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Thread: The Stimulus

  1. #1
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    The Stimulus

    Trades' last article pointed me to Recovery.gov, and it's interesting to see how the stimulus money was actually spent. In my opinion, a "good" stimulus meets the following requirements:

    (A) Injects money into the economy that was not there before the stimulus;
    (B) Directly impacts economic activity (i.e. not just "we will give everyone an extra $1,000, therefore they will probably spend an extra $1,000); and
    (C) Has the likelihood of generating follow-on economic activity (such as improvements to infrastructure that both require payments to workers and will make business more efficient going forward, or investments in new industries that will allow them to flourish going forward)

    Lets see how the stimulus stacked up. I'll take it in pieces and give my take (since I don't have time to do all of them at once).

    First, [URL="http://www.recovery.gov/Transparency/fundingoverview/Pages/taxbenefits-details.aspx#IndividualTaxCredits"]the $298.5B in tax benefits[/URL]:


    [LIST][*]Increased AMT Exemption: 64.7B. [B]My comment: This directly keeps money in the hands of individuals who would otherwise have been hit by the AMT. But [U][I]this is not a stimulus[/I][/U][/B]. [B]It does not encourage additional economic activity over and above what was already happening; it simply prevented people's tax bills from going up in the future. There's no multiplier effect here at all.[/B][/LIST]

    [LIST][*]25.7B in "American Opportunity Tax Credit" - which gives a larger tax credit for college tuition payments. [B]VERY VERY MUCH not a stimulus. The policy implications of this are debatable - but this should not have been included in a Trillion dollar emergency economic recovery bill. It has no immediate impact on economic recovery[/B][/LIST]

    [LIST][*]18.4B in "Child Tax Credits" for low/middle income taxpayers. [B]Again, not stimulus funding, though it puts dollars in pockets that can then be spent.[/B][/LIST]

    [LIST][*]10.7B in "First Time Home Buyer" tax credits.[B] Meant to encourage the entrance of new buyers to the housing market ("first time" makes sense, since if you are both selling and buying a home at the same time, it doesn't have any net effect on supply and demand), it did not really work. This is actually a "stimulus" provision, as it is meant to directly impact economic activity - but IMO it is a poorly targeted one, propping up a market and having few if any follow on effects.[/B][/LIST]

    [LIST][*]6.3B to exclude a portion of unemployment benefits from taxes. [B]Do I even need to say it?[/B][/LIST]

    [LIST][*]5.1B in Earned Income Tax Credit. [B]Ditto[/B][/LIST]

    [LIST][*]4.4B in more exemptions from the AMT. [B]See above[/B][/LIST]

    [LIST][*]1.1B in tax deductions for certain motor vehicle expenses. [B]See First Time Home Buyer section[/B][/LIST]

    [LIST][*]104.1B in "Making Work Pay" credits.[B] This is right in the "we'll give everyone extra money and that will stimulate the economy because they'll spend it" school of poor stimulus thinking[/B][/LIST]

    [LIST][*]38.45B in changes to rules governing business expenses and deductions. [B]None of which really related to economic activity. Again, this is the "Tax Cuts" theory of stimulus spending.[/B][/LIST]

    [LIST][*]230M in incentives to hire unemployed veterans and young workers. [B]Largely ineffective and there is no requirement that the business taking advantage of the incentive show a net gain in employees (in other words - fire a current employee, hire a vet at the same salary, and the business saves money at $0 in net economic gain)[/B][/LIST]

    [LIST][*]10.4B in credits for making homes more energy efficient. [B]Made it 30% cheaper to make energy efficient home improvements; may have stimulated some such improvements. Would like to see a study comparing the rate of such projects pre- and post-stimulus.[/B][/LIST]

    [LIST][*]420M in alternative energy credits. [B]Same as above - interesting to see what effect this had, if any, on the alternative energy industry.[/B][/LIST]

    [LIST][*]370M in credits for sourcing energy purchases from entities using renewable sources. [B]This isn't a stimulus at all - more a policy choice. It's a zero sum equation - electricity will be purchased from somewhere no matter what - and this is merely tilting the playing field towards a favored player and away from a non-favored one.[/B][/LIST]

    [LIST][*]90M in electric car credits. [B]This does not seem to impact purchasing decisions so much as change the amounts spent; the only people who would take advantage of this are those already in the market for a new car.[/B][/LIST]

    [LIST][*]43M in credits for "Alternative Fuel Refueling Properties". [B]Aaaargh. Take a great idea and underfund it and target it improperly. This provides a credit of 30% of the cost of putting an alternative fuel station (an E85 tank at a gas station, an electric car charging unit, etc.) in service, up to $30,000. This is the definition of a stimulus cut: it directly motivates economic activity (the construction of alternative fuel stations) that itself holds out the prospect of follow-on economic activity (if alternative fuel stations are plentiful enough, the chief objection to alternative fuel vehicles - their range - will be gone, and their production and popularity will greatly expand). And it is one of the most underfunded aspects of the program, limits the deduction for no good purpose, and further pushes the ethanol boondoggle. A far more robust program favoring the construction of electric charging stations could have had a huge effect on the economy. Oh well - at least they tried.[/B][/LIST]

    [LIST][*]3.7B in extra COBRA funding. [B]Not. A. Stimulus.[/B][/LIST]

    [LIST][*]4.1B in delayed tax withholdings for government contractors. [B]Doesn't seem like it spurs construction; a "money in your pocket" stimulus[/B][/LIST]

    [LIST][*]1B in construction bonds. [B]OK, stimulus[/B][/LIST]

    [LIST][*]630M in incentives to invest in alternative energy. [B]Again, a policy choice, but at least a stimulating one.[/B][/LIST]

    [LIST][*]350M tax credit for government retirees. [B]WTF?![/B][/LIST]

    [LIST][*]320M in new unemployment/health coverage benefits. [B]Not a stimulus.[/B][/LIST]

    [LIST][*]~500M in misc. items I won't bother to break down[/LIST]
    Bottom line, of nearly 300B in "stimulus" tax breaks, I count maybe 13B in really well targeted stimulus "spending" - including the tragically missed alternative fueling stations opportunity

  2. #2
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    [QUOTE=doggin94it;4233454]In my opinion, a "good" stimulus meets the following requirements:

    (A) Injects money into the economy that was not there before the stimulus;[/QUOTE]

    Then there can never be a "good" Stimulus.

    Govt. Stimulus doesn't arise from thin air, it's tax money taken from the market, taken from the taxpayer.

    As such, it can never be more than what was originally taken out, as Government cannot be and is not over 100% efficient.

    As such, any Stimulus will by definition put less money back into the market than it took out to start with.

    To back such an idea, you need the fuzzy (and IMO dishonest) math of "every dollar taken by Govt. and given back as Stimulus actually creates a billion dollars of money from thin air, but if left in the market it would create only poop" argument.

    Like any Govt. redistrubution, it's good for those who recieve, not so good for those it's taken from.

    I don't know about you, I didn't get anything from the Stimulus.

  3. #3
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    [QUOTE=Warfish;4233469]
    Govt. Stimulus doesn't arise from thin air, it's tax money taken from the market, taken from the taxpayer. [/QUOTE]

    if the money is printed it literally is out of thin air. Not all spending has to be from the tax payer, in fact 1.6 trillion dollars of spending each year isn't from tax revenue.

  4. #4
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    [QUOTE=bitonti;4233523]if the money is printed it literally is out of thin air.[/quote]

    If the Govt. prints it, it reduces the value of every OTHER dollar held on the planet, inclduing the value of the newly printed dollars. Very much a net loser.

    [quote]Not all spending has to be from the tax payer, in fact 1.6 trillion dollars of spending each year isn't from tax revenue.[/QUOTE]

    Lol. Defending Stimulus because we borrowed it from China.

  5. #5
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    [QUOTE=Warfish;4233469]Then there can never be a "good" Stimulus.

    Govt. Stimulus doesn't arise from thin air, it's tax money taken from the market, taken from the taxpayer.
    As such, it can never be more than what was originally taken out, as Government cannot be and is not over 100% efficient.

    As such, any Stimulus will by definition put less money back into the market than it took out to start with.[/quote]

    I very much disagree. First, the government is able to borrow at a far lower interest rate than individuals - and can thus obtain capital more readily than individuals in tight credit markets. So, when deficit spending is needed to jolt an economy, it's better for the government to be doing the borrowing than for individuals.

    Second, the government is able to address "collective action" problems in ways that individuals - and even the market more broadly - cannot.

    Take my favorite example - the paradox of the electric car industry. Part of the barrier to demand for electric cars is the lack of a widespread network of plug-in stations (without which electric cars are only useful for short-distance trips). But part of the barrier to the creation of a widespread network of electric plug-in stations is the lack of electric cars on the road; it's hard to raise sufficient capital to fund the creation of that network when there are not buyers ready to hand - it's a true long-term investment. The government is best placed to address that, by incentivizing the creation of the network so that the short term pain of the investment is significantly lessened. It's the equivalent of the massive highway building project of the 20th century - an investment that needed high-level coordination across many states and municipalities . . . the type of collective action that the market has a hard time providing



    [quote]To back such an idea, you need the fuzzy (and IMO dishonest) math of "every dollar taken by Govt. and given back as Stimulus actually creates a billion dollars of money from thin air, but if left in the market it would create only poop" argument.[/quote]

    Except it's actually not all that fuzzy. Take the Great Depression and the New Deal (the classic example of a government stimulus that worked). The sustained economic free-fall had basically wiped out liquidity, and the resulting fear of future ruin had essentially turned the entire country into "savers" rather than "investors". Relying on the market is all well and good when people are participating in it; when people are withdrawing their capital and sitting on it, the market can't do much of anything at all.

  6. #6
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    [QUOTE=doggin94it;4233604]I very much disagree. First, the government is able to borrow at a far lower interest rate than individuals - and can thus obtain capital more readily than individuals in tight credit markets.[/quote]

    When a credit market it tight, there is usually a good reason. Msot often, a Govt. ****up of some kind having destablized the overall financial market.

    [QUOTE] So, when deficit spending is needed to jolt an economy, it's better for the government to be doing the borrowing than for individuals.[/QUOTE]

    Outside National Defense in a Time of Defensive War, Deficit spendig is never "needed".

    [QUOTE]Second, the government is able to address "collective action" problems in ways that individuals - and even the market more broadly - cannot. [/QUOTE]

    "Collective Action" eh? As in State Forced Change on a Society that doesn't want it?

    [QUOTE]Take my favorite example - the paradox of the electric car industry. Part of the barrier to demand for electric cars is the lack of a widespread network of plug-in stations (without which electric cars are only useful for short-distance trips). [/QUOTE]

    Pure Fantasy. The barrier to entry is the consumer doesn;t bloody want electric go-carts, and the limitations and costs that come with them at current technology levels.

    If it wasn't for existing (and massive) tax breaks for them, they would never sell a single unit beyond the "true believer" types.

    [QUOTE] But part of the barrier to the creation of a widespread network of electric plug-in stations is the lack of electric cars on the road; it's hard to raise sufficient capital to fund the creation of that network when there are not buyers ready to hand - it's a true long-term investment.[/QUOTE]

    Unless the elctric car continues to flop in the market of course, upon which point the State, having invested billions on the flo, will have to turn to other means to force their social engineering policy.....i.e., another mandate or making gasoline cars illegal. Wait a while, that is the future, a State mandate of some kind.

    [QUOTE]The government is best placed to address that[/QUOTE]

    The Government is the least suited to do it, as they are a top-down tyrany, not a bottom up market driver. They create change through force of Law, not desire of happiness of consumer. They create change by removing freedom, the market creates change by fulfilling freedoms.

    [QUOTE], by incentivizing the creation of the network so that the short term pain of the investment is significantly lessened.[/QUOTE]

    Massive incentives I (and you) are paying for that may never show dividends if not forced upon us by Law. Without those incentives, the idea is a total unmitigated flop thus far.

    [QUOTE]the type of collective action that the market has a hard time providing [/QUOTE]

    Collective action. **** the individuals and companies so the worst individuals don't get left behind.

    [QUOTE]Except it's actually not all that fuzzy. Take the Great Depression and the New Deal (the classic example of a government stimulus that worked).[/QUOTE]

    Asbolute fantasy, the NEw Deal was a failure economicly. Without the War, the U.S. would never have recovered from it.

    What the NEw Deal did was bring socialism to America in a way it never had been before, a process that has continued unabated since then, and has failed at every single step along the way.

    It's sad that I'm beginning to know how the people felt in all those countries as they fell to Communism post-WWII. All the signs are there in the U.S. today. Be ****ed if I'm going to be a victim like those folks were.

  7. #7
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    Meh. That's a pure dogma response, Fish: "All government spending is tyrannical" (except for military spending, which you're ok with for some reason), and "everything government touches turns to crap" and "the market is the cure for everything."

    I find it as ludicrous as the "government can fix everything, capitalism is responsible for the world's ills, tax the rich and it'll all be fine" pablum coming from the left.

    Reality is just more nuanced than that, IMO.
    Last edited by doggin94it; 11-14-2011 at 07:48 PM.

  8. #8
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    [QUOTE=Warfish;4233610]
    It's sad that I'm beginning to know how the people felt in all those countries as they fell to Communism post-WWII. All the signs are there in the U.S. today. Be ****ed if I'm going to be a victim like those folks were.[/QUOTE]

    A revisionist and a drama queen. Wow.

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    [QUOTE=cr726;4233616]A revisionist and a drama queen. Wow.[/QUOTE]

    Was there really a need for that, CR?

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    [QUOTE=doggin94it;4233624]Was there really a need for that, CR?[/QUOTE]

    No need to worry, it's the end of times!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

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    While I agree with the theory of the stimulus I also think that the process in getting something of that size to pass through congress was why we got the poorly devised stimulus package to begin with.

    I just don't have faith that the gov't could create a smart and effective stimulus without screwing it up.

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    [QUOTE=bitonti;4233523]if the money is printed it literally is out of thin air. Not all spending has to be from the tax payer, in fact 1.6 trillion dollars of spending each year isn't from tax revenue.[/QUOTE]

    Sought of like defecit spending. It has to be paid back. So it will have to paid back one way or another.

  13. #13
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    [QUOTE=doggin94it;4233614]Meh. That's a pure dogma response[/quote]

    No, it's a policy response. I disagree with policy that (generally) claims the answer to a problem is less freedom, and more Government control and power. Generally speaking, I truly believe in the libertarianism I seem to at least in part represent here on JI. I respect a need for government, truly, but not to the degree we "enjoy" today. Not by a long shot.

    [quote]Reality is just more nuanced than that, IMO.[/QUOTE]

    In my experience, alot of bad things are defended via the claim of "grey areas", "nuance" and "it's not as abd as you think, and this is as far as we'll go, no further....till tomorrow".

    There is no real debate that since WWII the U.S. has moved steadily and directly in a direction of more socialism, more Government power and authority, and less personal and individual freedom under the Law.

  14. #14
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    [QUOTE=Warfish;4233558]If the Govt. prints it, it reduces the value of every OTHER dollar held on the planet, inclduing the value of the newly printed dollars. Very much a net loser.
    [/QUOTE]

    it doesn't happen instantly and inflation isn't a loser. the choice is either inflation or deflation.

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    [QUOTE=Warfish;4233469]Like any Govt. redistrubution, it's good for those who recieve, not so good for those it's taken from.[/QUOTE]

    Completely disagreed. Technically, all government spending can be labeled as "redistribution" of some kind. In the majority of cases, it is good for all of society, not only those who receive it.

    We all benefit from Defense spending, most of us are not in the military. We all benefit from SS and Medicare, most of us are not old enough to receive these benefits.

    [QUOTE]I don't know about you, I didn't get anything from the Stimulus.[/QUOTE]

    Every working American in 2009 and 2010 "got something" from the Stimulus. Were you unemployed during that time?

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    [QUOTE=parafly;4234498]Completely disagreed. Technically, all government spending can be labeled as "redistribution" of some kind. In the majority of cases, it is good for all of society, not only those who receive it.

    We all benefit from Defense spending, most of us are not in the military. We all benefit from SS and Medicare, most of us are not old enough to receive these benefits.



    Every working American in 2009 and 2010 "got something" from the Stimulus. Were you unemployed during that time?[/QUOTE]

    Since 1945 what benifit have we gotten from defense spending?

  17. #17
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    [QUOTE=Winstonbiggs;4234659]Since 1945 what benifit have we gotten from defense spending?[/QUOTE]

    Won the Cold War
    Massive arms build up
    Military flyovers before sporting events :D

  18. #18
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    Read in the paper today that Biden was telling reporters 2 yrs ago that when they thought about doing the stimulus, they went to someone who they thought would have all the answers: Jon Corzine.

    :rofl:

    That didn't work out so well. :rolleyes:

  19. #19
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    [QUOTE=quantum;4235200]Read in the paper today that Biden was telling reporters 2 yrs ago that when they thought about doing the stimulus, they went to someone who they thought would have all the answers: Jon Corzine.

    :rofl:

    That didn't work out so well. :rolleyes:[/QUOTE]

    I know right, a typical Wall Street dude who was out of touch and thought he was smarter than everyone. He's real unique. :rolleyes:

  20. #20
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    [QUOTE=cr726;4235211]I know right, a typical HARVARD "CONSTITUTIONAL SCHOLAR (yeah right)"dude who was out of touch and thought he was smarter than everyone. He's real unique. :rolleyes:[/QUOTE]

    Fixed

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