Leaky Bucket Fiscal Policy
CARPE DIEM
Professor Mark J. Perry's Blog for Economics and Finance
Friday, June 05, 2009
About Me
- Name: Mark J. Perry
- Location: Washington, D.C., United States
Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan. Perry holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University near Washington, D.C. In addition, he holds an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota. In addition to a faculty appointment at the University of Michigan-Flint, Perry is also a visiting scholar at The American Enterprise Institute in Washington, D.C.
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11 Comments:
My version:
So we'll put money into the economy by taking money out of the economy and then putting it back in the ecomony by giving it to banks that can't lend it and hopelessly incompetent automobile companies that will only piss it away.
Yeah, that should work.
What is the point of this negativism? Do you believe we can cure the recession by balancing the budget?
This is like Fox News.
So, Greg, do you think we can cure the recession by increasing the deficit by trillions? Spending money that you don't have is a time-proven recipe for disaster waiting to happen.
Greg,
Borrowing is forecast to be $1,840bn – equivalent to around half of all federal outlays and 13 per cent of GDP. A deficit this size has not been seen in the US since the second world war. A further $10,000bn will need to be borrowed in the decade ahead, according to the Congressional Budget Office. Even if the White House’s over-optimistic growth forecasts are correct, that will still take the gross federal debt above 100 per cent of GDP by 2017. And this ignores the vast off-balance-sheet liabilities of the Medicare and Social Security systems.
Projected debt levels exceed anything we have seen in our lives. While it is critical that the financial credit crisis is resolved, the level of debt and 9% annual growth in M2 looks like a recipe for the next financial crisis.
Perhaps, you could elaborate on your reasons for optimism. Few of us wish to consider the future as presented above. Canada and Japan have taken decades of high taxes trying to claw their way out of debt. It is not an economic boon one wishes on one's friends.
This is what we get when we hire a lawyer to fix our economy and a community organizer to lead our armies.
That's like hiring an accountant to repair the foundation of your house and a movie director as a bouncer.
Talking about our problems is not negativism - it's realism.
Would you encourage an alcoholic to just go on drinking - and not enter rehab to start talking about his problem in order to free himself of the addiction? Obviously, no.
We have a severe problem in this country: too much debt.
Hope won't repay debt and hope won't stop us from accumulating more debt.
What the government wants to do is to increase the velocity of money in our economy. As you know, when money changes hands the government gets to tax it. The government therefore wants Tom to buy something from Dick who then buys something from Harry etc. Now that every Tom, Dick and Harry knows that the government is going to raise taxes and that he needs to save in case he loses his job. This causes the economy to shrink. People are holding on to their money instead of spending it. The velocity of money is low and is likely to stay low. Government tax receipts are falling and will stay low. The government will be forced to raise taxes on the poor and middle classes. Sales tax, value added tax, carbon tax, gasoline tax etc are coming.
Rich people will still be rich. They just will not risk their money in starting or expanding businesses. They will not hire new employees. They will be conservative with their wealth. The poor will be poorer. Fewer jobs will be available and wages will be low when 10-20% of Americans are out of work.
Competition for a job pushes wages down. The middle class will soon have an additional $10 trillion in public debt to service. The dollar will continue to plunge. Manufacturing will continue to hemorrhage jobs. Interest rates will soar, choking the economy.
You cannot increase the total prosperity of a country with high taxes, government seizure of businesses and redistribution of wealth. The pain will continue until new politicians are elected in 2010, 2012 or 2016.
I can live with deficit spending to keep the wheels greased while people are freaking out. What I think is outrageous is how it's being done. Not by cutting the government's take, but by increasing government spending.
Cut taxes (for real) and of course over time Congress will "correct" that temporary stimulus. Increase the size of government and it will never be reversed.
> What is the point of this negativism?
Uh, to directly highlight the assinine absurdity of this so-called "economic policy"?
If you think this works, I need money, just give it to me and I'll give it back to you later....
Less government taxes of course...
^ Yes because McCain and Palin would have solved it all - specially Palin and her 19 year old single mom daughter with real American problems right? Come on give me a break.
One thing is to say the Economic plan won't work and another one is to think the alternative option would have been better. How can you tell if it did not even happen?
Give it some time. Regardless, when the new president was elected the Dow was at ~6,500 points and today it's at least 2,000 points above that. That should be some sort of indication that things are indeed moving in a positive direction. Even more news are posted every day on this same blog indicating the economy is slowly but surely moving on.
As Greg says this is indeed like fox news. The comments people post in here some times are just outrageous.
Get back at me in 2 years and we'll see where we are, but for now try to work with it instead of complaining about something that is already done. If you had a better idea then why did you not speak up when you had the chance?
Don't forget Palin 2012, she will solve all the problems we have! because she has the brains.
"Get back at me in 2 years and we'll see where we are, but for now try to work with it instead of complaining about something that is already done. If you had a better idea then why did you not speak up when you had the chance?"...
So we should go along with this socialist boondoggle and let the Manchurian Candidate continue his war on business, eh?
Oh yeah, people did oppose the stimulus/bailout...
Recall the Stimulus
by Lawrence Kudlow
FDR's policies prolonged Depression by 7 years, UCLA economists calculate
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