end up fighting through to find our financial freedom, you will eventually see where I am right. You will see where you were one who took the risks and sacrificed, and you are the one who should enjoy the rewards of your success.

Oh, but now you're going to come right back into that social darwinist tone you have with this post, as if everyone whose "out" is pounding at the door to get "in". I say: money is important, but it isn't everything.

This said, it's not YOU that made that success. It's a combination of circumstance and luck as well. Who you know, to which family you were born, who you happened to meet and how they did. Sorry, but it's just as much luck as anything else that go you your current income and net worth.

Then there's the nature of the economy itself. Resources are limited. this means that for every one person in the high income there will be upwards of 10 in the low no matter how hard they work or how much they sacrifice. Unless you have absolutely no compassion and are absolutely viscious, you should feel some obligation to give back to the community, and not just the causes your limited imagination can assume. That means giving some of your income back as taxes to a government which can represent all of the interests at play.

Re:No, good economics.

[JesseMcDonald]

If you assume one can take home either $250k or $55k for exactly the same work, sure, anyone would choose the $250k job, no questions asked. In general, however, that isn't the case. Higher-paying jobs tend to require more effort and longer hours, produce more stress, depend on specialized skills and connections which must be maintained, etc. The trade-offs a person may be willing to make to earn $1M likely wouldn't remain justified after 75% is cut away by taxes.

Everyone would like to make more money, but few are willing to pay the price. That price doesn't decrease any just because you tax away most of the incentive. Those on the margin, who would be willing to take on the additional responsibility at the higher salary but not the reduced one, will choose not to advance as a direct result of the tax.

Re:No, good economics.

[loafula]

No it is not a win-win situation. What you are practicing is Robin Hood economics which teaches class envy. Saying that it is "Ok" to tax the rich more takes away the incentive for most people to advance since most "rich" people are not associated with a corporation: they are just employees of a corporation.

The system in the U.S. basically incentive-based, and you taking away the incentive because it is going into the pocket of the government and not in the pocket of the person working harder or taking the risk to advance.

You are either a fucking idiot, or a greedy bastard.

Re:No, good economics.

[plasmacutter]

Higher-paying jobs tend to require more effort and longer hours, produce more stress, depend on specialized skills and connections which must be maintained, etc.

I disagree with this.

Fresh off the podium in this horrible job market, I was compelled to take a bottom basement job delivering food to get by.

I work upward of 55 hours a week in incredibly stressful, time-sensitive conditions, and am basically being paid in tips to drive rush hour traffic upwards of 7 hours a day.

The job is easily more stressful than my mother's (she works worker's comp claims), and she makes 3x more than I do.

The knowledge is just as specialized: she learns regulations and insurance law, I learn a maze of streets covering a 75 sq mile area.

Re:No, good economics.

[drsmithy]

You can still get as rich as you want, but you have to pay your fair share to society for the managment of the ever growing pool of resources you individually consume. (for example: why should the poor be forced to subsidize the greater value the rich get from police? After all, it's not the poor who are worried about people breaking in and stealing the tiffany glasswork. Let the wealthy pay their fair share for law enforcement)

I agree with most of what you're saying, but this is just a load of bollocks. The "rich" have a much, much lower impact on public and social services than the "not rich". For example, while, certainly, the rich have more to lose if they are robbed, their houses don't take any more resources to 'protect'. They also tend to fit out their houses with fancy security systems, or hire private security, or have proper insurance, etc, thus reducing their overall burden on society even when they are robbed.

The idea that the "rich" use a disproportionately (or even relatively) high amount of social services doesn't even pass the laugh test. The complete opposite is true.

Re:No, good economics.

[deKernel]

and where did you check, the heritage foundation? LOL

No, those numbers come from the IRS. You know, the ones that actually do the collecting.

Oh, but now you're going to come right back into that social darwinist tone you have with this post, as if everyone whose "out" is pounding at the door to get "in".

Please do not ever go into the business of mind-reading because you won't make much money. I did not imply that at all. What I was attempting to do is keep the conversion on-top, but since you want to go off-topic, I will bite.

...I say: money is important, but it isn't everything.This said, it's not YOU that made that success. It's a combination of circumstance and luck as well.

See that is where you are wrong. Nobody made me go out and get a job, but I did. I paid for MY by sacrificing my time to delivery pizzas so I could go to college.

...Who you know, to which family you were born, who you happened to meet and how they did.

I love my family dearly, but they were not in any position to pay for my education so I did not ask for a handle out, I EARNED it. See the difference there?

..Sorry, but it's just as much luck as anything else that go you your current income and net worth.

Guess what, bad luck can be overcome by time and hard work. Two concepts that most people these days don't want to sacrifice in the short term to win in the long term.

...Unless you have absolutely no compassion and are absolutely viscious, you should feel some obligation to give back to the community, and not just the causes your limited imagination can assume. That means giving some of your income back as taxes to a government which can represent all of the interests at play.

Again you are not very good at mind reading and off topic, but again, I will bite. I do believe in safety nets, and I do believe in paying taxes for which a percentage goes to pay for those safety nets. My disagreement with you is regarding that "rich people" (for which I am not) should pay a larger percentage based solely on the fact that YOU believe that it is fair. Fair is a subjective term here which I hope you understand.

I believe that everyone should pay the same percentage...period. To me that is fair. What you are proposing I believe is unfair. Just because someone makes more money does not entitle YOU to say that they should pay a higher percentage because YOU feel that they can afford it.

Re:No, good economics.

[jbolden]

Yep. And when we start seeing a problem where large numbers of people want to work shorter hours or take easy jobs (like we had in the 1970s) we can worry about the fact that incentives are now too low.

Are those the sorts of problems we have right now as a society?

Re:No, good economics.

[deKernel]

Sorry for the poor formatting here, I hit the Submit button instead of edit.

Re:No, good economics.

[Rycross]

Who payed for the education you had to get to even a low-level pizza job? Who payed for you to survive until you were old enough to hold that job? Who payed for the roads that you used to deliver that pizza? Someone else paid the pizza company to pay you to deliver that pizza. The pizza company hired you.

Your education and success in life was heavily helped, subsidized, and affected by the people around you. We're part of a society, and we can lift each other up because we cooperate as part of a society. No-one alive in America today has made their success completely on their own. They're simply blinded to the innumerable ways their family, heritage, and society have helped lift them up.

As far as rich people paying more, they have far more to lose from an unstable society and have gained far more from what society has put into place than poor people. If you took those rich people and replayed their lives in Africa, its highly doubtful they would still be rich.

Re:No, good economics.

[JesseMcDonald]

Experience is obviously a factor when it comes to employment. No one goes straight school into the sort of upper-level managerial positions I was addressing. Changes in the job market over time are also a factor; it's generally harder to start a career than it is to maintain one, and conditions are a lot tighter recently than they were in the past, so I'm not surprised that someone just getting started ended up in a more stressful and lower-paying job than someone employed earlier.

Note, however, that I wasn't addressing correlations of stress and pay between unrelated lines of work, or between different individuals. This is specifically about whether you would accept an advancement within your own field, trading off an increase in pay against greater responsibility.

Assume for a moment that an opportunity for advancement is available to you, accompanied by an increase in pay. They've already decided that you qualify. Wouldn't you agree that the new position is likely to be more difficult than what you're doing now? If it were just a matter of finding an opening, wouldn't you happily take the job at your current pay grade? Why would they offer a raise as well, if not to give you an incentive to switch -- to compensate you for the opportunity cost of taking the job?

If a tax is imposed, then that incentive is decreased by the full amount of the tax. The decrease in opportunity cost would be somewhere between 0% and 100% (corresponding to another job with the same tax). At best the tax has no effect; in the far more likely case of a relative decrease in incentive vs. cost, some will choose not to advance.

Re:No, good economics.

[hawkeye]

Nope. Taxing the wealthy (>$500k/yr.) at progressively higher rates is the right way to go. People tend to forget that capitalism fails without a strong middle class. Give businesses shelter from taxes so that the truly wealthy are forced to invest in things that (hopefully) return value to the economy.

What we have now is dramatic increases in those living below the poverty line and those making obscene amounts of money. The latter excels at the former's expense, with very little effort and even less added value to society...or the economy.

To quote Krugman, supply side economics is "a crank doctrine that would have had little influence if it did not appeal to the prejudices of editors and wealthy men."

Can we please put this de-bunked doctrine to rest...FOREVER!

Of course, if we tax the wealthy too highly then they might just "off-shore" themselves...something to think about, eh?

Re:No, good economics.

[plasmacutter]

Different people have different definitions of "Reaganomics". My definition is "reduce regulation, reduce taxes, let the economy grow on its own". And that does work pretty well.

for huge corporations.

For small businesses and individuals there's another more accurate definition:

"tax the hell out of the middle class while repealing consumer and investment protections and allowing anarchy to reign"

it works just fine until the first person takes the rampant fraud to a high enough level to make the big fish too concerned to continue investing.

Of course, by this time consumer spending will be in the crapper because of the eviscerated labor protection driving down wages, and because of the rampant defective and/or unsafe products put out through shoddy manufacturing.

Wait, this sounds familiar, maybe we did experience real reaganomics the past decade+

Re:No, good economics.

[deKernel]

I think I have finally figured out where you are coming from: you are basically looking for excuses as to why you have not achieved your full potential by blaming people and circumstances around you that you can't control.

You were not promised a golden spool as neither was I. The difference is that I am not spending my time looking back and wondering "what if" and making sure I have a scapegoat ready when I hit a rough patch.

Will I fail? Odds are I will several times, but I take those as learning experiences where you seem to get mired in making excuses and blaming others.

Life is what YOU make of YOUR life, not what others tell you what you can only be. Once you let someone control the direction of your life (which I can only surmise is your situation), then you become a victim to mediocrity.

Now regarding your comment about "rich people" having more to loose from an unstable society. It is theirs to loose if they want, you do not have the right to tell them that they must do something (in this case, pay even more (more and higher percentage) in taxes compared to the next person) to help them keep they position in life. They are free to throw away their fortune if they want.

Re:No, good economics.

[plasmacutter]

Guess what, bad luck can be overcome by time and hard work. Two concepts that most people these days don't want to sacrifice in the short term to win in the long term.

here's your chance to convince me of this.

is 18 years of my life, 100k in student debt, and a BA in two majors from a good school while almost losing my last parent to cancer enough hard work and sacrifice? Because i'm still here, unable to get arrested, let alone a job without a name tag, and quite frankly the smile I put on every day is feeling more and more farcical.

If you are bright and talented, but don't know someone in HR somewhere, you will get NOWHERE because "behavioral interviewing" weeds out any "eccentricities", which most people of this type have in spades.

Again you are not very good at mind reading and off topic, but again, I will bite. I do believe in safety nets, and I do believe in paying taxes for which a percentage goes to pay for those safety nets. My disagreement with you is regarding that "rich people" (for which I am not) should pay a larger percentage based solely on the fact that YOU believe that it is fair. Fair is a subjective term here which I hope you understand.

Ok, i'll give you an idea on "fair".

Your average rich person has several homes in expensive parts of town, all upwards of 7k square feet, often serviced by staff, each stocked with its own luxury cars and multiples of things most people can only dream of.

I have a chronic medical condition, and, even though my mother and extended family are willing to foot ANY bill necessary, nobody will sell me medical insurance. This means I pay upwards of 2k/mo in prescriptions. Often times I do without rather than burden my family, and i spend time in excruciating pain and resulting exhaustion.

If 2k/mo were siphoned from the rich person's account, it wouldn't phase them one bit, they probably wouldn't notice for 10 years if you didn't tell them.

So, objectively, which is more fair?

The rich person "enjoy" the two houses he never actually visit while I wallow in horrible pain, or i get some medication and the rich person gripes about a small tax hike to his friends as he speeds along in his lotus?

Re:No, good economics.

[Rycross]

No, you haven't figured out where I am coming from at all. I am far better off than most of the population. As a matter of fact, last time I checked, I was upper-middle class, and had a decent shot of being lower-upper class. I love in a nice place in a good city, have plenty of extra cash for entertainment and travel, and don't have to worry about next month's bills. I'm in a good position in life, and its rather presumptuous of you to assume that I'm some lazy sap looking for a handout.

What you haven't figured out is that I'm trying to be honest about where my success came from instead of patting myself on the back and turning up my nose at people less fortunate than myself.

The thing is that I realize that there are a lot of people and outside circumstances that contributed to put me where I am. A large part of it was my own effort and decisions, but I also had a lot of help along the way, and that's not substantially different than a lot of people, especially people who claim to have themselves up by their own bootstraps.

When taking a close look at my life and success, and the lives and successes of others, I've come to realize that the self-made-man is myth that people use to make themselves feel better. Its used so that people can denigrate poor people as just being lazy or unethical. Its used to reassure people that those rich guys really deserve everything because they're just so much better than the rest of us. Its used so that people can turn a blind eye to their fellow humans without feeling like assholes.

What I'm saying is that people need to take a good hard look at where their success comes from instead of patting themselves on the back too hard. It might be that we realize that we do have some social responsibility, because society gave us the opportunity to grab our success. Despite my best efforts, I would not be who I am today if I grew up in Africa or some third world hell-hole.

That is where I'm coming from: an honest assessment of reality instead of an idealized myth.

Re:No, good economics.

[plasmacutter]

Economics is about the study of the allocation of scarce resources.

The wealthy are, by nature of this fact, wealthy at the expense of others.

Taxing them will not remove them from this position of power, nor deny them the lifestyle they earned, but it will provide a minimum standard of living to those who lost in the game of life, preserving the healthy middle class which is required for the economy to function and for money to make it to that rich man's account.

If you don't preserve this basic balance and squeeze the low end too tightly, you end up with no revenue, and, if it moves further to that extreme, violent rebellion.

progressive tax rates on the wealthy grease the wheels of society and the economy. WIthout such programs both grind to a halt.

Re:No, good economics.

[plasmacutter]

Any competently designed economics curriculum will have the unit I had on supply side economics.

We spent a week going over the theory, and going over why it didn't work. I'm sad to say most of my classmates were asleep during that lesson.

Re:No, good economics.

[Viv]

The trade-offs a person may be willing to make to earn $1M likely wouldn't remain justified after 75% is cut away by taxes.

I have found that, generally speaking, the type of person making $1M in the first place is internally motivated more so than externally.

That is to say, in my experience, they bust their asses just as hard whether they're earning $50k or $750k.

The fact that they do this is, in large part, why they progressed to make $750k at all.

Re:No, good economics.

[plasmacutter]

it's generally harder to start a career than it is to maintain one, and conditions are a lot tighter recently than they were in the past

this is a severe understatement.

An assessment from someone on the front lines: Nobody wants to train their labor anymore, period.

With the trends being what they are, they'll continue to expend their training operations in places like mumbai, and as the workforce on US soil dies off they'll just migrate their whole operation.

Re:No, good economics.

[drsmithy]

None of that has anything to do with my post...

Re:No, good economics.

[deKernel]

No, you haven't figured out where I am coming from at all. I am far better off than most of the population. As a matter of fact, last time I checked, I was upper-middle class, and had a decent shot of being lower-upper class. I love in a nice place in a good city, have plenty of extra cash for entertainment and travel, and don't have to worry about next month's bills. I'm in a good position in life, and its rather presumptuous of you to assume that I'm some lazy sap looking for a handout.

If you look back you will notice that I have not implied at all that you are a "lazy sap" or a successful tycoon, and I really take offense at your serious mis-characterization of what I have been discussing. I have been talking about your viewpoints and not your particular financial position. I do find if ironic that you were the first one to state just how well you are doing without knowing my position. I am not the one throwing it out there that I am upper-middle class with a fair amount of spare cash in my pocket and able to travel. Hmmm, yup, ironic.

What you haven't figured out is that I'm trying to be honest about where my success came from instead of patting myself on the back and turning up my nose at people less fortunate than myself.

Again, look back you will see that I NEVER said that anyone who is able to move forward should not be thankful for any help that they have received on the way. What I am saying is that you are basically telling people that to succeed means that they should feel somehow guilty of their success because it was done on the back of someone else. Most times, the people that do succeed by those methods, usually end up failing in the end so I am in no way endorsing those practices.

I've come to realize that the self-made-man is myth that people use to make themselves feel better. Its used so that people can denigrate poor people as just being lazy or unethical. Its used to reassure people that those rich guys really deserve everything because they're just so much better than the rest of us.

Now here you are taking just a few bad seeds and casting a wide assessment here. By and large, a very large percentage of successful people are the biggest givers to charities, and they don't do it for tax purposes, but out of the goodness of their heart. And many give anonymously because they don't want the light shone on them, they just want to help. Here I speak with many wonderful examples, but giving those examples would do their actions a disservice.

Its used so that people can turn a blind eye to their fellow humans without feeling like assholes.

I think many times here, you are actually talking about people that are born into wealth and success and not people that created that wealth. This is not always the case as I said.

Despite my best efforts, I would not be who I am today if I grew up in Africa or some third world hell-hole.

First off, I take serious offense with your language regarding "third world hell-hole". From one who travels to those regions quite frequently, you have ZERO clue here. If you had been born in one of those countries, and you had not succeeded relative to the population, then your success was pure luck, and I hope to God that you do get down on your hands and knees and thank him for giving you the apparent "dumb" luck. Now since you seem to mis-characterize me, when I say "dumb" luck, I mean the fact that you stumbled onto your success.

That is where I'm coming from: an honest assessment of reality instead of an idealized myth.

Your idealized myth is more of a mis-characterization more than anything. Down deep, you are for some reason, feeling guilty for your success, and you just don't realize it which is a shame because you can't really help those that do need the help because your formula for success is skewed by your guilt.

Success is gu

Re:No, good economics.

[Rycross]

First off, you are mixing me up with someone else. You are the only person that has replied to me in this particular thread. I am not the person who first responded to you, and only chimed in. Nowhere in this thread has someone parsed my "initial response" other than you. I am writing strongly but not angrily; any anger you are reading into this is your own interpretation.

Second, you are twisting what I am actually saying into what you think I am saying. You speak of mis-characterizations while at the same time doing exactly the same to me.

I at no time said that people should feel guilty for being successful, especially if that success was achieved at the end of hard work. What I said was that people should realize that no matter how hard you work, you do not get there completely on your own. Some people get more help than others, but at the very least you had parents that raised you. What I am saying is that one should consider that fact, and consider that some people do not have the same fortunes as others, and may never succeed despite working just as hard as others. I am saying that its important to not look down on the poor as being lazy and unmotivated, because there are a helluva lot of motivated, hard-working poor people out there. I am saying that there is some amount of social responsibility that goes with having success.

Of the wealthy people I have met, most are acutely aware of their social responsibility. They would not characterize their success as being completely of their own doing. They will point out the hard work they did, but also point out the people that stood by them and made that possible. They give to charity because they are kind and generous, and because they feel that they should give back to those who did not have the opportunities that they did. The people who talk about being self-made usually do so as an excuse to why the poor do not deserve help, at least in my experience.

I don't know where you got that I am guilty about my success. I achieved it by working my way through college, living within my means, saving, honing my skills, and constantly being on the lookout for better opportunities. I have no reason whatsoever to be guilty of that. But I also had a family that gave me a safe environment to learn and grow, specifically lived in areas with good schools, raised me to have a good work ethic, and encouraged me in my endeavor. I owe my success in part to them, and the society that enabled me to live safely and go to school.

As far as the "third world hellhole" thing, no, I don't think I would have succeeded as much because of the lack of a stable society. This is not because I am lazy and only stumbled upon my success, but because a lot of success is about having the opportunities to begin with. I could probably do well relative to the population, but relative to the population is fairly meaningless. Its extremely unlikely that I would be doing as well as I am doing now.

I find it humorous that you are trying to portray me negatively for plainly stating my living conditions. I did not due so to brag, but to counter your assertions that I am "... basically looking for excuses as to why you have not achieved your full potential by blaming people and circumstances around you that you can't control" and that I "... let someone control the direction of your life (which I can only surmise is your situation)." If you were not trying to say that I am a lazy underachiever then I apologize, but you came off that way very VERY strongly.

I do happen to give to charity, but that particular one is not on my list. I happen to be from a military family, so I am aware what the military does for this country, FYI. And since you seem to mis-characterize me, I am only pointing this out because you seem to be implying very negative things to me, and mention charity with the presumption that I do not back my words with actions. It is not my intent to brag about this.

In summary, its ok if you're done with me. You do not want to

Re:No, good economics.

[mc6809e]

Economics is about the study of the allocation of scarce resources.
The wealthy are, by nature of this fact, wealthy at the expense of others.

Oh, bullshit. First, just because resources may be scarce, doesn't mean that, over time, they remain as scarce as they were in the past. Available resources can grow. Second, resources aren't necessarily the same as wealth. A lot of wealth consists not of resources, but of artifacts.

This "wealthy at the expense of others" crap is meant to drive a wedge between the classes and to create conflict were no conflict need exist.

Re:No, good economics.

[plasmacutter]

Ah, i guess bauxite just materializes out of thin air?

Re:Or...

[Shakrai]

Well the Vatican has a population of 824 according to the World Factbook. Do they need a bailout?

Re:Love it!

[Shakrai]

My bank is owned by the State, my home is own by the State, my car is owned by the State, my car and home insurance are owned by the State. Now my job can be owned by the State.

Pretty soon they'll own your health care too. If you thought arguing with the insurance company was bad just wait until you get to argue with a bureaucrat instead. At least you can choose to do business with the insurance company......

Re:Love it!

[thrillseeker]

cradle to grave, brother.

Re:That might not be a bad thing.

[Pax Romana]

One of the main reasons we got out of the last depression was because of the switch to more jobs with the onset of World War II. In some ways, a place to lay our blame might not be such a bad thing. If we have a place to refocus our attention, it would be a great boost for our economy. I'm not saying I want something bad to happen, but such a catastrophe might not be as catastrophic as you may think.

where are the workers?

[cliffski]

Are there one million trained and skilled IT workers in the USA that are currently unemployed?
If not, this is just a great jobs package for China and India.

Re:where are the workers?

[girlintraining]

Yeah, we're unemployed because of the last job package for China and India... it was called the H1B visa program, followed by changes to tax law to allow companies to "export" the work. Hell, even Canada gets more work out of US companies than our own citizens these days.

Re:where are the workers?

[Average]

Demanding US workers in the deal might mean more 'trained and skilled'. Many, many jobs are looking for "3 years this, 5 years that, plus the degree", and uninterested in growing in-house talent. Employers don't do that, since workers aren't loyal anymore, because employers aren't loyal, and so the cycle goes. A demand for US IT workers might mean more companies willing to hire a fresh face and do more training.

Re:where are the workers?

[nine-times]

We're not necessarily talking about programming jobs that can easily be handled remotely. For at least a certain percentage, you're talking about support jobs that need to be local, and don't require that much training.

Re:where are the workers?

[tnk1]

You don't need full US employment for all of the money to go to China and India, they'll just send it there because it's cheaper.

Re:where are the workers?

[mattwarden]

perhaps instead of complaining that we're "allowing" companies to export work, we should ask the question of why companies want to export work

Re:where are the workers?

[mattwarden]

You can demand that the stimulus money only directly go to US workers, but that will just put more pressure on private sector to move a greater % of its work to non-US workers. Parent was right; this ends up being money to India and China directly or indirectly. Thank your tax laws.

Re:where are the workers?

[mattwarden]

The question is not whether the work can be done remotely. The question is whether the work is done by people who would otherwise be doing work that can be done remotely. If you provide work to a pool of workers whose usual work can be done remotely, then you improve the situation for the 10% of the pool you can cover, but hurt the situation for the other 90% you can't, as companies employing them will feel increased cost pressure to send their work remote.

Re:where are the workers?

[mattwarden]

Trying to explain economic evolution to this crowd will only get you hanged. Most of these people don't accept that their annoyance in needing to re-tool results in a net positive for the economy.

Re:where are the workers?

[nine-times]

So you're complaining that creating more jobs in the US will drive up demand for workers, thereby increasing their pay, thereby increasing the likelihood that businesses will outsource? That's quite a roundabout way of getting there, but good job, you've made an argument why we should pray for a high unemployment rate. I don't think anyone will buy it, though.

Anyway, my point was that hardware tech jobs need to be local to wherever the hardware is. When you're talking about jobs created by building tech infrastructure, a certain percentage (probably relatively high percentage) of those jobs will be for hardware techs.

Hardware tech jobs and programming jobs aren't really filled by the same set of people-- at least not to the degree that some people assume. Being the Verizon guy that installs hardware (and being good at it) doesn't generally require as much training as being a good programmer, and that job can't be outsourced to India.

Re:where are the workers?

[mattwarden]

I'm not complaining about anything. I'm explaining that there will be an indirect effect.

Bad assumptions

[DaveV1.0]

They figure only one third of the manufacturing jobs, and only the manufacturing jobs, created by this $10 billion IT stimulus will "leak" out of the country.

I think they underestimate the number of jobs that will "leak" out of the country in all parts due to H1B visas, outsourcing, and, of course, the off-shoring of IT equipment manufacturing jobs.

Re:Or...

[pete-classic]

There was an email going around a while ago with this exact mistake.

You can always tell folks who never took any hard Science; they can't reliably divide in scientific notation.

-Peter

Print and borrow. Destroy savings.

[Anonymous Coward]

The theory here is that jobs and things that people value can be created by printing money and taking more loans. It didn't work so well for Rome, Germany, Argentina, and Zimbabwe.

Re:Or...

[nospam007]

The Vatican has 824 with 558 citizens per se.
http://en.wikipedia.org/wiki/Vatican_City#Demographics

Mod parent up.

[khasim]

Congratulations. Very nicely stated.

And the way I see it, it IS all about using the taxes gathered by our government (or money borrowed by our government) to improve OUR economy in the most effective and efficient fashion.

It's very simple. If you reduce the taxes of a billionaire by a million dollars, he will spend it differently than if that million dollars was spread amongst people making $20,000 a year.

Re:Mod parent up.

[Gilmoure]

Sucks for the super rich, but in reality, it's not likely to alter their lifestyles anyways.

Um... having his wealth reduced caused a big change in this guy's lifestyle.

Re:Or...

[oodaloop]

We simply tax each person...uh...one million...uh, how about we build a giant wooden badger.

What's best in the long run.

[Samschnooks]

What's better for the Taxpayer, which is all of us, in the long run: have jobs here in the US to put in the infrastructure at a higher cost than having the lowest cost bidder do it - even if it is the Indians; or saving money and having more done for the same cost and larger pay-offs down the road? Wouldn't having the most done for the cheapest price be the best all around? I don't know myself - I'm not that smart.

Speaking as someone who lost his job to Indians and who wants to slap the Laffing shit out of every economist he meets.

Re:What's best in the long run.

[Profane MuthaFucka]

I'm not a believer in the free market. We need to regulate the money and jobs going out of our country.

The right wing is only concerned about brown people coming into our country, but what have they done to hurt you?

We can have it one of two ways:

1) Drop the borders and make it just as easy for people to leave the country as the money and jobs. This means no passports for travel in and out of any nation in the world. This means the end of citizenship in nations.

OR

2) Make it just as hard for a job or a dollar to leave the country as a person. When a CEO wants to send a job to India, make the CEO apply for an exit approval, which could take 5 years for approval. Then before the job is allowed into India, make the CEO of the company apply for a "job citizenship" which could take 10 years and thousands of dollars of lawyers fees.

Make the companies go through the same hell for EVERY FUCKING JOB THEY WANT TO SEND TO INDIA as what people have to go through to change their citizenship.

And the flip side?

[booyabazooka]

Can we calculate how many jobs are lost as the indirect result of pulling $30 billion out of the economy via taxation?

Re:And the flip side?

[fishbowl]

"Can we calculate how many jobs are lost as the indirect result of pulling $30 billion out of the economy via taxation?"

Roll 2d10 if only CEO jobs are lost.

Re:And the flip side?

[JoeMerchant]

Can we calculate how many jobs are lost as the indirect result of pulling $30 billion out of the economy via taxation?

Well, let's look back at the Iraq occupation and extrapolate from there.

Re:And the flip side?

[SydShamino]

Sure, if we knew when we'd pay it back. Since this is borrowed money, at some point in the future (hopefully, during a booming economy), we'll be taxed more to pay it back.

That taxation at that time will have an effect to slow the economy, which could be a good thing as smoothing out peaks can help lessen troughs and slow inflation. And if the jobs lost then change unemployment from 1% to 2%, it could be a good thing, depending on various definitions of full employment, as an over-employed economy could also result in rampant inflation.

http://en.wikipedia.org/wiki/Full_employment

Re:And the flip side?

[Threni]

They're not going to burn the money, it's being used for something. What about the 900 billion dollars which will be used to prop up the economy - is that being taken out of the economy too?

Re:And the flip side?

[T.E.D.]

Can we calculate how many jobs are lost as the indirect result of pulling $30 billion out of the economy via taxation?

Probably. However, they are talking about lowering taxes for most folk. The rich people who will get a tax hike (actually, they just are allowing Bush's temporary tax break giveaway to the rich to expire), generally don't spend as large a % of their money as the rest of us, and they don't do it as quickly. Stimulating the economy is all about getting dollars flowing from person to person quickly. Giving $X to a guy living paycheck to paycheck has a much bigger impact on the economy because that guy is going to go out and spend every penny of that money immediately. So it is quite likely the net effect on the economy for both moves would be positive. I'd be interested to see an analysis.

You'd be right to warn that in the long run the piper will have to be paid. The way it is supposed to work is that the government spends like a drunken sailor during the bad times, and then when times are good cuts the deficit back down to help keep the economy from overheating. The problem with this theory is that nobody ever wants to play scrooge with their voters when times are good.

Re:And the flip side?

[Yvanhoe]

Ah... I like the non-sensical questions but I prefer the semi-sensical ones ! Let me answer semi-sensically as well : According to simple mathematics, it will result in 3% of the jobs loss caused by Iraq war.

Re:And the flip side?

[mattwarden]

Retarding the economy is good for the economy? Yeah right.

What you're talking about is keeping companies from making poor predictions based on an economic bubble, because when the bubble pops the downturn is way worse. But what you're missing is that free markets don't create bubbles; governments do.

Re:And the flip side?

[mattwarden]

Um, what?

When gov't does this kind of spending, they are either taxing heavily or borrowing.

We have a progressive income tax system, so when the government taxes heavily they are taking money from productive members of society and redistributing that money to failed businessmen, lazy workers (although I know liberals want to believe these don't exist), dishonest workers, and criminals.

What's more likely to happen here is that government will BORROW the money. And, sorry bud, that DOES take money out of the economy. All that interest goes to foreign economies... mostly China.

Re:And the flip side?

[mattwarden]

1. Make less incentive for productive members of society to work hard
2. Increase incentive for unproductive members of society to work hard
3. ...
4. Profit!

Re:And the flip side?

[rastoboy29]

To be fair, that's not what they're doing.  They're *borrowing* the $30 billion.  So that money isn't taken out of the economy per se now.

It'll happen later, when we can afford it. 

Re:And the flip side?

[tehcyder]

Can we calculate how many jobs are lost as the indirect result of pulling $30 billion out of the economy via taxation?

How can taxation cause job losses? All it means is that people in work have a bit less money each.
As for the people who create jobs, why would taxation stop them being entrepreneurs, unless it was at some absurd rate over 100% or something?

Re:And the flip side?

[SydShamino]

Retarding the economy is good for the economy? Yeah right.

Exactly. I'm glad we agree. Oh, were you sarcastic?

But what you're missing is that free markets don't create bubbles; governments do.

Really? So you don't think that the economic boom in Somalia because of the influx of ransom money from pirating can be described as a "bubble"?

Re:And the flip side?

[mattwarden]

> So you don't think that the economic boom in Somalia because of the influx
> of ransom money from pirating can be described as a "bubble"?

Should I feel like your comment has any relevance to what we're discussing?

Re:And the flip side?

[SydShamino]

Of course, because Somalia is the only "free market" on the planet, and yet they still have bubbles.

Your entire argument is completely wrong. Fortunately, most of the world agrees with me that a regulated market that tries to reduce the peaks and troughs is better than one allowed to ride freely, so your argument really doesn't matter that much anyway.

Re:Love it!

[thermian]

Pretty soon they'll own your health care too. If you thought arguing with the insurance company was bad just wait until you get to argue with a bureaucrat instead. At least you can choose to do business with the insurance company......

Don't talk crap. I live in a country where the government controls the health service, and we have national health insurance that everyone pays.
You know what? It may not always be great, but its always there whenever you need it in an emergency, you can go for checkups without being afraid of your insurance premium going up, and you don't get stuck in a job you hate because you can't get new health insurance for a disease or illness you have developed.

Like I said, it isn't perfect, but compared to your system where its possible to have no health cover at all, its good enough.

I'm all for abandoning roads and bridges

[SuperKendall]

It's the only way automakers will finally have enough motivation to give us our flying cars. This the future, dammit.

Re:I'm all for abandoning roads and bridges

[SGDarkKnight]

Damn, here i was thinking that we might actually get flying cars until i watched this....

http://www.theonion.com/content/video/mean_automakers_dash_nations_hope?utm_source=embedded_video/

on the other hand...

[zr]

while that may be true, you still have to drive/walk so physical infrastructure is important if you care about bridges not falling from under your feet.

How many of these jobs will be outsourced?

[Schuthrax]

Or spent on companies that are good old USA companies, with tax shelters in Ireland and 99% outsourcing? But hey, they're American companies!

obviously that is just the present value

[NotQuiteReal]

You don't give everyone a million dollars right now, that would cost too much. But for $350 million, you might be able to set up an annuity that would pay 350 million people 10 cents a year, for 10 million years.

Re:Or...

[thrillseeker]

From the next 10 generations.

We (well, our government financial wizards anyway) obviously know better how to spend future money than we do - look at who we elect and what they've done so far - since spending has gotten us collectively this deep in debt, then more spending will obviously get us out.

Oddly, this approach doesn't seem to work for all my credit cards.

Ronald Regan is on the phone...

[SuperBanana]

This would also create jobs (at least in the short term) indirectly, as those who get the high-paying jobs directly related to this "stimulus" will demand additional production and services to fill their personal needs, which will create other jobs, and so on. In this way, each dollar invested in this infrastructure will actually be spent multiple times.

Ronald Regan called from 1980, and wants his trickle-down economics policy back. This is a bullshit lie, and I'll give you two examples of why.

First off, people in high-paying jobs have a lower marginal propensity to consume. It sounds absurd, but the single parent with a $40k job is spending almost their entire paycheck back into the economy just to survive. Someone who makes $120k is not spending 100% of their paycheck- not even close. They're putting a fair amount into long and short term savings. On a related note, gas and food price jumps really hammer the $40k person more than the $120k person; percentage-of-income-wise, the $40k person spends much more on food and gas than the 120k person does.

Second: money spent these days very, very quickly leaves your local, state, and national economy. Spend $5 on a burger at national franchise, and a teeny bit of that goes to employing the people in the store. Some of it goes towards the materials for the product, which were made as efficiently and cheaply as possible. Most of it goes to a trademark holding company aka tax shelter in the Cayman Islands as "trademark license fee". The article I mentioned lists Limited Brands, Toys "R" Us, ConAgra Foods, Home Depot, Kmart, Gap, Sherwin-Williams, Circuit City, Stanley Works, Staples, and Burger King as examples. I'm sure there are hundreds more.

Even locally, money spent largely doesn't go to the business owner if they don't own their own property. It goes largely to the landlord of the property. Commercial property owners aren't in the lower income brackets; they're in the top income brackets, and they're writing off their Mercedes as a business expense.

Back in the 50's, corporations shared tax responsibilities evenly with the American individual. Now, A HREF="http://www.americanprogress.org/issues/2004/04/b45142.html">corporations pay about 7% and 60% didn't pay a dime. Meanwhile, their tax rate compared to the GDP is around 1.8%, down from the 1950's level of 5%. Meanwhile, you lose about 33% of your paycheck to state and federal taxes, then get taxed on the gas you put in your car and the stuff you buy.

Re:Ronald Regan is on the phone...

[dedazo]

First off, people in high-paying jobs have a lower marginal propensity to consume. It sounds absurd, but the single parent with a $40k job is spending almost their entire paycheck back into the economy just to survive. Someone who makes $120k is not spending 100% of their paycheck- not even close. They're putting a fair amount into long and short term savings.

The family that makes $120K also typically spend more just to "survive" in the sense that they have bigger mortgages, more expensive cars, higher public utility usage, etc.

And on the flip side, increased savings means banks have more money to shuffle around, which then translates into lower interest rates and makes it easier for people to borrow money for business ventures.

Small business owners are the largest borrowers in the US, not surprising considering small businesses make up for the majority of the economic output and activity in the country as well.

So people who save might be bad for the economy in the short term, but probably good in the long term.

Re:Ronald Regan is on the phone...

[AK Marc]

Ronald Regan called from 1980, and wants his trickle-down economics policy back.

This isn't trickle down. Trickle down is if you were to make a large cash payment to the richest person in the US that the poorest people in the US would see a benefit from it. It also states that the large cash payment would be "better" spent by the rich person than the poor person.

This is a stimulous package that pays people (not rich, not poor, but working people) to do work that benefits the country. So, it will employ people that will buy things, and once done, we will have things that will reduce costs for all. Trickle down is that you could disproportionately pay the rich and help the poor even more than giving the money directly to the poor. It wasn't a comment on the state of the fact that money is spent multiple times and helps everyone when more people are employed. That tenet of economics was never in question. What was in question was whether paying a rich person cash would improve the lives of the poor more than paying the poor people cash. Voodoo economics states that the rich are smarter/better and giving them more money helps poor rather than giving the stupid poor people money. Well, except they try to word it a little nicer and toss in some graphs to hide the elitism.

But this is employing otherwise unemployed or underemployed people in order to create things with lasting value.

Re:Ronald Regan is on the phone...

[Atario]

Ronald Regan called from 1980, and wants his trickle-down economics policy back. This is a bullshit lie, and I'll give you two examples of why.

You've got this exactly backwards. Reagan argued that taxing the rich less would mean they invest the difference, and that would somehow magically end up in the hands of the working man. This proposal is to create jobs (not cut taxes) for the working and middle classes (not the rich) and the money would be spent (not invested). It's watering the roots instead of the flowers.

Not to mention, when it's built, we all have more connectivity (infrastructure), which will only help matters for decades to come.

As to whether the people will spend the money or invest it, I'm fairly sure they'll be spending a good deal more than if they didn't have jobs.

The remainder of your points seem to be arguing for favoring small business over big corporations, which I'll wholeheartedly endorse.

Re:Ronald Regan is on the phone...

[mattwarden]

> Most of it goes to a trademark holding company aka tax shelter in the
> Cayman Islands as "trademark license fee".

And do you ever ask why?

> Back in the 50's, corporations shared tax responsibilities evenly with
> the American individual. Now, corporations pay about 7% and 60% didn't pay a dime.

And do you ever ask why this changed?

> Meanwhile, you lose about 33% of your paycheck to state and federal taxes, then
> get taxed on the gas you put in your car and the stuff you buy

Oh it's much, much worse than that. Not only do you pay taxes on the stuff you buy (ie, sales tax), but you pay a ton more in taxes that are hidden in the price of the products you buy (you hinted at this above). Due to increased competition and the ability to sell overseas more cheaply (increasing demand which affects the company's pricing model), companies can bake more taxes into the price you pay and avoid the taxes biting into their profit margins. When you buy a pair of scissors, you are paying sales tax, yes, but you are also paying payroll tax and partial income tax on the wage earner who mined the ore for the scissor blades. Same for the wage earner who formed the steel. Same for the wage earner who molded the blades. Same for the wage earner who dealt with the plastic. Same for the wage earner who molded the handles. Same for the wage earner who marketed the product. Same for the wage earner who stocked the shelf. Same for the wage earner who cleaned the store's floor. Et cetera. You pay a TON of taxes. I honestly believe if people understood how much money they pay their government to keep it running, they would be outraged and there would be considerable increased scrutiny on the government's behavior.

It truly is incredible how much the consumer pays to fund this government. Not to mention that flat consumption taxes -- and that's what this ends up being since I pay the same tax component in my scissors as the mother of 2 on welfare does -- are incredibly regressive.

Re:Ronald Regan is on the phone...

[shmlco]

"Someone who makes $120k is not spending 100% of their paycheck- not even close. They're putting a fair amount into long and short term savings."

And??? You think the money just disappears at that point? Or is it used to buy stocks and bonds, and taken by banks and invested in loans and other financial instruments?

That money goes into "the economy" too.

Re:Ronald Regan is on the phone...

[SecurityGuy]

True. In addition, what someone who goes from $40k to $120k has also done is aged a fair bit and gained a family to support.

Personally, I had more free spending money when I made $20k per year. Youth is cheap.

Re:Ronald Regan is on the phone...

[JesseMcDonald]

Since you seem to have strong opinions about economics and tax policy, would you mind telling us what economic training, if any, you have?

I'm normally on your side, but this is nothing more than a blatant attempt at ad hominem -- or possibly an appeal to authority, which is just as much of a logical fallacy. Debate the subject, not your opponent.

The GP's statements of fact are largely correct; the primary issue lies with the unstated assumption that the situation described is somehow wrong -- other than the point about individuals being more heavily penalized via taxes. You pointed out one such instance with respect to savings, but there are others. The GP implicitly asserts that it is wrong to import goods, wrong to take steps to minimize losses to taxation[1], wrong for the those "in the top income brackets" to rent out property for profit... these concepts underly the GP's entire post, but no logical support is provided for any of it.

--------------------
[1] Even at least one federal judge I know of disagreed with this one, stating that people have no obligation whatsoever to increase their tax burden beyond the minimum the law demands.

Re:Ronald Regan is on the phone...

[3263827]

Obviously you've never worked in the restaurant biz. Labor is usually the highest element in the cost of goods, typically around 20%. The food items are usually around 20%, paper items another 6-8%. Throw in rent, utilities, etc. Royalty fees for McDonalds are around 10%, and the franchisee is usually gunning for a 10% margin. So for a $1.99 Big Mac, $.40 stays in the local economy as wages, $.40 stays in the state/US economy for the food components, so on and so forth. So try another stupid example...

And it's Reagan, not Regan. But then again, facts don't seem to bother you too much.

Re:Ronald Regan is on the phone...

[dunkelfalke]

i wouldn't call stock market gambling an economy, whether it is directly invested or taken by banks and invested again.

Re:Or...

[Samschnooks]

Tomato..tomato..what's a multiplier of a million? This is government money we're talking here.

"Exported"

[phorm]

unless it's been exported overseas.

This is actually a good point. Is there anything to ensure that this clause won't simply be used to foreign labor VS creating (reasonable wage) domestic jobs? I hardly think it would help the economy as much or create a lot of local employment opportunities if it were used for more outsourcing...

Flamebait?

[dedazo]

I don't understand why this was modded down. It's inevitable that US corporations will find exciting new ways to outsource work to countries like India, China and Eastern Europe. That way they can claim a $0.03 per-share gain in their balance sheets and things like that.

For example, $BIG_CORP will say "we are saving money by contracting with IBM for all our IT support needs, weee!", and most people think that means the money and jobs stay in the US, when that really means IBM Global Services, which in turn really means IBM India. It's been done many times before. Even if the jobs are in the US, they're usually staffed by Indians on L2 visas.

I've stopped caring about how the US spends taxpayer money since I don't pay taxes there anymore, but any government investment like this should be accompanied by a strong oversight to avoid loopholes and waste. In any industry. Look at the appalling lack of accountability we're seeing now with the bailout.

Re:Flamebait?

[Profane MuthaFucka]

I got modded down because Pudge has a gaggle of ignorant fucks following him who wish that they had bullets instead of mod points. That's right, if they could, they would shoot you in the head in the name of the Lord. But all they have are mod points, so they mod me down.

Re:Flamebait?

[dedazo]

Well then, thank god for mod points <g>

Relax, seriously. I have my own personal stalker that occasionally spends all his mod points and shells out 5 "overrated" hits. No big deal.

Re:Or...

[dietdew7]

You used to work on Wall Street right?

Good for employment, bad for productivity.

[khasim]

If you really want to stimulate the economy, you have to spend the dollars directly to the wages (that is, massive government hiring).

Yep. The problem is that the government is (with a few exceptions) extremely bad at producing anything other than paperwork and hindrances.

In my opinion, the government SHOULD hire some more people ... who will determine which citizens belong to the group that will spend the MOST money on legal, local services and start pumping the cash into that segment.

It's easier for the local pizza place to hire more cooks and delivery people if there is additional demand for pizza delivery due to the locals having more pizza money available.

Whereas is you just give the pizza store owner additional cash, he's not going to expand his business. There won't be additional demand for him to service.

Focus on funding the demand and let the supply grow itself.

Re:Good for employment, bad for productivity.

[bonius_rex]

It's easier for the local pizza place to hire more cooks and delivery people if there is additional demand for pizza delivery due to the locals having more pizza money available.

No matter how rich you are, you can only eat 5 or 6 pizzas a day :-)

Re:Good for employment, bad for productivity.

[Lumpy]

FOr the established business? yes you are correct.

but create a business incubator and that is very different. If I were to be given $100,000 I would be hiring new positions and gearing up for more business. What is limiting me is that I do not have the capital to buy the equipment I need to go to the next level where I can hire employees. so I either wait 5 years and save for it, or if I was given an incubation fund to build my business now I could hire for new positions.

I turn down business right now because I cant gear up for what I need to do. No credit is NOT the answer. Most of my competition went out of business because of getting credit for everything.

Re:Good for employment, bad for productivity.

[larry bagina]

Is there an overwhelming need for 3 (or 1 or any number) million new government employees? Sure, the patent office needs a few more, but doubling the staff at the DMV won't help LaTrella paint her fingernails and get back to work any faster.

Re:Good for employment, bad for productivity.

[serviscope_minor]

Yep. The problem is that the government is (with a few exceptions) extremely bad at producing anything other than paperwork and hindrances.

Why oh why oh why do people keep modding thus utter bullshit as insightful. It isn't it's an ignorant meme repeatedly spread by people with a bizarre faith in business.

Example of there the government produces something worthwhile: the road network. They produced it, and it basically works year in, year out and the country would fall to pieces without it. In many countries, governments run a significant fraction of the school system as well.

Example of big business failing miserably: Enron, the current financial crisis.

So, frankly, anyone spouting this miserable gibberish are unable to muster even the weakest powers of observation of the world around them today, never mind historically. In some cases, the government can do a better job, in some cases they foul up. In some cases businesses do a better job. In some cases they foul up.

Remember the current stink happened because the government stopped being a "hinderance" and let the businesses do what they wanted. Look where that landed us.

Re:Good for employment, bad for productivity.

[frizop]

Excluding the hiring of people to find the right deployments to sink money into, isn't this what the government is doing? As far as internet infrastructure go's we are way behind, and creating more infrastructure allows for higher internet speeds. This in turn will drive the market to produce products that use those faster speeds. Creating jobs and spending.

Re:Good for employment, bad for productivity.

[aftk2]

Good post. And me without mod points. Sigh.

Re:Good for employment, bad for productivity.

[ThreeE]

The government doesn't produce anything -- not even the road network. The government takes the resources to build the road network at the barrel of a gun from taxpayers. The government then gives the money to a construction business to build the road network.

Worse, the government is terrible at allocating scare resources -- see also central planning. The best way to allocate scarce resources is the free market. It isn't perfect, but it's better than anything else.

Re:Good for employment, bad for productivity.

[TooMuchToDo]

We too are a small business. We put off expansion plans as we needed $250K in credit to purchase more Cisco gear, servers, etc. 6 months ago we were eligible for over $1+ million for equipment loans, leases, etc. With the credit crunch, even the most eligible for credit are having hard times getting it.

Re:Good for employment, bad for productivity.

[tweek]

The current stink happened because the government didn't get out of the way enough.

It injected itself in private business affairs through things like the housing market.

This Keynesian bullshit that's been going on since FDR is going to just continue to fuck us.

Having the government artifically prop-up the economy only leads to bubbles and busts like we're seeing now.

Re:Good for employment, bad for productivity.

[Hatta]

It's easier for the local pizza place to hire more cooks and delivery people if there is additional demand for pizza delivery due to the locals having more pizza money available.

Whereas is you just give the pizza store owner additional cash, he's not going to expand his business. There won't be additional demand for him to service.

Exactly. Wealth trickles UP, not down.

Re:Good for employment, bad for productivity.

[arth1]

A few good examples of the governments doing a heck of a better job than the private companies that took over due to populist conservatism:

• British Railways. Look at the shambles the UK rail transit system is in now.
• Postal services of multiple countries. The costs to the end users have gone up, and the quality of service has gone down the drain. I have to send presents to relatives overseas through registered FedEx, because the privatized mail system can no longer be trusted to deliver anything.
• Energy providers, like formerly government owned hydroelectric plants. The cost to consumers have skyrocketed, while the safety guards that were in place are no longer there, and people get affected by outages because redundancy and backups are cut to the bone to save costs.
• Water. Look up the Cochamba water riots, and what happened when the municipal water supply was privatized.
• Internet. When governments and government funded education ran the show, peering was a given, and alternative routes would always exist. These days, all the eggs are put in the cheapest basket, and peering is just another way to squeeze the lemon -- if you don't pay our stock holders, we won't carry your traffic. The result is a more expensive service that doesn't auto-repair itself anymore. When a cable breaks, suddenly most of a country or continent is without Internet access, despite all the other cables that connects it.

Capitalism and consumerism is all about delivering the lowest quality product the market will accept at the highest possible price they will pay. You don't get quality that way.
Or, to put it in other words, if Stonehenge had been built on contract, it wouldn't have lasted 40 years, and definitely not 4000.

Sometimes we need officials who don't have a vested economical interest in profitability, but can spend a little extra to get a better product or service. Especially in the products and services that a government can provide.

I think it's time we saw more nationalization of what's important, not privatization. Leave the non-important stuff to capitalists and market forces, but not what really matters. Cause to a true capitalist, their wallet will always matter more than your welfare.

Re:Good for employment, bad for productivity.

[tweek]

The argument that the owner wouldn't spend the money to expand is just as specious as the argument that people would buy more pizzas.

Just let the people keep their money and spend it where THEY see fit instead of trying to prop up the pizza delivery business.

Re:Good for employment, bad for productivity.

[Wildclaw]

Yep. The problem is that the government is (with a few exceptions) extremely bad at producing anything other than paperwork and hindrances

I think the main reason goverments are unefficent is confined to one specific thing. Goverments simply tend to have an easy time to start projects and a hard time to get rid of them. That leads to projects that can be good at the start but drag on for too long. Businesses on the other hand will lay off people when they no longer are needed. In a similar manner, goverments are less likely to give up on bad projects which cause extra money to be spent on something useless.

Therefore it is important for any goverment that want to stimulate the job market to create jobs that are temporary. Building infrastructure usable by society as a whole is one such type of job. Adding more people into the DMV bueraucracy is not.

Also, to prevent bad project being "money pits" it is important to not invest money too much money into any individual project. Also, having many smaller projects make it easier to judge externally employed companies on reliability as well as efficency. Not to mention that corruption becomes less likely. I have also always wondered if it wouldn't be a good idea to introduce an independent goverment agency whose only purpose is to review the efficency of other agencies.

How to make a goverment run operations more efficently is actually a very interesting topic. And, no, a small goverment isn't the same as an efficent goverment, although smaller goverments are often forced to be more efficent.

Re:Good for employment, bad for productivity.

[jbolden]

The problem our society is having is because of the culture of corporate corruption that has developed, our corporations are much more wasteful than our governments. I don't think you can show much evidence that government spending isn't producing quite a bit of value per dollar as contrasted with private (particularly large corporate) spending.

Re:Good for employment, bad for productivity.

[jbolden]

First off the governments in some places do actually build roads. But more importantly the shift from governments performing work to governments hiring companies to do work was an efficiency measure called specialization of labor that business engages in as well.

As for the free market allocating resources well, that's precisely the problem it hasn't and it doesn't. It does a fairly good job most of the time and in most instances, but it can do a spectacularly bad job particularly when the people allocating the resources have different incentives from the people whose resources are being allocated. Which is precisely the problem we have in the investment community.

Re:Good for employment, bad for productivity.

[jbolden]

The problems we are having are in general a result of deregulation. For example conflicts of interest between the buy side and the sell side of a brokerage. Or conflicts of interest between the investment banking arm of a bank and the traditional arm. Or conflicts of interest between stockholders and bondholders, or executives and boards of directors.

That is precisely the kinds of problems that government "getting in the way" is good at fixing.

Re:Good for employment, bad for productivity.

[KraftDinner]

Trips to the moon? Okay, that worked. What did we get out of that again? Tang?

http://library.thinkquest.org/5218/spinofflist.htm Only Tang, eh?

Re:Good for employment, bad for productivity.

[legirons]

Yep. The problem is that the government is (with a few exceptions) extremely bad at producing anything other than paperwork and hindrances.

Why oh why oh why do people keep modding thus utter bullshit as insightful. It isn't it's an ignorant meme repeatedly spread by people with a bizarre faith in business.

http://burningourmoney.blogspot.com/

Re:Good for employment, bad for productivity.

[pintpusher]

speak for yourself!

Re:Good for employment, bad for productivity.

[Logic and Reason]

Example of there the government produces something worthwhile: the road network. They produced it, and it basically works year in, year out and the country would fall to pieces without it.

The roads work, but that doesn't mean they work well. Traffic jams, potholes, "orange cone season", and of course high maintenance costs... there is a lot of room for improvement. Private roads might do better, but we'll never know as long as the government keeps doing a passable job with "free" (taxpayer) money.

In many countries, governments run a significant fraction of the school system as well.

And look how well that's going in the U.S.! The situation may be better in other countries, but this example is ambiguous at best.

Example of big business failing miserably: Enron...

And then Enron went bankrupt, and doesn't exist anymore. Can you say that about most failed government projects?

...the current financial crisis.

The current financial "crisis" was ultimately caused by the Federal Reserve's foolhardy policy of keeping interest rates artificially low, which encouraged malinvestment. Those malivestments eventually came to light and are now being systematically purged by the market (or would be, if not for various ill-advised government bailouts).

In some cases, the government can do a better job, in some cases they foul up. In some cases businesses do a better job. In some cases they foul up.

This is certainly true, but the point in question was that in general, governments produce worse goods and services than do private businesses. The reason is simple: private businesses have a very powerful and direct incentive to efficiently produce what consumers want, namely profit. The profit motive occasionally produces "bad" behavior as well, but its overall effect is overwhelmingly positive.

In contrast, the only incentives government agencies have to produce good products are the extremely indirect incentives that arise from the popular vote. Those incentives are easily overwhelmed by special-interest lobbying and other forms of corruption, or simply by the human nature of bureaucrats.

Re:Good for employment, bad for productivity.

[jbolden]

I don't think it is a question of allocating all resources or an either/or choice. I think the free market generally does a good job but sometimes doesn't. To pick another example in general the free market for pricing works well creating the right level of output. Sometimes however pricing distortions are harmful so thinks like rationing, high levels of regulation or price controls can be useful.

For example:

rationing: When the cause of the shortage is well known and easy to overcome over the mid-long term. Often the goal is to have the good distributed in a least disruptive fashion to the rest of the economy, which doesn't necessarily correspond with distribution to highest points of demand which is what free pricing would achieve.

regulation: when costs are not born almost entirely by the seller or purchaser. For example environmental impacts of production or disposal.

price controls: Very useful when the government wants output above or below market level. Defense needs can be an example of this.

In other words the free market is a good tool for a society to allocate resources, but it just one of the tools.

Re:Good for employment, bad for productivity.

[steveo777]

True. What the GP was saying is if a whole neighborhood has use for three pizza joints, whereas before they they barely kept one in business... The only way to do this is to give the people who would want the pizza, could they afford it, the means to buy it. Only way to do this is give them more and/or better paying jobs (or cash).

Either way works, but handing out money only works for a little while and generally results in irresponsible spenders (the road we're on now in the US. Collapsing housing market because of bad loans, lenders, all that). More jobs generally give more responsible spenders, but it's a LOT harder to do. How do you create jobs? Get more demand. Quite the conundrum.

Oh, yeah, that's right. Population ultimately drives demand. Economists, statisticians and other mathy people pour over this sort of problem day in and day out and even then they're not much more able to predict or affect economy any more than a weatherman can predict or a American football coach can affect the outcome of a game. It's understood how it should work, but there are so many factors that it's impossible to make it work.

The problem with the US is that so few people are willing to work hard and exercise self control. Which is why there is this credit collapse. The average person in the US has $8400 in credit debt. On a whole, we're too flipping lazy for the "throw money at the problem and it'll fix itself" plan to ever work.

Re:Good for employment, bad for productivity.

[elefantstn]

Every single one of your examples is, not coincidentally, a privatization where the government granted a monopoly or oligopoly to providers. It should not be surprising that a private company with no competition is as corrupt and inefficient as a government.

I think it's time we saw more nationalization of what's important, not privatization. Leave the non-important stuff to capitalists and market forces

'Importance' has nothing to do with it -- availability of competition does. For goods like internet access, we can improve quality by loosening corrupt, good-ol-boy licensing/franchising deals that lock customers into Comcast-or-dialup. For goods like train service, it's probably not feasible.

Food, though, is certainly more 'important' than either of those two, and every instance of nationalized food supply seems to result in famine.

Re:Good for employment, bad for productivity.

[David Greene]

Bravo!

I'll also add that the "paperwork and hindrances" are exactly the mechanisms we put in place to keep the public sector accountable. You see, when there is public ownership there can be public accountability. There can be no public accountability in the private sector. Privatization of public goods is a bad idea all around.

Re:Good for employment, bad for productivity.

[dwarg]

The argument that the owner wouldn't spend the money to expand is just as specious as the argument that people would buy more pizzas.

You've made it specious by using the words *would and wouldn't* instead of *should and shouldn't* A business owner certainly could expand his business based on money pumped in, or taxes reduced by, government. That would just be a really stupid way to make business decisions since that has no bearing on the demand for your product.

The way the system is supposed to work is if you can make a compelling business argument for expanding your business you should have that opportunity to do so with credit. Which is what makes this whole debate strange. If we want to talk about stimulating business growth we should be talking about the current frozen credit markets, not business taxes or taxes on upper income people (which are all too often confused).

Just let the people keep their money and spend it where THEY see fit instead of trying to prop up the pizza delivery business.

That's the interesting part of this debate. It's really a debate over who those people are that should be allowed to keep their money and what the value is of what they do with it. His point about building up demand with tax credits or rebates or reductions or whatever to lower-income families, who will immediately spend the money, has a little more merit because that money comes right back into circulation. But since it represents a momentary infusion of cash and not a correction to any fundamental problem I'm still not particularly fond of it.

It would be nice to have an intelligent discussion about the nature of taxes and monetary policy, but it has simply become to politically charged, and the waters muddied, by too many falsehoods and talking points and an absurdly over complicated bureaucracy.

The problem that no one seems interested in talking about is that the entire system is predicated on too much debt at every level. As I said earlier the system requires a certain amount of credit but we're over extended and while many are trying to unfreeze the credit markets there aren't many plans out there being all that selective about how or where that's done.

In Slashdot terms the system needs a rewrite and everyone's still talking about patches--except for the flat/fair taxers and they're crazy.

Re:Good for employment, bad for productivity.

[koutbo6]

Think of government as just another player in the market. They can be better or worse than other player in the market.
Here are equivalent examples that show how governments don't necessarily do better than private sector:
- Have you been to india or egypt and used their railway or public transportation? they are government owned btw.
- I Worked in a foreign country for a few years that had a government owned postal service (no need to mention the country's name), the service was a disgrace! no home delivary, mail was occasionally opened, I would say you are lucky if you receive anything at all. You walk into the post office and letters are scattered all over the floor, you cant even find an employee whom you can complain to. They even had discussions in their parliament (yes it's a democracy!) about the issue, but 10 years later, things are just worse.
- another country I lived in which is considered one of the richest countries in the world with some of the highest capita per head. They had scheduled blackouts because their power infrastructure was so outdated and couldnt meet demand. It is equally disgraceful with water and internet. Need I mention you need to pay bribes to get your service hooked up within a week? otherwise it could take months
- As for internet ... one word....censorship.

I wonder though where we can really find a government without interest in profitability (or self interest). I have seen many government initiatives that start with good intentions and do extremly well in the short run, but over time, self interest, whether in politics or personal profit, would bring about corruption and what follows is degradation in quality of service.
The sad thing is, when such a thing happens, there are no other players in the market who can cease the opportunity of this sole player slacking off, and offering better service.
We can certainly be better off if we are aware that government run business are similar to monopolies and realize what that entails. More importantly, we should be willing to take the responsibility and oversee them, or perhaps allow them to operate for a limited amount of time then privatize the business.
But absolute government control is not a good answer in the long run

. The worst harm IMHO from such initiatives is the behavioral changes in society that comes from the sense of entitlement.
I have certainly seen it in the countries I lived in and how it kills the entrepreneurial drive of individuals in that country, let alone the hostile feelings towards foreigners because they are reaping the benefits of the country's public infrastructure. Its a recipe for disaster and a cause for much unneeded political conflict.

Re:Good for employment, bad for productivity.

[EMB Numbers]

Read James Carville's book: "We're Right, They're Wrong : A Progressive Program for the Millennium"

He agrees with you. He is also wrong on every point.

The U.S. Federal Highway System is an abomination. It destroyed inner cities. It damaged our culture. It destroyed rail roads which had to develop and maintain infrastructure on their own under the burden of oppressive regulation at the same time the federal government subsidized the competition (busses, trucks, highways). The government is constantly building roads to nowhere. Look up Robert Byrd sometime. http://en.wikipedia.org/w/index.php?title=Special%3ASearch&search=Robert+Byrd+highway&ns0=1

Look-up Tennessee Valley Authority and its role in the New Orleans levies.
http://www.nashvilleistalking.com/node/90474
http://en.wikipedia.org/w/index.php?title=Special:Search&search=Tennessee+Valley+Authority&fulltext=Search&ns0=1&redirs=0

Do you want to see what national health care will look like? Look at the Veterans Administration Hospital system.

How about the War on Poverty? Answer more people impoverished after it in 1980 than before it in 1964.

Who do you sue when the government screws you over ?

By definition, the bigger the government, the less free you are.

Name one government program ever that was an unmitigated success.

Re:Good for employment, bad for productivity.

[Rycross]

Are they? I used to live in Illinois, and the roads were pretty good quality. The parts that weren't were getting construction for repair or expansion. And I don't see why Obama in a federal position would have any authority over state-run road construction.

Re:Good for employment, bad for productivity.

[serviscope_minor]

The roads work, but that doesn't mean they work well. Traffic jams, potholes, "orange cone season", and of course high maintenance costs... there is a lot of room for improvement. Private roads might do better, but we'll never know as long as the government keeps doing a passable job with "free" (taxpayer) money.

Traffic jams aren't the government's fault. Traffic grows to fill the available capacity, at least it does on the M25 in the UK. Ignoring that, look at the recent history/current state of the UK railways to see just how well the privatised infra-structure worked. Look at somewhat less recent history to see how well a network consisting of private roads worked.

And look how well that's going in the U.S.! The situation may be better in other countries, but this example is ambiguous at best.

Well, in those other countries, it works just fine. Very well, in fact.

And then Enron went bankrupt, and doesn't exist anymore. Can you say that about most failed government projects?

And what about the private pension fund of many of the employees? Ooops. That's gone. Or the way Enron instigated rolling blackouts to hike the price of electricity. That worked really, REALLY well.

The current financial "crisis" was ultimately caused by the Federal Reserve's foolhardy policy of keeping interest rates artificially low, which encouraged malinvestment. Those malivestments eventually came to light and are now being systematically purged by the market (or would be, if not for various ill-advised government bailouts).

That and phenomenally irresponsible behaviour on the part of private businesses. They didn't hae to leverage themsemves 50 to 1. But the government did not prevent them from doing it, so they did.

This is certainly true, but the point in question was that in general, governments produce worse goods and services than do private businesses. The reason is simple: private businesses have a very powerful and direct incentive to efficiently produce what consumers want, namely profit. The profit motive occasionally produces "bad" behavior as well, but its overall effect is overwhelmingly positive.

This is just not true i general. It's true in some cases. It's not true in others.

Re:Good for employment, bad for productivity.

[Beer_Smurf]

"The problem with the US is that so few people are willing to work hard and exercise self control. "
This is a true statement.
Unfortunately the solutions being proposed penalize the people who do work hard and have self control and give the money to the ones who least deserve it.
Trying to find ways to help those who bought more house than they could afford or mad bad investments on the backs of the ones who were responsible makes me want to puke.

Re:Good for employment, bad for productivity.

[shaitand]

Big business, government, and any other organization large enough that the people making decisions don't have a personal interest in the results will always do a poor job at producing.

Private business can be more effective than government at most things but you are right, there are exceptions. Bascially anytime the quality of the result is more important than being cost effective or that the result must be realized even if the result is a loss. Roads, healthcare, schools, etc.

If we are going to stimulate something, we should stimulate small businesses, education, and manufacturing. Grants (as opposed to loans) for students that are not based on minority status, the same for small business start-ups, and the elimination of taxes on the refinement, processing, and manufacturing of materials and products that qualify for a "made in the usa" sticker. Not to mention eliminating income tax for those working to make such products.

Quite frankly, we could do far worse than to find ourselves in a position where our local manufacturing infrastructure had grown so large that these tax breaks were causing our nation a problem. While we are at it, lets stop punishing small businesses and self-employed individuals on their taxes.

Re:Good for employment, bad for productivity.

[shaitand]

'If that's so, do you then advocate that prostitution should be legal?'

Yes. Along with most other people. That has to be the poorest example I've ever seen. Prostitution is much like the illicit drug trade, the problems come from it being illicit and it its only illicit because its outlawed. Yet all those problems, ruined lives, slave trade, etc that result from outlawing the practice are used to justify the outlawing!

Re:Good for employment, bad for productivity.

[wellingj]

Or so much fructose corn syrup...

Re:Good for employment, bad for productivity.

[wellingj]

Not entirely. This bubble was fed with credit made possible by the FED. In that regards it was an enabler.

Re:Good for employment, bad for productivity.

[gobbo]

Thanks for that. May I add, as a clue, that where government is appropriate is in places where there is ubiquity (e.g. road networks) or a degree of permanence (e.g. lifelong transactions, like health care/records), or obviously, regulation and law.

Re:Good for employment, bad for productivity.

[sydbarrett74]

Yep. The problem is that any sufficiently large and powerful organisation is (with a few exceptions) extremely bad at producing anything other than paperwork and hindrances.

There, I fixed it for ya.

Re:Good for employment, bad for productivity.

[sydbarrett74]

Complete wankery. Look at per capita (i.e., average), not total, GDP. At PPP as of 2007, those figures are $36,570 (UK) versus $47,025 (US) -- in other words, not the huge gap you disingenuously indicate. Also notice the population disparity of 60M (UK) versus 300M (US). Other things equal, more people means more production and consumption. Duh!

Re:Good for employment, bad for productivity.

[HanzoSpam]

The problems we are having are in general a result of deregulation.

ROFLMAO!!!

I keep hearing that, but I'd like you to name one example of deregulation. You call Sarbanes-Oxley deregulation? Regulation has, in fact, been pouring down thick and fast. The last major repeal of regulation was the reform of the Glass-Steagall Act in 1999. Guess who was president then?

Re:Good for employment, bad for productivity.

[arth1]

Every single one of your examples is, not coincidentally, a privatization where the government granted a monopoly or oligopoly to providers.

Should the British government have laid twenty parallel tracks before privatizing British Rail, so there could be real competition? That would only have delayed a fall-back to monopoly.

The natural state of capitalism is monopoly and oligopoly. Put ten capitalist players in a pen, and eight of them will be quickly be bought out by the other two, without replacements appearing, and the remaining two will reach a truce and split the market. You need to make the playing field uneven and punish the big players for small players to ever have a chance. If you're not willing to do that, at least let the government run the show -- they don't have a vested interest in maximizing profits to line the pockets of shareholders.

Re:Good for employment, bad for productivity.

[elefantstn]

Should the British government have laid twenty parallel tracks before privatizing British Rail, so there could be real competition?

From my post:

For goods like train service, it's probably not feasible.

Re:Good for employment, bad for productivity.

[XDirtypunkX]

The real reason government projects can be more expensive is that the greater accountability and transparency required in government leads to costs that would be externalized by private industry to be internal to the government.

Of course, if private industry was doing it, the government would still probably have to pick up the external cost anyway. Or the problem would be ignored and get worse and worse until...

Re:Good for employment, bad for productivity.

[mcvos]

Every single one of your examples is, not coincidentally, a privatization where the government granted a monopoly or oligopoly to providers. It should not be surprising that a private company with no competition is as corrupt and inefficient as a government.

It's not as corrupt an inefficient, it's way more corrupt and inefficient. Natural monopolies are much better off in government hands. Markets that are naturally competitive are usually better off privatised.

Re:Good for employment, bad for productivity.

[xaxa]

Then you should fix your government. All these things do work, if you pick the right country.

Who do you sue when the government screws you over ?

The government, surely?

Re:Good for employment, bad for productivity.

[jbolden]

First off the amount of regulations increased. The level of enforcement fell off a cliff. Particular types of regulations were enforced but they were very narrow. Also these problems happened under Clinton as well.

As investment with traditional banking Wachovia ring a bell?

Re:Good for employment, bad for productivity.

[steveo777]

Trying to find ways to help those who bought more house than they could afford or mad bad investments on the backs of the ones who were responsible makes me want to puke.

I agree with one caveat. Loan officers and realtors who did everything they could to make people believe they could afford those loans. I was there, I saw it. When the feds lowered interest rates to try to stimulate the housing markets the prices skyrocketed. Anyone with half a brain (and I have more than half a brain) should have been able to see that coming.

My point is that some of these people weren't smart enough to know the math behind what was really happening. So helping them out is sickening because they should have known exactly what they were doing (in this day and age, ignorance is never a good excuse). But also the lecherous snakes that helped them destroy their lives for a 3.5% commission should be thrown in a well, or used as test subjects. They knew exactly what they were doing.

Re:Good for employment, bad for productivity.

[phlinn]

Neglected to log in before posting, but the above was posted by me.

Re:Good for employment, bad for productivity.

[jbolden]

Glass-Steagall Act repeal
Bankruptcy Abuse Prevention and Consumer Protection Act
Allowing mega mergers in banking.
Almost no SEC enforcement (which is effective deregulation)
Almost no Labor enforcement

should I keep going?

Re:Good for employment, bad for productivity.

[jbolden]

Glass-Steagall Act repeal
Bankruptcy Abuse Prevention and Consumer Protection Act
Allowing mega mergers in banking.
Almost no SEC enforcement (which is effective deregulation)
Almost no Labor enforcement

Re:Good for employment, bad for productivity.

[HanzoSpam]

Bankruptcy Abuse Prevention and Consumer Protection Act

Uh-huh. More stringent requirements for declaring bankruptcy is "deregulation"? And that contributed to our current economic woes, uh, exactly - how?

Allowing mega mergers in banking.

Mega mergers in banking? I was working in the banking industry in the 1990's, when most of those occurred. Those were the result of what deregulation? (Reform of Glass-Steagall didn't occur until 1999.) And, again - how did those contribute to the current problem? In fact,there is no correspondence between institutions that benefited from the repeal and those that recently collapsed. Institutions that didn't take advantage of the Glass-Steagall repeal, such as Lehman Brothers and Bear Stearns, were the ones that failed most spectacularly, in part because they lacked the stability provided by commercial banking deposits. If anything, the repeal of Glass-Steagall helped relieve the crises - Bank of America and J.P. Morgan Chase would not have been able to acquire Merrill Lynch and Bear Stearns under Glass-Steagall. Mega-mergers were the only thing that saved their bacon.

Almost no SEC enforcement (which is effective deregulation)

Examples?

Almost no Labor enforcement

Again - examples?

Re:Good for employment, bad for productivity.

[jbolden]

In terms of SEC enforcement: Bernie Madoff is a perfect example. The SEC had numerous complaints for years. Other examples would have been auditing resources for financial derivatives in terms of capital adequacy requirements.

Allowing the mega mergers reduced diversity in the banking system. It is the same way that reducing diversity can lead to species extinction.

No labor enforcement: Not having overtime rules. Not protecting the union process during union membership drives.

Really, wrong.

[tjstork]

You will get NO net jobs.

That's arguably not true at all. You could wind up with less jobs, or more jobs, but a net of zero effect is really rather unlikely. In your the simplest case, you assume that the government invests exactly as efficiently as the private sector, in which case, the number of jobs is the same. But, if the government invests -more- efficiently than the private sector, then, there will be more jobs than if the private sector would have invested it.

The problem we have right now, mind you, isn't so much as unsustainable lifestyles, but, a lot of bad investment by the private sector and now the government is picking up the lurch. That's ok in the short term but in the long term you want the private sector to take off again, not even from the libertarian ideological perspective, but from a government risk management one.

If the government taxes the output of all economic activity, it gets the benefit of the economic winners without having to determine them itself. When the government is doing the investing, its actually assuming the risk of failure that more properly ought to be born by private citizens doing the risk, not all of the people, whether that risk is by their consent or not.

Maybe using the Bush count?

[internerdj]

"Throughout our history, the words of the Declaration have inspired immigrants from around the world to set sail to our shores. These immigrants have helped transform 13 small colonies into a great and growing nation of more than 300 people."--Charlottesville, Va., July 4, 2008

Re:Or...

[dedazo]

You could give each citizen $1 million and let things take their course. That would cost you roughly $350 million

More like $360 trillion, right? That's substantially more than the entire GDP of the US. I think that's more than the GDP of all the countries combined.

I think I saw one of those chain letter emails that had this dumb claim on it a few weeks ago. I'm amazed that someone who posts on Slashdot would actually fall for that kind of thing.

Re:Love it!

[philspear]

At least you can choose to do business with the insurance company......

That's a good option when you're positive you will never, ever get sick or injured. And the choices don't end there, you can often choose between high premiums and high denials of coverage, or even higher premiums and higher denials of coverage. If you've had a bit of the cancer previously, your choices are even better! For instance, a friend of mine got to choose to either stay with a low paying dead-end job with adequate insurance, to switch jobs and go bankrupt with COBRA, or to go without coverage and risk a recurrance that would be classified as a pre-existing condition (again bankrupcy).

Seriously, the benefits of being able to call a number and possibly get your billing straightened out faster with a private company rather than the government more than makes up for the troubles those people who are not a good investment have. They shouldn't have ever gotten sick!

Not Even Half

[DynaSoar]

No way will money pumped into "health IT" result in significant jobs increase. Money thrown into this ring will get snapped up and swallowed whole by the medical industry. We're talking about an industry here that grew to be larger than the previously decried defense industry including all governmental support, without producing any significant increases in quality of care or patient satisfaction, or differences in these measures as compared to other countries. The IT infrastructure used has grown more than patient care. During its explosive growth, millions of jobs were created. At its (sustained) peak, every patient supported 4.5 employees through the charges which increased well more than an order of magnitude. But the growth has plateued so that the companies involved can continue to increase profits and stock prices without losing capital to supporting themselves.

Consider this an expert opinion. I was trained to be one of 'them'. I got an MHA (master's in health care administration, an MBA for the health care industry). I specialized in medical informatics and telemedicine. When I saw the massive fiscal irresponsibility and rampant greed, I refused to be part of it and gave up on the field. I still watch it. It hasn't changed.

Just Stop Inhibiting IT

[Bob9113]

I'd be happy for the gov't to just stop inhibiting the IT industry.

You've got the knee of two labor tax curves landing squarely on IT labor (payroll taxes become regressive starting at $105k, and the progressivity slope of income tax bends over toward flat at around $200k).

Then you've got capital gains tax set way below total labor tax, which transfers wealth from high skill labor companies (Oracle, Microsoft, Google, etc) and gives it to high capital expense companies (industrial sector).

Lower capital gains taxes made sense, I think, during the industrial revolution and advent of the assembly line. Socialism though it is, it helped vault us to superpower status. Perhaps it could be argued that the same is now true of the high skill labor sector; universities, hospitals, IT - the sectors in which we kick the rest of the planet's ass - might benefit from that same treatment.

But I'm always skeptical of government interference. I'd like to start with just having the government stop putting the bulk of the tax burden on our industry (and other high-skill labor intensive sectors).

JM2C

Re:Or...

[geminidomino]

Tomato..tomato..

You do realize that that particular idiom doesn't translate well to text-based communication, right? ;)

Digging Holes

[colganc]

Dig more holes faster please. Thanks for taking my hard earned rewards for work and giving it to someone else. I really appreciate it government.

Re:Digging Holes

[avandesande]

It's even worse than that. They are borrowing against you and your children's future production.

Re:Digging Holes

[callinyouin]

I think the solution to all of this is simply not having children.

Re:Digging Holes

[colganc]

I'd like to spend the $5 where I want it spent. Preferably on something that makes me more productive. Might be food, might be entertainment, but I don't want to pay someone to dig holes. They could be producing something useful for the world. Digging holes will never be "responsible investing". It is no better than trading houses back and forth at increased prices each time. No where in my post did I say there should be neither no government nor taxation and I'm not quite sure where you're getting that from in my post. I do however sarcastically imply I want my money to be used productively instead of for hole digging.

Re:Digging Holes

[tehcyder]

Dig more holes faster please. Thanks for taking my hard earned rewards for work and giving it to someone else. I really appreciate it government

Go and live alone on a desert island and there'll be no one to tax you then.
Yours truly, the government.

More jobs =/= more output

[Anonymous Coward]

An economist visits China under Mao Ze dong. He sees hundreds of workers building a dam with shovels. He asks: 'Why don't they use a mechanical digger?''That would put people out of work,' replies the foreman. 'Oh,' says the economist, 'I thought you were making a dam. If it's jobs you want, take away their shovels and give them spoons.'

Re:Or...

[eln]

I think the better (and cheaper!) solution is to give me $20 billion. I promise that I'll create at least 2 or 3 jobs that wouldn't exist otherwise (maybe more, depending on the size of my harem). In this way, I will personally be responsible for a net increase of 2 or 3 jobs to the economy. This is a much better rate of return than the $750 billion already spent, which has resulted in a net decrease of several thousand jobs so far, with no end in sight.

Clearly, the wisest move is to invest in me. I promise I won't give any of the money to investment bankers or CEOs, and I will not hoard it (okay, maybe just a tiny bit of it). In fact, I will embark on a spending spree of truly epic proportions.

Re:Love it!

[Shakrai]

to switch jobs and go bankrupt with COBRA

If he switched jobs and the new job had a group plan they wouldn't be able to exclude that pre-existing condition.

Re:But where do the jobs get created in?

[turbidostato]

"May be IT investment creates more jobs than physical infrastructure investment. But if the jobs are created in India, are we (Americans) really better off?"

Yes, even then, provided they are cheaper and get the job done: they allow for new opportunities backed up from the saved costs. It's up to you to take advantage of them or not.

government sponsorship

[boombaard]

Sure you can. Just make it money that comes with strings attached, or create a government oversight body that checks if prices are 'realistic', and enforces a maximum price for goods.. or create regulation that forces ISPs/carriers to lower prices, say 1-3% per year each year, so that they're forced to become more efficient to keep the same profits (in a semi-monopolistic market)..
They've done it to the former monopolist ISP/phone/mobile carrier over here (Holland), and it works just fine. The company is doing better than ever, infrastructure is still being maintained & upgraded, competition is thriving, and prices are going down anyway.
What a marvellous world we live in, where regulation rules the roost.. (yes, I realise the concept of government oversight probably wouldn't work in the US, as it would be a "private" body that would soon be bought up by one of those ISPs, but try to imagine a world in which they had created legislation to prevent that from happening)

Re:Or...

[smooth wombat]

And to think I wasn't drunk when I wrote my comment.

Thanks for the math updates folks.

Re:Love it!

[Rycross]

And yet my friend with Crohn's disease wishes he could find a new job but is afraid that he will lose his health insurance. Maybe he is ignorant of the reality, or maybe he's looked into it and its not quite that simple. At the present rate, he is being fucked over, and even with insurance being pushed into debt to merely stay alive and in "good" health.

Re:Love it!

[Anonymous Coward]

Your rates won't go up, but you'll probably die before you get that MRI!

Re:Love it!

[JoeMerchant]

One benefit of national healthcare is accountability of the system. With the US insurance + uninsured system, it's "acceptable" for uninsured healthcare to be atrocious, and if you don't like your insurance plan, let us show you a more expensive one...

With the national system at least there's a humane baseline.

Bush's "no bridge left behind".

[Ostracus]

"This report takes a look at how many jobs you get if you invest $10 billion each in three different IT infrastructure projects â" broadband, health IT and the smart grid. It argues that if you are going to be spending billions on a stimulus package, investing in 'digital infrastructure' creates more jobs than physical infrastructure (e.g. roads and bridges) in the short-term, and you get a whole host of other benefits in the long-term."

There's just one problem with that argument. It's the physical infrastructure that's falling apart, not our digital infrastructure. I should also point out that people have lost their lives due to failures in the former and none that I know of in the latter.

Re:Love it!

[philspear]

If health insurance started right away instead of 6 months to a year after he went full time (which was also not immediate) you'd be right. Sadly, that was not the case.

Oh please don't do this

[bberens]

We're still feeling the pain of the last time we artificially inflated the IT market during the 90s. There just isn't the skillset out there to have another 1 Million people working on IT infrastructure.

$30K per head

[JoeMerchant]

I hope these jobs last longer than one year, and that they earn more than $30K per employee.

It's about time for a(nother) strong IT infrastructure push. The .com bubble put plenty of fiber in place, financed by a Wall Street boom-bust cycle (which is just as chilling on new job creation as a tax increase, perhaps more so), but there seems to be a problem getting private financing of wireless coverage. I think wireless technology is ready for a national rollout, and once it is ubiquitous, there will be a market explosion for wireless 'net connected devices and services.

Stated another way - US cellphone carriers are greedy bastards mired in the 1990s and they need to be taken out and spanked the way wire based phone carriers have been. Free (tax supported) nationwide wifi coverage translates to free Skype (and similar) services everywhere - which should finally present some competition to the people who offer $0.05 each or $10/month texting services, and similarly fat voice, and fatter data services.

People still read that nonsense?

[Drew84WHEEE]

Just a hint: There's just a tad more to macroeconomics than what you'll find in "Economics in One Lesson". I would've thought the title would make that obvious. It's like reading "Auto Repair for Dummies" and claiming to be a mechanic, except that "Auto Repair for Dummies" is presumably not completely full of shit.

Well

[coryking]

Do you really believe that our economy is in the dumps because we don't have enough roads or bridges?

It will be if we continue to underfund the upkeep of the ones we have already built. Most of the new-new-deal money will go to repair (or in many cases replace) what we've got, not build new things.

Re:Love it!

[javilon]

I also live in a country where there is a universal health service (Spain) but I don't agree with you. The reason is that with this system we stop the market from pricing treatments. Basically a farma megacorp just needs to buy the right official and they are in. No competition.

The problem this causes is long term. We are very close to some sort of bioengineering singularity where your life expectancy (and mine) gets expanded faster than you actually age. This would come to pass faster if we allow a market economy to allocate the right resources at the right hands. That means that yes, you would need to deal with a private company for your health needs, and yes, it would mean that you could get no coverage at all if you fail to manage it properly, but in the long term, it also means that you would get life saving treatments into market faster.

Also, it would mean that the health industry would stop to be considered a drag to the economy and it would be considered a growth engine. Instead of considering health expenditure wasted money, like it is now, it would be considered a growth engine for the economy. I don't really get why expending money buying a car in US is accounted by politicians as a way to grow the economy and treating an illness is considered wasted money.

Please read Longevitymeme. There is a lot of technical information there, but also some political opinion about why a free market for health care and less regulation (yes, I know this is not trendy now) would be good long term.

Huge Problems on the rise

[Archangel Michael]

The ONLY thing that creates "MORE" jobs is Efficiency, which also puts pressure on jobs.

We can have make work programs, like elevator operators who are the only ones allowed to push the buttons. Or we can realize that isn't efficient use of money.

Yes, we have full employment, but many people are doing meaningless jobs. We can get rid of Robotics to make cars, that will create more jobs. However cars would end up more expensive in the process.

The whole point of a free economy is to make most efficient use of limited or expensive products and services.

Government and pointy headed elites aren't necessarily the best people to say what is most efficient use of a resource.

EVERYONE knows of some Government regulation or program that simply is a waste "Make work" or purposeful hinderence to the Market, that provides NO benefit.

Until we can start working on ELIMINATING these things that don't work, it isn't going to get better. Think of all the alphabet agencies we have, and their mandates, and how often they completely fail in their mandates.

I'm sick of the typical response to government failure as if it is a "glitch" ... NO it isn't a glitch. It is that people will route around whatever problems they face, or give up. Applying more regulation isn't the solution, the solution is to punish people who screw people.

The problem is, our system is designed to have slow justice, which people are quite frankly tired of.

Everyone know Madoff is a crook, the SEC failed, and all the rest, but it won't be fully adjudicated for YEARS, and Madoff will be probably be dead of natural causes before it is over (remember Ken Lay???)

There is no justice anymore. The system is no longer set up for justice.

Re:Huge Problems on the rise

[JoeMerchant]

The ONLY thing that creates "MORE" jobs is Efficiency

Demand creates jobs, not efficiency. You can be efficient as all hell at making buggy whips, churn them out for a penny a piece, and how many orders will you have? (assuming they are not being re-purposed for something else, which would be a way to increase demand.)

People who have (excess) money create demand when they are willing to part with said money in exchange for labor, either directly in the form of services, or indirectly in the form of goods.

The _real_ way to end a recession is to distribute a Prozac for the wealthy that makes them feel that "everything is going to be fine," which, in turn, gets them to open their wallets widely enough that those downstream also have excess money that they can also feel o.k. about spending.

Re:Huge Problems on the rise

[AppleTwoGuru]

Until we can start working on ELIMINATING these things that don't work

Yea, tell that to Microsoft. Eliminate the monopoly so a freer market can exist. Microsoft has artificially injected motivation to key points of control in government and in the market, that in order for everyone to do the right thing, they would have to not listen to Microsoft.

And this isn't just Microsoft. Many (evil-to-true-democracy) companies do it. Lobbyists and litigation. Some just get away with it better than others because of how much they pay the watchdogs to look the other way. Where is the justice? (It's slow, because it has been slowed down not to judge right from wrong, true Democracy versus Monarchy/Dictatorship/Red Communism/Slavery, but to allow the robbery of freedoms.) If we won't repent, we can not continue in freedom, but we will hold ourselves in bondage. Going deeper into debt is one way to secure that bondage.

In the end, after all the bailouts have been made, all we might say is, "Guess that didn't work." It's not the rich and wealthy that will be hurting. It is the people who are not them that will hurt.

Re:Huge Problems on the rise

[OneSmartFellow]

You can be efficient as all hell at making buggy whips...

But, but, but, buggies are less efficient than automobiles, that's the flaw in your rebuttal.

Re:Huge Problems on the rise

[Archangel Michael]

If demand for something that is plentiful (buggy whips at $.01 ea.) is low, all that means is that the resources used to BUILD the buggy whips would be better used elsewhere. That creates efficiencies, and in this case, people who make buggy whips go and make something else, less plentiful.

You're error is that you were thinking Micro Economics when I was talking Macro.

I look at the current economic reality from a perspective that the economic model is correcting for HUGE inefficiencies in the market. I look at those inefficiencies as being cause by ALL of the following reasons.

1) Greed
2) Stupidity
3) Regulations
4) Expectations

If you look at ALL the bubbles that form that end up correcting themselves ... they all have one thing in common ... the unreal expectations that it will continue as it is going. Which is stupid. People know it is stupid, but they are greedy and want to get a piece. And in the current bubble, Regulations that didn't work and Regulations that had unintended consequences contributed to the problem.

Right now, the ONLY solution I see that is going to work, is to realize that EVERYONE is going to suffer in the short run. Take our medicine (suffer) and wait for the full fallout to occur. All the Bailouts are going to do is delay the inevitable.

Re:Huge Problems on the rise

[Archangel Michael]

Without Microsoft, there would be no Linux.

Don't be mistaken, I don't like MS any more than the next guy. However, I truly believe the Monopoly that MS created for itself necessitated the need for an alternative. Linux fit the need and the hole created by the monopoly.

Yes, all monopolies create holes in efficiency. People will eventually route around those inefficiencies.

I can only imagine where we'd be today had Standard Oil not been broken up. Imagine people growing their own fuel (bio diesel), or better public transportation (buses, trains etc), better laid out cities where one can walk to most necessary shopping ... etc etc.

People will route around monopolies, and then the monopolies will disappear. Microsoft will not be able to compete with a Linux, and will fade away into oblivion.

Re:Huge Problems on the rise

[JoeMerchant]

you were thinking Micro Economics when I was talking Macro.

Ah, yes, on /. I am typically thinking of efficiency in terms of percent energy conversion from sunlight to electricity and such things, I forget that macro economics has done to the word "efficiency" what psychology has done to words like "stress" and "pressure."

1) Greed 2) Stupidity 3) Regulations 4) Expectations

Softer terms still, I would rate the present crisis as mostly based on poor risk assessment, first on the part of lenders making too many loans that were unrecoverable in default, second on the part of the borrowers taking loans they couldn't reliably repay, third on the part of the securities packagers who effectively misrepresented the risk inherent in the new "free money" mortgage backed securities, and fourth on the part of the investors who bought into those securities without questioning their risk level when it was fairly obvious to anyone that the risk had to be at historically high levels.

This pretty well matches your summary list, except that I would say lack of regulation was more at fault than regulation. I'm not saying we need regulation against risky investment, just more transparency into the risk level of what is being offered. For example, when I invested part of my portfolio in Prudential's pLife 2010 or whatever they call it, they advertised it as "properly balanced risk for maturity in 2010" whatever the hell that is supposed to mean. What it meant in reality was 45% weighting in mortgage backed securities and losing 60% of its value over the last 9 months. What I would want for any aggregated investment product (fund) would be quarterly, or more frequent, reports in hypertext format where I am free to drill down in the various investment sectors of the product and get performance graphs on the aggregate of the investment, including volatility, relative to broader similar market segments and the market as a whole. What I get instead is an impenetrable pile of text that has some weak imitation of that buried in a bunch of unrelated and irrelevant crap, funds' quarterly reports more resemble advertisements for their product lines than a meaningful attempt to communicate any intelligence to the investor.

But... as to solutions... those are all in the realm of psychology. Since there is no king of the world, the world's richest families in effect hold more power over the world economy than any government. If any one government tries to tax their rich too heavily, the rich just move to a more money friendly country. So, there's this dance done, you can call it "increasing efficiency," or "taking our medicine and waiting for the full fallout", but what's really happening is a liquidity pullback by the big private money. They're limiting their risk, keeping their cash in "safe" places, and the way things are structured this reduces new investment and job creation. The Western upper middle class, as a group, also has significant economic power, and as a group I believe they are also pulling back at the moment, adding to the problem in a small way.

A non-tax funded trillion dollar "bailout" will effectively devalue the currency a bit, which is just another form of tax, albeit one that is distributed proportionally across every dollar everywhere instead of focused on a particular activity or group of people. If it is focused on creating low level jobs, it can get the economy moving for a bit, but until the people with "power class money" loosen up, things won't be changing much. If too much "bailout" (or war making) activity takes place, the wealth will be heading for other currencies, furthering devaluation of the dollar.

The thing that really ticks me off about the recent mess is all the immature people of means who are effectively crying "do over! I don't like the way this turned out." Regulations need to be put in place to make it really damn obvious to anyone who invests in anything risky, just what the risks are and just where they will end up if (when) things go down the tubes. If that's a place they're not willing to go, they shouldn't be allowed to play.

Random thoughts, haphazardly presented, use at your own risk.

Re:Huge Problems on the rise

[Archangel Michael]

"poor risk assessment" = 4) Expectations

"fourth on the part of the investors who bought into those securities without questioning their risk level" = 2) Stupidity

"first on the part of lenders making too many loans" = 1) Greed

The one I think you missed, is the Regulations, one of which effectively required banks to make risky loans to people who didn't qualify or risk being sued for "discrimination".

I used to think that way too

[coryking]

Until I realized two things:

1) Companies located in our country have to offer health care plans. Companies located elseware dont directly have to offer this benefit--their government does it for them. GM is fux0red for many reasons--one of them is the fact they have to pay gobs of money in health care benefits when their competition doesn't. Thus, one can deduce it is harder for US companies to compete because their employee costs are higher then elseware.

2) You pay into an insurance pool of some form for pretty much your entire life. How fucked up is it that if you go uninsured for even a few months, you can get sick and go broke? Good luck getting insurance after you got sick too. While I can see things from the insurance companies perspective, and I dont think they are "evil" like some, I dont think they can sustain a business model that really keeps us all healthy.

3) Lets not forget that as you get older, your premiums go up. A young guy like me can get private insurance for around $210/mo while a 60 year old would be paying around $700/mo for the same plan. Group plans like the ones offered by companies can average the cost of their old and young employees. This is why when you go on COBRA and you are young, your premiums are way higher then what you'd pay if you got (and could qualify for) a private insurance plan. Lord help you, by the way, if you have a pre-existing condition and want to get a private insurance plan. Unless you have a "domestic partner" or a spouse who has group insurance plan, you can kiss the idea of being an independent contractor goodbye.

4) I'm glad I dont have to make decisions like this.

5) ???

6) Win Ponies.

Depends

[coryking]

Every single expansion of Governmental power erodes our freedom and liberty.

and

Group coverage plans (i.e: the kind you get from your employer) aren't allowed to exclude pre-existing conditions if you already had coverage.

Conflict. You lost freedom by not having a government provide healthcare. You have a medical condition? Want to be self-employed? Forget health insurance. You don't have that freedom anymore and you are stuck workin' for the man.

Sometimes you have to give up a freedom to gain another. This isn't all black and white.

Re:Depends

[Shakrai]

You lost freedom by not having a government provide healthcare.

Did I also lose freedom by not having a government provide me with free housing?

Sometimes you have to give up a freedom to gain another. This isn't all black and white.

But what if I don't want to give up that freedom? What if I want the freedom to live my life as I see fit with as little governmental interference as possible? Why should the government tell me how to live if I'm doing anything to harm my neighbors?

Here in New York State, Governor Paterson wants to impose an "obesity tax" on non-diet soft drinks. Why is this a role for Government? Leaving aside the fact that there's nothing wrong with consuming soda in moderation, why should it be the role of the Government to try and legislate behavior? One of the arguments used to justify polices like this is the increased health care costs of obesity. Where does it end? Is the Government going to outlaw or tax skydiving because of the risks involved? Drinking? McDonalds?

Less is More

[mosb1000]

"People sitting around doing nothing is wasted capital."

Sometimes doing nothing is better than doing something. I am talking to you, Uncle Sam.

Re:Less is More

[plasmacutter]

"People sitting around doing nothing is wasted capital."

Sometimes doing nothing is better than doing something. I am talking to you, Uncle Sam.

Hoover obeyed your wishes.

The US economy didn't recover until WWII rendered it the SOLE FUNCTIONING ECONOMY in the world.

Re:Less is More

[mosb1000]

The economy didn't improve for a long time under Roosevelt either.

It is stupid to try to draw a conclusion from one data point in history. It's impossible to know what would have happened is something was done differently. However, personal experience has taught me time and time again that action is not always the best choice.

People sitting around doing nothing is better than people going around wasting resources and being destructive.

Re:Less is More

[plasmacutter]

The economy had broken down to the point of life support by the time roosevelt got to it.

Without swift and decisive action, whether it's the economy or a human being, severe injury will result in long-term debilitation or death.

By the time roosevelt got there, the golden hour was long past. Roosevelt did an excellent job with what he had, and his efforts founded one of our nation's largest cities and paved the way for the US rise to economic power following the war.

Re:Less is More

[Logic and Reason]

Hoover obeyed your wishes.

No, he didn't. This myth of Hoover being "laissez-faire" is completely unfounded; see, for example, this article by Murray Rothbard. His harmful interference included signing disastrous bills like the Smoot-Hawley Tariff Act and the Revenue Act of 1932. In Hoover's own words:

We might have done nothing. That would have been utter ruin. Instead we met the situation with proposals to private business and to Congress of the most gigantic program of economic defense and counterattack ever evolved in the history of the Republic. We put it into action...

The revisionism surrounding Hoover is much like what's happening with Bush the Younger: for some reason, people stubbornly believe him to be pro-market, despite the fact that federal expenditures have risen dramatically during his administration, as have federal regulations.

The US economy didn't recover until WWII rendered it the SOLE FUNCTIONING ECONOMY in the world.

If by that you mean that the war had an even worse effect on most other major economies than it had on that of the U.S., you may be right. If, on the other hand, you are saying that the war actually helped the U.S. economy recover, then you are falling for the broken window fallacy.

Re:Less is More

[mosb1000]

Wow, you say that with such conviction. What makes you believe any of that?

Re:Less is More

[plasmacutter]

Your first link was to mises. you may as well have linked to intelligent design.

Have a good day.

Re:Less is More

[Logic and Reason]

Ad hominem:

Source A makes claim X
There is something objectionable about Source A
Therefore claim X is false

Have a good day.

Re:Less is More

[plasmacutter]

Ad hominem:

Source A makes claim X

There is something objectionable about Source A

Therefore claim X is false

Have a good day.

That doesn't hold true when the "something objectionable" about "Source A" involves their analysis of the issue at hand.

The Austrian school of economics has long been the "intelligent design" of the economic field.

the school has traditionally advocated an interpretive approach to history to address specific historical events......

its methods consist of post-hoc analysis, and do not generate testable implications; they argue this approach fails the test of falsifiability....

I know of a few other organizations whose philosophies take an interpretive approach to history and whose theories fail falsifiability as well.

Look, plain and simple, the austrian school is not economics, it's a religion being passed off as economics by the dogmatic and corrupt.

Re:Less is More

[shaitand]

In reality, the economy is what is left after all artificial valuation has crashed. It can't die, only the economy as we know it can die and that shift of real wealth could very well have been a good thing.

Re:Less is More

[Logic and Reason]

its methods consist of post-hoc analysis, and do not generate testable implications; they argue this approach fails the test of falsifiability....

Please explain how to falsify Keynesianism. In fact, nearly all of macroeconomics is non-falsifiable right now, because we lack the capability to run the necessary experiments. Indeed, there is reason to believe we will never gain that capability, due to the nature of human actors.

In either case, as long as we are unable to properly test macroeconomic hypotheses using the scientific method, macroeconomics is not a science, and should not be treated as one.

Oh, and it's nice how you cut out the words "Critics of the Austrian school contend that" from the front of that sentence. The part about "post-hoc analysis" is almost exactly the opposite of the truth: the Austrian school uses a priori analysis from first principles to derive general laws of human action that apply no matter the circumstances.

That gives Austrianism a predictive power that applies consistently in the long run, but not as much in the short run, given the complexity of large economies. In contrast, more "scientific" macroeconomic schools of thought claim to be able to predict the short run, but they are consistently wrong and can only keep adjusting their models to "predict" what has already happened.

Re:Less is More

[plasmacutter]

. In fact, nearly all of macroeconomics is non-falsifiable right now, because we lack the capability to run the necessary experiments

You're kidding right? Do you think economic data going back centuries is not enough?

What do you think the past 20+ years have been as far as testing reaganomics?

The 70+ before that as far as mixed economy and new deal?

The centuries before that as far as domestic non-interventionism and international protectionism?

We've had our experiments in the real world economy. We've seen which ones work best and which ones don't.

So far as "general laws of human action", the modern proponents of the austrian school seem to forget the general law of human action in the absence of government intervention is to lie, cheat, steal, and murder anyone who gets in their way.

The gangsters of the roaring 20's, Enron, Tyco, The S&L scams in the 80's, the CDS markets, and the list goes on and on as to the plentiful examples of why the government MUST step in with regulations to protect investors and consumers.

he part about "post-hoc analysis" is almost exactly the opposite of the truth: the Austrian school uses a priori analysis from first principles to derive general laws of human action that apply no matter the circumstances.

Oh, so they're like the predictions of nostradamus then?.. some austrian school junkie predicts something vague will happen in the vague "future", and, much like psychic friends, it inevitably happens.. "oh look i'm right".

This is in sharp contrast to the chicago school which uses actual economic data to make actual predictive price models using real statistics which say "on this day, the price of gas should be, with a margin of 2% error, $X", and are correct enough to be used in decisions at the corporate and state level.

Re:Less is More

[Logic and Reason]

You're kidding right? Do you think economic data going back centuries is not enough?

It is not enough. You do not seem to understand how the scientific method works: you come up with a hypothesis that explains some phenomenon, then you design an experiment that is capable of falsifying that hypothesis. Such an experiment needs to have controls, and needs to be repeatable. Looking at historical data fails on both counts; as a result, you can justify almost any macroeconomic hypothesis by looking at the data in a certain way.

The gangsters of the roaring 20's, Enron, Tyco, The S&L scams in the 80's, the CDS markets, and the list goes on and on as to the plentiful examples of why the government MUST step in with regulations to protect investors and consumers.

Doesn't the fact that these kinds of examples continue to crop up show that the government is not very good at preventing them? See, for example, Bernie Madoff and the $50 billion ponzi scheme that the SEC failed to recognize for over ten years, even though they've been getting warnings about him since at least 1999.

This is in sharp contrast to the chicago school which uses actual economic data to make actual predictive price models using real statistics which say "on this day, the price of gas should be, with a margin of 2% error, $X", and are correct enough to be used in decisions at the corporate and state level.

Oh? Please point out some Chicago school economists who are currently making such predictions, so we can see just how accurate they are. And if they can predict such small details, then certainly they must have seen the current financial situation coming, right? Unlike the Austrians...

Re:Less is More

[tsm_sf]

People sitting around doing nothing is better than people going around wasting resources and being destructive.

I can guarantee you that one leads to the other.

Re:Less is More

[plasmacutter]

It is not enough. You do not seem to understand how the scientific method works: you come up with a hypothesis that explains some phenomenon, then you design an experiment that is capable of falsifying that hypothesis.

how about one on monetary policy.

You raise interest rates, and see what happens. You lower them and see what happens.

You do this over a number of decades. You have numerous counterparts in other nations do the same, but at different times.

The same thing happens every time.

I'd call that testing under the scientific method.

Oh? Please point out some Chicago school economists who are currently making such predictions, so we can see just how accurate they are. And if they can predict such small details, then certainly they must have seen the current financial situation coming, right?

Actually, they did. They were hollering about a bubble for ages. I was one of the people who looked at the numbers and said "this is not sustainable".

Politicians and investors don't like to let news like this travel too widely though. The investors want to maximize their gain before they "get out" when the bubble bursts. The politicians don't like to have their pet policies proven wrong.

As for your friend mr schiff.. he was only saying this in 2006?.. was he under a ROCK?!

Talk about pointing out the obvious.

Re:Less is More

[DragonWriter]

The economy didn't improve for a long time under Roosevelt either.

In fact, the recession that began in August of 1929 ended in March of 1933, just a couple of months into Roosevelt's first term, and the next four years saw what was, a pretty decent expansion; but things had gotten so bad in the long recession that preceded Roosevelt's term that even with that strong growth, conditions were pretty bad throughout the expansion. (e.g., unemployment, while it improved quite a lot from the 25%+ it had reached at its worst, never got out of the double digits, either during the 1933-1937 expansion, or even, IIRC, prior to WWII.)

So its pretty completely inaccurate to say that the economy did not improve for a long time under Roosevelt; it stopped getting worse and started improving almost immediately under Roosevelt, its just that the economy had gotten so bad that it could improve substantially and still be miserable. Which is one reason why we might not want to let things get as bad as they did in 1929-1932 before working really hard to turn them around.

Re:Less is More

[XDirtypunkX]

Then again, there were some years of stupid growth again under FDR prior to WW2 and he did something... but not enough.

Re:Less is More

[plasmacutter]

In reality, the economy is what is left after all artificial valuation has crashed. It can't die, only the economy as we know it can die and that shift of real wealth could very well have been a good thing.

Not true.

When artificial value deflates, the economy has a tendency to over-correct and move into a downward spiral as people lose confidence.

Re:Less is More

[DrgnDancer]

It is arguable, and is being argued by economists, that Roosevelt was simply too little too late. Had the same sort of reforms and programs been attempted years earlier it could have been significantly more effective. Remember that the Great Depression started in 1929 and Hoover did almost nothing for over a year. Then he tried some band aids for a couple of more years. Roosevelt inherited almost 3 years of minimal attempts to mitigate the effects. In contrast, the government wasted no more than 6 months, and arguably less this time around before attempting extraordinary measures. Only History will be able to see whether this was more effective or not, but it's different enough to be difficult to compare.

Re:Less is More

[shaitand]

'When artificial value deflates, the economy has a tendency to over-correct and move into a downward spiral as people lose confidence.'

Artificial valuations are affected by confidence. Actual wealth cannot. Confidence can affect artificial valuations like the stock market and bank balances, it can't evaporate houses, cars, and bars of gold.

Comment removed

[account_deleted]

Comment removed based on user account deletion

It's a win/win/win

[PinchDuck]

Our deficit hits a Trillion dollars, India gets a windfall from all the software they could write, and China gets to ship us a hundred million compromised Cisco routers. What could possibly go wrong?!?!?!?!

I vote no.

You should.

[khasim]

But, but... that's not how the free market works, is it? If I can offer services (me) for less than someone else, why shouldn't I?

But what is best for you personally is NOT always what is best for the economy of the USofA.

The "Free Market" is a fantasy based upon impossible assumptions. Only if the consumers and producers have PERFECT knowledge of ALL the ramifications and costs of the transaction does it work. And then only if the population as a whole shares the same values.

Which is why we end up with all kinds of regulations on it.

Re:You should.

[tweek]

Who cares what it best for the US Economy? The most important unit in the world is the individual.

If I want work, I'll offer my services at a rate I see fit. I'm not here to prop up your salary.

Don't try and bait people with some false sense of patriotism.

You say the Free Market is a fantasy because you don't have the ability to compete yourself.

Re:You should.

[tehdaemon]

So, you are saying that 'what is good for IT is good for america?' Cheaper labor is good for the economy as a whole - as it frees up cash for other productive uses. Ain't that the chief reason China is so competitive? The fact that it will hurt you poor IT wallet just makes you another pleading special interest economic illiterate.

The only 'fantasies' about the free market are that a) it has ever really been tried and b) that the special interests would ever let it alone. - On second thought, b) is a pretty damn big fantasy, built on impossible assumptions - just not the ones you had in mind.

T

Re:Love it!

[fotbr]

Don't talk crap?

You're telling me that "may not be great" is good enough. I say to hell with that. I want better, I can pay for better, and I'm willing to pay for better. But, and this is the the part that most non-us-ians don't understand -- I don't want more government, in any way, shape or form.

I understand that a government run program will provide some baseline of services, but settling for "good enough" is not something many US citizens like. Especially those of us who pay taxes, and would end up footing the bill for everyone else, in return for diminished services. In other words: pay more, get less.

I'm by no means "upper class", but the only people who like this idea are those that don't pay anything now anyway -- either already on the government dole in some form, or that are still living on mommy's and daddy's money.

Private Roads, the libertarian achilles heal.

[coryking]

Just once, I've love to hear a die-hard libertarian explain how privatized roads would work. Just once. I'm not talking highways either, I'm talking arterials, residential roads, etc. And don't cop out and point to tiny road networks found in gated communities. Tell me how you'd have a privatized road system on the scale of say, New York or LA.

And if your answer is "it would be impossible now", explain how you could, from scratch, create a privatized road network that would then give birth to a city of that size.

For extra credit, explain if it is nessicary to create a standard for signs, lighting, turn signals, mirrors, cross-walks and such. If it is, explain how this would be legislated and if it is not legislated who would regulate such things.

Re:Private Roads, the libertarian achilles heal.

[tweek]

What do libertarians have to do with it.

First off, most Libertarians are concerned with the proper roll of the federal government as defined in the Constitution. That has nothing do to with roads per se or even having those handled by private entities.

Secondly, there's a valid Constitutional argument that the federal government does, indeed, have a role in roads under the authority for interstate commerce.

What many people argue for, in terms of privatization, is getting the government out of the business of actually staffing the show. Why do we have such a large DMV? Why not farm the maintenance out to a private company that has to go through a bidding process?

I've never argued that roads need to be privatized but I have argued that we don't need a multi-thousand employee DMV when a private company can do it much more efficiently.

Re:Private Roads, the libertarian achilles heal.

[CodeBuster]

Just once, I've love to hear a die-hard libertarian explain how privatized roads would work. Just once.

They work quite well and in France of all places (hardly a Libertarian paradise). There are 1,00,960 km of roads in France and unlike many other countries, most of them are toll and operated by private companies such as Société des Autoroutes de Paris Normandie (SAPN). Now, before you respond, "Well, nobody drives in France" it is important to realize that France is among the most car dependent countries in Europe with 937 billion vehicle kilometers travelled in 2005 (85% by car). Despite this extensive private road network the public transport in France, as in many other developed EU states, is excellent (particularly by American standards) with high speed rail service, trams, and light railways providing extensive connections.

Now obviously it is not practical to privatize every last minor road and many forms of public transportation, street cars and buses for example, share the same local road networks as private vehicles. However, the example in France demonstrates that a quality network of highways and even regional roads can be maintained quite well by private enterprise. Indeed, that is more equitable. Why should people who never use the Highways pay for them? If they only take the bus and use trains or airplanes for longer trips then why should they pay for highways with their taxes?

The problem comes when people on both sides try to paint the issue of public vs private roads as an all or nothing proposition without acknowledging that a balance of the two is really what yields the best results.

Re:Private Roads, the libertarian achilles heal.

[SETIGuy]

What many people argue for, in terms of privatization, is getting the government out of the business of actually staffing the show. Why do we have such a large DMV? Why not farm the maintenance out to a private company that has to go through a bidding process?

"Private business is always more efficient" is also one of the lies that never gets challenged. For anyone who has been on the buying end of a large contract can tell you is that "low bid" is equivalent to "low quality", "inexperienced workers," "behind schedule", and "over budget" and that no amount of oversight changes that. The reason why is obvious to anyone: profit motive.

For any job with a finite time frame, there is going to be a minimum cost required for engineers, workers and materials. Now add 10% profit, and you've just made the job more expensive than it would have been for the government to do it. Now add some government engineers and managers to oversee the work. You've just added more cost to a price tag that is already too high.

Now throw in competition to be the low bidder. Well, a company isn't going to cut their profit, so the only options are to cut workers below the minimum necessary to meet schedule, cut material quality, and to pay off the inspectors not to notice how you're screwing the state. Then when it becomes apparent that you won't meet schedule, you start asking for more money. What are they going to do, stop the job? Hire someone else? You've already earned your profit on what you've done so far, what do you care if they give the rest of the job to someone else?

Re:Private Roads, the libertarian achilles heal.

[A non-mouse Coward]

Just once, I've love to hear a die-hard libertarian explain how privatized roads would work. Just once.

"libertarians" believe in private property, yes. But to argue that all libertarians want all roads private is just as stupid as making all citizens pay for all roads with federal tax dollars. The primary notion is decentralization. If a community wants to collect local tax revenues (via property, sales, or income tax) to pay for local roads, that's OK by a libertarian. A libertarian wants the LIBERTY to choose whether or not to live in such a location. In some places, it makes economic sense to do so, because free roads (and parking) may provide a boom to local economy.

But a libertarian also wants the freedom (liberty) to choose to live on the end of a long private road with no trespassers or passersby. It's the freedom of choice.

I'm also curious how many libertarians would want to live in large megalopolis cities like LA or NY.

Re:Private Roads, the libertarian achilles heal.

[Cochonou]

There are 1,00,960 km of roads in France and unlike many other countries, most of them are toll and operated by private companies

I'd like to stress that you're talking about highways here. Most of the highways in France are run by private companies (3/4).
As far as I know, most of the other roads are run by the state (route nationale) or the regional collectivities (route départementale). Some regional collectivities might subcontract the operation of a few regional roads, but this is far for being the typical case.

Re:Private Roads, the libertarian achilles heal.

[LanMan04]

Why should people who never use the Highways pay for them? If they only take the bus and use trains or airplanes for longer trips then why should they pay for highways with their taxes?

You'll pay for it anyway because everything you touch in your life has something to do with road transportation.

1. Produce company needs to ship vegetables to the market
2. Their trucks need to use, and pay for, private road use to get their produce to market.
3. They mark up their prices accordingly.
4. You pay higher price, which includes road use.

Name a commercial transaction that doesn't have someone driving somewhere as a previous step. Since everyone will need to pay for it anyway, just make it a tax. Problem solved, and without funneling (more) of your money into the hands of private individuals, who will take a big 'ol chunk of profit out, making the whole thing more expensive in the long run.

Re:Private Roads, the libertarian achilles heal.

[CodeBuster]

Since I am not a French citizen, nor have I lived in France I cannot say how good or bad the present private highway system in France is from personal experience, but the highways in France have been privatized for some time now and the fact that they are private does not seem to be a big issue in France. Perhaps they eat more locally grown produce there so the highway costs are not as much factored into food purchases? Whatever the case may be the French seem to be in no hurry to nationalize their highway system, so draw your own conclusions from that.

Re:Private Roads, the libertarian achilles heal.

[DragonWriter]

Secondly, there's a valid Constitutional argument that the federal government does, indeed, have a role in roads under the authority for interstate commerce.

So long as roads are used by the postal service, there's an even better argument that the federal government has a role in roads under the Article I power related to postal roads.

I've never argued that roads need to be privatized but I have argued that we don't need a multi-thousand employee DMV when a private company can do it much more efficiently.

Please provide evidence that a combination of a private contractor would rationally be expected do the work of the DMV of any particular state "much more efficiently". AFAICT, the only thing backing this idea is the quasi-religious faith that the private sector is always more efficient at doing everything

Re:Private Roads, the libertarian achilles heal.

[LanMan04]

Oh, I agree that the French system appears to work, no argument there. I just wonder if it's really more efficient, or if it's "what they've always known" as opposed to a conscious choice based on experience. Does anyone know when they went private, or if they've always been private?

"Broadband stimulus" - bad idea

[Animats]

What do we need a "broadband stimulus" for? Why subsidize TV over IP, torrents, and p0rn? That's the only reason for more bandwidth than we have now. 90% of US "active internet users" already have something faster than dialup.

About 67% of US households have a broadband connection. Only 58% have cable TV. Well under 50% get a newspaper delivered. What's the problem?

With the exception of South Korea, all the countries with higher broadband penetration than the US are tiny, snowbound, or both.

Steve Clone

[JackassJedi]

"$30B IT Stimulus Will Create Almost 1 Million Jobs" No wonder it cost him some proteins. Cloning ain't soft on the body.

Re:Steve Clone

[Kvasio]

I could understand why someone ordered 1 Million of Jango Fett's, but why the hell anyone would need 1 million of Steves?

Alright.... it diverts jobs... so?

[brian0918]

Alright, so it diverts jobs from the private sector to the public sector, thus leaving private companies that worse off. Does it actually result in any wealth creation, or are we simply trading prosperity today for poverty tomorrow? An economy is not build on jobs, but on production.

$30billion?

[ionix5891]

whats that in "X days in Iraq"

Re:$30billion?

[man_ls]

About six months worth. ($200 mil/day)

Re:Love it!

[Rycross]

Bullshit. My friends and I would definitely like some tax-funded universal health care, and we all hold down jobs, pay taxes, and pay for our own health care. We have a friend with a severe illness, and have seen the private system fuck him over and prevent him from reaching his potential. We want universal health coverage because we respect peoples' freedom and right to life, and we're willing to suffer (very very very) light inconveniences so that we can secure this. We are not selfish assholes.

I have no faith in the private system. The private system will fuck you over hard and fast given half an opportunity if it can increase their profits by .001%. I don't think people should have their freedom and even life taken away because they had the sheer audacity to become ill.

Apple is safe now

[mmustapic]

With 1 million new Steve Jobs the reality destortion field will be stronger than ever.

Re:"Hiring people" != "Create Jobs"

[JoeMerchant]

Spending money the government does not have

Ever since we quit using hard currency, money has been an imaginary construct anyway, and any money the government "has" theoretically comes from taxes anyway...

blah

[coryking]

Government didn't get out of the way enough for details that didn't matter, yes. But at the same token, government didn't get involved enough in areas that *did* matter. Say corporate bond ratings. Say helping to spur a some clearinghouse for default credit swaps so they can be traded in public view.

Government *can* help. They can help by regulating the system to make it more transparent. The lack of transparency leads to a lack of trust in the market. Lack of trust leads to... well you are living it in now.

Re:blah

[tweek]

This I can agree with to some extent. It would obviously depend on the details.

Take the whole Microsoft antitrust case. As a free market capitalist, I had trouble reconciling my feelings on the case vice my feelings on capitalism.

Antitrust is one of those itchy issues. When it comes down to it, antitrust legislation is there to ensure that the people who would abuse the monopoly they've earned in a market segment allow competitors the same opportunity.

Microsoft was the enemy of capitalism in that case.

Then sometimes we end up with useless legislation like SOX which has done nothing more than prop up legal and accounting businesses as well as storage and data retention businesses.

Re:blah

[Joey Vegetables]

Microsoft committed significant amounts of fraud in order to acquire and maintain its monopolies. Many libertarian commentators failed to recognize this, because the nature of the fraud (mostly lying about its APIs, file formats and such) was somewhat technical in nature and not readily understood by non-technical people. Also, Microsoft used the force of government to empower the BSA mafia (apologies to the real Mafia) to enforce contracts that were of highly questionable validity in the first place, and arguably to commit extortion as well.

In my interpretation of a libertarian society Microsoft would not have been forced to disclose this information, but would have had to do so accurately if it did so at all. It could have chosen to disclose truthfully - in which case interoperability would have prevented the monopoly - or it could have chosen not to disclose at all, in which case there would be no Windows-only third-party software, and again no monopoly. It is only because it was allowed to fraudulently advertise specific details about its APIs, file formats, etc., and then break those just enough to prevent competition (but not enough to prevent third-party software from being written), that it gained and maintained a monopoly position in spite of having a fairly crappy product.

And, of course, this analysis assumes for sake of argument that current IP laws and practices would exist in a libertarian society, as would limited liability for corporations. Libertarians are divided on both issues, but I'm strongly against both at least in their current form, and without them, my case would become even stronger. Without limited liability, investors would be far more cautious about investing in companies that act unethically or illegally. And without software patents (among other IP abominations) reverse-engineering would probably have broken the MS monopoly much sooner than it did.

Money Obsessd Nation

[mosb1000]

I would like to take this opportunity to remind Shashdotters that money is an abstraction, which generally represents value. Many people seem to think it is the other way around.

For example, you talk about the "money multiplier" without realizing that is does not represent an associated "value multiplier". Multiplying is inflation. It is brought about by lending, not exchange (you put it in a bank, they lend it to someone else who exchanges it with someone else who puts it in a bank, etc. . .). It is approximately the reciprocal of the reserve ratio (the % of deposit a bank is required to keep in cash).

Spending money now will only cause an increase in future value/resources if it is invested wisely. People seem to think a return is automatic, but it isn't. The government is not known for it's ability to spend money wisely.

People are sitting on their money right now because they got burned on their previous bad investments and the want a clearer picture of our economic situation before they invest. This is a good thing, because people have been in the habit of expending resources at a rate they can not sustain. Now they are slowing down and thinking more about what they are doing.

The last thing we need right now is economic stimulus. Why would you want to trick people out of living in the real world and back into the fantasy our nation has been living for the last 60 years or so? Do you want us all to die?

Think what you would get with $700 Billion

[Dan667]

But that kind of money is just stupid to give away.

Re:Or...

[MBGMorden]

No, he doesn't mean anything. He's just another parroting fucktard, repeating some stupid-ass email he got from someone who used the British definition of billion = million million, rather than a thousand million.

What does it matter what the British definition is? He stated that $1 million to each person would cost $350 million.

When broken down to:

$1 million multiplied by Y = $350 million

Y is going to be 350 people regardless of what definition you use for million.

It won't work this time...

[EddyPearson]

The Keynesian route is a dangerous one. In my humble opinion we need to take a monetarist route out of this hole...

As Keynes' system says, it's fine to create deficits during an economic downturn, in fact it's encouraged to stimulate growth, but it can't work without paying off those deficits when times are good and saving.

Most 8 year olds understand this concept.

We're (UK, US, most of the western world) carrying around an almost unprecedented level of debt, debt which we have made no real effort to pay off. Even during the 90s and early 00s when business was booming, we continued to borrow.

We have to stop spending money like we're afraid of it.

Funny:
http://consumerist.com/consumer/clips/snl-skit-dont-buy-stuff-you-cant-afford-252491.php

Re:It won't work this time...

[DragonWriter]

The Keynesian route is a dangerous one. In my humble opinion we need to take a monetarist route out of this hole...

Uh, the Federal Reserve has been desperately doing everything possible in terms of monetary stimulus, cutting interbank loan interest rate targets to essentially zero (though rates had already fallen on their own to zero) and pumping out something like $2 trillion dollars to increase the money supply.

This has had, essentially, no effect. (Of course, Keynesian policy includes everything in the monetarists' arsenal as a component of stimulus, where Keynesians and monetarists disagree, outside of interpretation of past events, is whether fiscal stimulus is useful in addition to monetary stimulus.)

As Keynes' system says, it's fine to create deficits during an economic downturn, in fact it's encouraged to stimulate growth, but it can't work without paying off those deficits when times are good and saving.

Uh. yeah. This is exactly what Keynes says. Since you seem to agree with Keynes, here, I don't see why you are describing Keynesianism as "dangerous". What is actually dangerous is forgetting Keynes after the recession is dealt with, which is unfortunately common.

That doesn't mean that restricting oneself to the tools that have proven ineffective is the better choice when you are actually in a serious recession.

We're (UK, US, most of the western world) carrying around an almost unprecedented level of debt, debt which we have made no real effort to pay off. Even during the 90s and early 00s when business was booming, we continued to borrow.

The gross debt increased, but the gross debt isn't what is most important, the debt to GDP ratio is, and that did not grow for all of that period. Taking a longer view, the debt to GDP ratio fell for most of the post-WWII period until Reagan took office, grew under Reagan, exploded under the first Bush, grew at a slowing rate under Clinton until 1996, fell for the remainder of Clinton's term, and then exploded again under the second Bush.

We are, as a result of the last few years, in a particularly bad starting point going into this recession, and there is considerable reason to think that, as a result, fiscal stimulus, while still more likely to be productive than further monetary efforts, will not be as effective as it would have been if the debt:GDP ratio going into the stimulus efforts was lower. That's not a reason not to pursue fiscal stimulus; instead, its a reason to be very careful that any spending programs or tax cuts are structured to be temporary (i.e., have definite sunset provisions), and to make sure that once the economy gets going policies are adopted to bring the debt to GDP ratio back under control. Its something the US can do, and has actually done pretty consistently in the post-WWII period when the President was not a Reagan or a Bush.

"you get a whole host of other benefits"

[John Hasler]

Yes. You get virtual bridges to nowhere.

Reality 101

[coryking]

Nope you can still self-employed and just deal with your medical bills yourself.

You assume medial costs are cheap. Unfortuantly reality called and would like to inform you that they are not at all cheap.

You don't understand what freedom is, likely because you've never seen a country that has much of it.

Just maybe it is because your vision of "freedom" simply could not function in a system containing more then a few dozen people.

And if your reply contains "the problem is, nobody does X and if everybody just did Y", then you fail. Anytime an argument requires "If only everybody did Z", it means something is wrong with your argument, not society.

Re:Love it!

[Hatta]

I'm by no means "upper class", but the only people who like this idea are those that don't pay anything now anyway -- either already on the government dole in some form, or that are still living on mommy's and daddy's money.

Yeah, fuck you. There are plenty of people working full time, paying taxes and bills, who simply can't afford another large bill like health insurance. For them, government health care is quite literally better than nothing.

Not everyone who is poor is a deadbeat. Most of us work quite hard. So you can take your assumptions and shove them somewhere extremely uncomfortable.

Re:Love it!

[Average]

Are you suggesting that employers don't do plenty to snoop on a prospective employee's health (and that of his family)? Or, to hound out people with a sick child who run up the group plan costs? Yes, it's illegal. And it happens every single day in this country.

Then we should invest in manufacturing capacity.

[RustinHWright]

I agree that putting people to work is good but if we're going to do so, why the f*ck not have them do that work building manufacturing capacity instead of just assembling and installing yet more parts we're depend on others to support and upgrade?

It really wasn't that many years ago that most of what was inside a computer was made in America, not just the design for the box. If we're so all fired up to undo the damage that shortsighted corporations have done to this country, then we should get our act together and subsidize and assist the creation of new manufacturing capacity. Not commodity stuff like RAM chips but more high end components and maybe even a few strategic assets like LEDs.

We're finally getting more factories running that make photovoltaics in this country. Why the hell are we still allowing ourselves to be held by the shorthairs in what is supposed to be one of the few fields where Americans still excel?

Re:Love it!

[Omestes]

Hyperbole much?

And here is my stock question to anyone who says the word "right"; What the hell is a right, and where the hell do they come from? I'm sick of all this "rights" talk, which is generally just a cover for greed and Ayn Randian egotism.

I'd prefer health to be a so-called "right" over "me having tons of extra money". Since A) Health precludes all other things; B) health has a larger impact on the general well-being of society than you owning an extra plasma TV; and C) it is an essential quality to being, as opposed to "the right to lots of money". You can live without excess money, but you can't, obviously, live without your health.

Yes, you are an individual, and you might be blessed with enough money for decent health insurance (is there such a thing in America anymore?), but millions of others are not. Those people count in the equation too, since government exists for them as well. Government actually exists on the behalf of ALL of society, rich and poor, insured or not. Government does not exist to benefit you specifically, it exists to benefit ALL of us. It, in a sense, exists to keep you from stepping on my toes, and visa versa. Thus if there is millions of people with a problem, it is the governments job to help, by its very existence. If this requires a little pain (not equal to the millions of others suffering) to the rich, then sobeit, as long as it results in a net gain of happiness, well-being, or such.

I digress. Generally the terms "rights" is replaced in my brain with the phrase "prepare for some borderline sociopathic ad-hoc justification for greed and egotism"

How do you define risk?

[RustinHWright]

A company must turn a profit to succeed. A government just needs to accomplish a decent rate of return on their investment for the entire aggregated economy it governs. If Blah Corp takes on the risk of creating a new design it fails if Goo Corp copies it and gets to market first. If the U.S. government takes on the "risk" of, say, putting in more internet capacity, the "downside" is limited to overestimating demand. That's what everybody was saying Korea did in the nineties. Now that those fat pipes have helped Korea become a powerhouse in a dozen fields, nobody is saying that anymore.
The only real risk that government faces is if the level of corruption is so vast that nothing gets built. This is a real risk, as anybody who has watched the fiasco of the "digitizing" of the patent system call tell you about. But it is addressable and is a risk for corporations, too.
Look at what happened to the OLPC project. Their own devices have been meh at best. But it's pretty damn obvious that they inspired the netbook market, which has been a vast win for everybody, including their intended recipients. No OLPC, no Intel Classmate, no EEE PC, and so forth. And, from the looks of it, we'll be seeing the Pixel Qi tech coming out in another year or two, which will be yet another vast win for their intended result. Have they "turned a profit"? No. Have they achieved an excellent return on investment? Hell fucking yes.
In short, most of what makes a project "risky" to a profit-making entity is a null-value statement in a case like this.

Re:Love it!

[rudedog]

Group coverage plans (i.e: the kind you get from your employer) aren't allowed to exclude pre-existing conditions if you already had coverage

Isn't this because of laws, i.e., "governmental intervention". Which you claim is eroding our freedom. It's a bit hypocritical for you to be holding this up as a good thing only one paragraph away from deriding the government.

Since when is it a Zero-sum game?

[Beorytis]

Can't we have bridges and routers? We need both physical infrastructure and digital infrastructure, as well as ethical, spiritual, psychological, cultural, etc., etc., etc. We've been blowing our money on all the wrong things for too long.

Re:Since when is it a Zero-sum game?

[John Hasler]

It isn't a zero sum game. Politics is a negative sum game.

> Can't we have bridges and routers?

We don't need bridges. Everyone uses TCP/IP now.
 

really?

[dAzED1]

$30B IT Stimulus Will Create Almost 1 Million Jobs

30B/1M = $30k....

were they talking about giving $30B more than once? Otherwise, isn't it a million $30k/yr jobs that last 1 year?

Uh, no.

[Shivetya]

Corporations are merely collectors of taxes, so regardless if they actually have a payout to the treasury they are in effect only transferring wealth from American taxpayers to the government. They are nothing more than a proxy for the US government collecting money from income earners. I don't want them to have parity with the regular income earner because it means that even more taxes are indirect and the American citizen loses more. In other words, the more that taxes are indirect the more that fraud, waste, and abuse, of those tax dollars is hidden from the consumer and more of the true cost of their government is hidden.

If Americans were taxed for the full amount directly we might have real change in America. Instead by the use of class warfare including both between income earners and putting the taxpayer versus corporations government is effective at hiding its true cost to the individual earner.

As for trickle down, put it bluntly, if I stop spending my income on side items, services I could do myself, it will not trickle down. Suddenly that restaurant has less customers, that lawn service fewer contracts, that car wash gets less cars, and someone is out of a job. So it does trickle down very well. The problem is those who seek to portray it otherwise give extreme examples to bolster their case.

Trickle down works fine but the burden on the income earner is so severe that most attempts will fail because people rightfully don't want to give it up.

The greatest ponzi scheme is the American Government yet it our very representatives that seek to exaggerate and find any they can find in the private sector as examples of greed when in fact it is the very government doing this that is the greediest of them all.

umm.. Wont work

[VBJonC]

$30BN divided by 1MM jobs is 30K each employee. So you want to hire 1 MM people, for 1 year, then lay them off? Oh, how are you paying for rent, electric, equipment, etc? FAIL

$30K per face

[salarelv]

How many months can one IT employer work for $30 000? Maybe 7-10 months. The crisis will last at least one Year. How the stimulus can offer 1M jobs?

Re:Or...

[callinyouin]

How about "tomahto"?

Re:Love it!

[Dragonslicer]

If you thought arguing with the insurance company was bad just wait until you get to argue with a bureaucrat instead.

You say that as if there's a difference.

Then how about open protocol transit.

[RustinHWright]

I have at least a partial response to that. Open source, shared protocol transit systems.

The internet is, by some standards, an excellent example of what you're saying can't be done and the reason that it works is that the shared protocols are adhered to.

Keep in mind that our current road systems are, literally from the ground up, products of over a hundred years of mass organization thinking. Everything about how they're built, from signage to surface composition, to determination and enforcement of traffic regulations, is an outgrowth of how we handle vehicular rights of way. And then remember that all of this has been subject to vast bribery and subversion by car companies, oil companies, and the like. As such, not much of it would qualify as good engineering. And trust me, I've spent plenty of hours of my life being ranted at by engineers and managers at various DOTs bemoaning this in great detail.

Anyway, go, read the blog post, and think about open standards and shared protocols. Then think about implementation of transparency of operations, another thing that organizational procedures have been advancing for at great speed. This kind of thing can be done. And we're getting better at it all the time.

Re:Love it!

[5KVGhost]

Like I said, it isn't perfect, but compared to your system where its possible to have no health cover at all, its good enough.

Fair enough. The problem is that your government-run health care system is free-riding on those countries that actually invest in improving the state of health care. Your "good enough" standard of care is constantly advancing thanks to those improvements in the status-quo. Fortunately for you, these new developments will eventually drop to a price that your government thinks your health is worth. Or, if you don't feel like waiting, you can hop on a flight to the US and pay out-of-pocket using all that money you didn't need to spend on those health insurance premiums.

Simply put, private companies in the United States pay a huge chunk of the R&D costs for new drugs, new procedures, new equipment, and improved medical training. It's hard work and costs huge amounts of money, but the potential for progress and profit in open markets offsets the many risks. You enjoy the benefits of those investments even if you never set foot in a US hospital. And I help pay for it. You're welcome.

Re:Love it!

[loafula]

The argument that you can't get "new" health insurance is not an argument to remain at a job you hate. Group coverage plans (i.e: the kind you get from your employer) aren't allowed to exclude pre-existing conditions if you already had coverage.

You know why they aren't allowed? Government regulation.

Who modded this crap up?

[GuloGulo]

"Now, where that is nonapplicable, is in the fact that a lot of dollars are spent in "investment", and those dollars are evaporating at an amazing rate. In other words, if you leave the dollars with the rich, then they will disappear with no net benefit at all."

This is only true if "the rich" (true colors there bud) are investing in losing investments.

GUess what, there are many investments that aren't losing.

Your assumption, and therefore your point, fails totally.

And so do the mods who agreed with you without bothering to read a post that outs itself as ignorant immediately.

What about the jobs lost due to the cost?

[blitz487]

Never mind all the jobs lost from sucking $10 billion out of the economy to pay for those stimulus jobs.

Re:What about the jobs lost due to the cost?

[John Hasler]

It's ok. Only Republicans will be harmed.

Re:Or...

[MBGMorden]

Why do you need 20 billion? With 1 million invested properly, I could live off of it for the rest of my life and stimulate the economy.

He mentioned hiring a harem . . . I'm not sure "proper investments" are really a goal he was striving for :).

Re:Love it!

[MBGMorden]

Just one note about care being there when you need it in an emergency: in the US it's illegal for a hospital to refuse emergency treatment to anyone.

I happen to have health insurance. Very good health insurance as I work for the government. However, I recently had an episode where I had to visit an emergency room (was having shortness of breath and passed out at work). A coworker drove me over to the hospital and since I didn't arrive via ambulance I had to check in myself. When I checked in I started to mention my insurance and proceeded to get my card and the desk clerk stopped me and said "We're not allowed to even ask. All the insurance billing stuff will be handled later.".

That was that. I was asked for my insurance/billing information as I checked out.

MOD PARENT UP.

[SETIGuy]

Insightful.

Re:Love it!

[jcnnghm]

Me too, I can't wait till the doctors office is as well managed as the DMV.

Rather see H1B restructured or rolled-back

[otis wildflower]

I think US citizens in IT would be better served by either rolling back H1B visas or by mandating that those that are issued to fill critical jobs that Americans don't have the skills for are paid 2x the prevailing comparable wage.

H1B should only be about finding people to do work that there are not enough Americans to do, at any price, so that desperate employers would be more than willing to pay 2x the prevailing comparable wage for them.. For example, if a company in CA wanted to find a senior DBA but simply couldn't at the prevailing wage of $80k/yr, they could hire H1b but only if they were paid at least $160k/yr.

Not holding my breath.

Re:Rather see H1B restructured or rolled-back

[MidnightBrewer]

So you're suggesting that you put a portion of the tax-paying workforce out of work and repatriate them to their former countries? How is that going to help the economy?

As an American who lives in a foreign country working on a visa, I'm damn glad they don't decide to revoke my visa in order to help native citizens. I would be very screwed, and out of a relatively stable, recession-proof job. I'd be forced to pay the high cost of moving home and suddenly become a burden on the American economy as I would be unemployed and in debt. Not a very sound economic policy.

The American public would be better served if H1B visas were more strictly enforced, not if salaries were artificially skewed to punish companies. I agree that the visa should be used to bring in foreign talent who are the best at their jobs, not as a simplistic way to give companies a way to increase their profit margins.

My biggest concern in all of this is that the companies who received government funds would mimic the banks in buying out other companies and not creating new jobs at all.

Re:Love it!

[Rycross]

Given the last time I had to use my insurance it was a 2-month wait because it was deemed non-emergency and had to schedule in with the "approved" doctor, well, I don't have much faith in this system's expediency either.

And the last time I went to the DMV, it was extremely well managed and efficient. The only places I've seen with terrible DMVs are places where they're under-funded.

Re:Love it!

[JoeMerchant]

If we pass this singularity where life expectancy advances faster than time itself, all economies are going to have a hell of a problem - most of the world is based on the idea that life is short, we all die eventually. The resulting population boom would be more than dramatic, and strains on natural resources would dwarf anything seen on Earth to date.

I hope I live to see it come to pass, but the problems we're complaining about today pale in comparison to what happens when virtual immortality is a reality.

Re:Love it!

[jbolden]

The statistics show the exact opposite. Median income is higher among democrats.

Re:he is ignorant of the reality (since 1996)

[Rycross]

And, given that his condition requires continual treatment, and the assloads of caveats with exclusionary periods and days without coverage (two months), its basically still incredibly risky for him to switch a job. That is, unless I'm reading this wrong, which is possible, because I'm terrible at parsing all the terms they use in these sorts of things.

He swaps to a new job, they don't like him, they fire him, *bam* death sentence. Disease not covered by new insurance? Death sentence. Current work finds out that he's looking and decides to fire? Death sentence.

The legislation does help a lot (thank you government, fuck you libertarians), but it doesn't put him remotely near the kind of mobility that members of his peer group enjoy.

No, UHC wouldn't solve his problems completely, but it would make them significantly easier to burden. The world cannot be made perfect and fair, but that doesn't mean that we shouldn't do our best.

Re:Or...

[JesseMcDonald]

Presumably they'd get the funding from the same place they're already getting $2.5 trillion (about $7.1 billion(!) per citizen) for their current "recovery" programs: inflation and debt.

Re:Love it!

[JesseMcDonald]

Government programs always look good when you want exactly what they're offering and don't consider the cost. For those who believe they would be better served by a different provider, or who end up being coerced into paying more than their share to subsidize the services you enjoy on the cheap, it's not such an obvious choice.

Re:Love it!

[Rycross]

Yes, and the gist of that is that we already have socialized health insurance. It's just that its far more expensive and inefficient. If libertarians want the true free market ideal, then we need to repeal that law. If you can't afford treatment then your life is not worthwhile, and its perfectly OK to let you die in a gutter. That's what an unfettered free market would decide, and precisely why I believe that health care coverage should be filed under "right to life".

Re:Love it!

[Rycross]

Every insurance company I have dealt with ever has been so thick with bureaucracy that I try to deal with them as little as possible. I don't see how the government can be any worse. Maybe not better, but definitely not worse. At least I wouldn't have to deal with it when I'm sick and waiting for my appointment.

Re:Love it!

[Omestes]

There is a difference between helping, and being a nanny. There should be room for personal responsibility along with room to nurture society. We have a democratic government, so its role is pretty much anything we say it is, within some constitutional constraints. If we all decide tomorrow that the ultimate role of the government is to give us cake, then that is its roll. No where in the constitution does it say that the government shall NOT offer care or assistance to those in need, so this is a potential role of government.

I'd rather, personally, the government do something that matters to real people in need, than much of what its doing now. I'd rather my tax dollars go to healthcare than to idiotic wars, and the goal of spying on every individual in the US. I'd rather it go to real people than locking up millions of pot heads, or to handouts to unviable, unethical corporations. I'd rather being helping Americans than Israel, or Uganda, or whoever we're throwing money at today.

Am I a slave because I disagree with all of these? I have to pay for all of these, and none of them are as ethical as helping people. Hell, I don't even drive a car, so am I slave to you since my taxes go to roads I don't use.

All of this aside, disagreement over the roll of government is fine, even healthy. I'd hate to live in a government ruled by any pure ideology.

I agree there is nothing wrong with a degree of greed or egotism. Until, that is, it starts to come at the detriment of others. When it becomes hurtful (I will gain at your expense), then it becomes immoral. I also find it rather distasteful when it becomes an ends to itself. I generally hate it when people pull the Ayn Rand card too, that somehow being a greedy sociopath is GOOD for society, far better than being a decent helpful human being. We're all greedy individualists to some extent, we all hold ourselves (and families) in higher moral esteem than others, but when it comes without compassion, then your just a parasite doing nothing for society as a whole.

I also get peeved when people think government exists (or "rights") to protect THEIR individual interests, at the expense of anyone else's. Your rights are not, and never will be, more important than everyone else's.

To shorten things up a bit; all things should be a compromise between individualism, and the good of others. When this balance breaks you have tyranny.

The last words of that economist.

[sethstorm]

He asks: 'Why don't they use a mechanical digger?''That would put people out of work,' replies the foreman.
'Oh,' says the economist, 'I thought you were making a dam. If it's jobs you want, take away their shovels and give them spoons.'

The famous last words of that economist before his unexpected demise. Trying to look towards the illogical extreme in that respect(scaling down) is only trying to appeal to absurdity.

Mod the parent down.

Re:The last words of that economist.

[mjwx]

The famous last words of that economist before his unexpected demise. Trying to look towards the illogical extreme in that respect(scaling down) is only trying to appeal to absurdity.

Uhhhh... that was his point.

...and from a region sold off to non-US interests.

[sethstorm]

...and Southern.

Re:Less is More... More is Less...

[davidsyes]

Lore or Mess?

Re:Bad economics.... TAG!

[davidsyes]

You're IT! Reminds me of a shell game...

Re:and that's why COBRA was created

[Rycross]

I couldn't remember if Crohn's was fatal or not, so I googled it, and found that there is a mortality rate, albeit low if treated. I was perhaps being hyperbolic by calling it a death sentence, but left untreated it is possible to cause death. Not everyone has it at the same severity, and I'd hardly stop at calling the removal of most of the large intestine (and possibly all) simply "unpleasant."

I also don't see how its unreasonable to claim that having to pay the full cost of health insurance over the course of 2-3 months, and being severely screwed if you happen to lose your job, dramatically lessens job mobility. I appreciate that this is a resource for Huntington's sufferers and that they have more medical costs than Crohn's. But this is hardly a case of problem-fixed-job-done. Nothing can be perfect, but we can do a lot better than "Well if you jump through the appropriate hoops and pay enough money, and don't have a run of bad luck, then you should be able to keep getting treated for your illness."

Its a good step, and it dramatically reduces the risk of a job change, but it by no means lowers it to the risk of his healthier peers.

Re:Love it!

[Shakrai]

It's a bit hypocritical for you to be holding this up as a good thing only one paragraph away from deriding the government.

I didn't hold it up as a good thing. I was merely pointing out that the argument that you can't switch jobs because of pre-existing conditions is incorrect. That mandate actually increased the cost of health insurance. Whether or not the benefits of that mandate were worth the increased cost is an exercise for the reader to decide.

oooh oooh I know! pick me! pick me!

[Iamthecheese]

Just once, I've love to hear a die-hard libertarian explain how privatized roads would work. Just once. I'm not talking highways either, I'm talking arterials, residential roads, etc. And don't cop out and point to tiny road networks found in gated communities. Tell me how you'd have a privatized road system on the scale of say, New York or LA. I would use the internet model. I would make small areas each responsible for their own internal transportation problems (residential roads) and make it known (in your "from scratch" scenario they would already understand) to them how paying for the backbones(highways and arterials) is in their best interests because if they do, they can travel to other places. The highways and arterials would be privatized, tolls charged for highways. Those with lower tolls get more traffic. Arterials would be funded by an entirely optional fee to each community or driver. Pay the fee, get a sticker for your windshield allowing travel on those roads. Traffice police would be paid for the same way, with the only penalty being: the car would be forbidden to travel on that road/group of roads/any major road for a short time/long time/ever. Private industry, when given a profit motive, can come up with very good ways of knowing car from car. Appeals possible in the case of theft, with coordination with local police. And if your answer is "it would be impossible now", explain how you could, from scratch, create a privatized road network that would then give birth to a city of that size. For extra credit, explain if it is nessicary to create a standard for signs, lighting, turn signals, mirrors, cross-walks and such. If it is, explain how this would be legislated and if it is not legislated who would regulate such things. Yes such standards are necessary, and can be handled by a standards organization. Tell me, was IP-6 legislated into existance?

Money will create 10 jobs first

[SupremoMan]

and those 10 will outsource the remainder of the jobs to save money.

Re:Love it!

[thermian]

Government programs always look good when you want exactly what they're offering and don't consider the cost. For those who believe they would be better served by a different provider, or who end up being coerced into paying more than their share to subsidize the services you enjoy on the cheap, it's not such an obvious choice.

That's an old argument that we proved was little more than rhetoric long ago. I hear it a lot from Americans though, always from Americans who currently have health insurance.

As long as such selfish ideas are upheld , you will always have an unfair system which is set up to benefit the providors, not the recipients.

Re:Love it!

[Omestes]

I thank you for the rational response.

Though the constitution doesn't really place our rights at any given source, the closest we get is the Declaration, and that doesn't hold water.

I have read my Locke, and agree somewhat with him (I'm more of a J.S. Mill person myself). Though I find the idea that rights are natural to be absurd, they have varied from culture to culture, and time to time, if those cultures even had a concept of them. In many "primitive" cultures these rights were nonexistent. Hell, America didn't even grasp "liberty" as a right until fairly recently. Though I can see some distinction here, since rights might be universally applicable to "people", and we change who we consider as "people" constantly.

Being that these rights are not universal throughout disparate cultures and times, then Locke either discovered something unforeseen to the world, or made a mere normative statement dressed in the guise of universal principle. If the latter is true, I'd rather accept Kant's Imperative as the origin of "rights".

In the end, I have a hard time seeing "rights" as anything but socially constructed to mirror the values (i.e. ad hoc) of that society, or to justify that society's history/goals.

Somalia's nice this time of year

[Richard W.M. Jones]

If you truly want to live in a country without government, please go and live in Somalia. Let us know how it goes. If you don't get shot.

Rich.

Re:Somalia's nice this time of year

[harl]

Hyperbole much? Don't put words in my mouth. Where did I say I wanted to live with no government?

A /million/ ??

[bentcd]

Isn't one Jobs enough? What have we done that we should have to put up with a /million/ of him??

Re:Love it!

[JesseMcDonald]

That's an old argument that we proved was little more than rhetoric long ago.

That's an old argument that we proved was little more than rhetoric long ago.

Seriously, where is this "proof" you speak of? All you've done is dismiss others' legitimate concerns out-of-hand.

... you will always have an unfair system which is set up to benefit the providers, not the recipients.

The providers don't benefit unless (a) the recipients believe themselves reasonably compensated by provided services; or (b) someone like you forces them to pay the provider despite not believing they are receiving adequate service. Such beliefs may be wrong, temporarily, but who are you to make that decision for everyone?

Re:It's still not the broken window fallacy, thoug

[phlinn]

True. The broken window fallacy seems to be referenced when other parts of "That which is seen, and that which is unseen" are more applicable.