…better than Obama’s first one. It’s not hard.
If they want a “second stimulus,” step one would be rescinding the first one.
53 thoughts on “Five Stimulus Plans”
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…better than Obama’s first one. It’s not hard.
If they want a “second stimulus,” step one would be rescinding the first one.
Comments are closed.
If you’re a not a Keynesian, then I agree that rescinding the first stimulus would be a good step. But those who voted for the Stimulus claim to be Keynesians. In which case I would say: Spend the first one first; now, not next year in the run-up to the 2010 campaign funding season.
The timing of the stimulus is de facto proof that Congress is not made up of Keynesians, but rather just bald-faced vampires latched onto the public’s jugular.
I’m glad to see non-Democrats proposing stimulus plans rather than just criticizing the ARRA. As for the plans he proposes:
1) Cutting capital gains and corporate taxes is a give-away to the wealthy, and is less effective as stimulus per $ of foregone revenue.
2) Cutting the payroll tax is a great idea.
3) Easy refinancing of mortgages at 4% by a nationalized Fannie/Freddie would help a lot of homeowners, and keep some of them from defaulting.
4) I’m doubtful that announcing future Social Security benefit cuts would impress investors that much, especially since it’s Medicare (and not Social Security) that has looming solvency problems.
5) Canceling 90% of ARRA is an anti-stimulus plan.
Cutting capital gains and corporate taxes is a tax cut for every American that works for a American corporation or purchases products made my American corporation, as well as everyone that owns even a single share of stock with the intent to sell it at some point.
Nationalizing the mortgage industry will re-inflate the same damn bubble that just popped, so we’ll have the same problem again in a few years.
Canceling 90% of ARRA would improve the creditworthiness of the nation, and cool some fears over the soundness of our currency and treasury bonds. Spending it will do us exactly as much good as the millions that were spent to hold back the ocean from New Orleans. The money got spent, all right, but improvements never happened.
I’m glad to see non-Democrats proposing stimulus plans rather than just criticizing the ARRA.
They always were, even at the time, despite Obama’s lies about it.
#1 and #2 were proposed, and aren’t terribly stimulative. If you think CRA caused the housing crisis (it didn’t) and are upset about GM getting government help, I have no idea why you’d support #3 (more “fascist” nationalization). #4 is pure hopium, and #5 is (by definition) not a stimulus at all.
I love how Rand cuts to the point.
Anyone with a 401k, pension, annuity, life insurance policy or direct ownership of any stock or bond would benefit from this. Which, I’d guess, is about 95% of the USA.
Unlikely. People usually default when they either lose their job or the equity in their house goes negative. Refinancing at 4% (rather than the available rates of 5%) isn’t going to change either of those variables.
Only if you think taking money from the (productive) private sector and having the (wasteful, inept, corrupt, expensive) Congressional programs spending it on random projects is “stimulus.” Recall arguments about “the multiplier is not greater than 1.”
I didn’t necessarily say that I support any of them. I just said that they are all better than ARRA, because at least they’re not likely to make things worse. As short-term stimulus, which is what it was sold as, it is a total failure.
IMHO, the stimulus passed by congress and then signed so quickly by Obama is much less about getting the economy started and much more about getting his agenda passed.
To Brock: Where are these 5% loans of which you speak. Several of my friends and I have looked into refinancing our current mortgages. The low rates all require significant points and are extremely hard to get, even when there is plenty of equity.
I like #3 because it would let people keep more of the money they earn and eventually let people start selling (and buying) homes again. I would prefer that the money given to banks via TARP come with a string attached that said they had to offer these lower interest loans.
I’m having a hard time understanding how ARRA was a stimulus. I know Democrats said it was, but I don’t see evidence that it was.
Anyone with a 401k, pension, annuity, life insurance policy or direct ownership of any stock or bond would benefit from this. Which, I’d guess, is about 95% of the USA.
401ks, pensions, etc. are already tax-free, so there’s no benefit to cutting capital gains taxes there. The people who really care about capital gains taxes are well off, and for them this would be a windfall. Not only that, but it would prompt a huge one-time stock sell-off — good for the IRS coffers, but not for investor confidence.
Eliminating corporate taxes is an invitation to abuse. I could easily incorporate my small business (currently an LLC) and stop paying taxes by keeping profits in the company. At some point I could sell the company, with its stockpiled profits, and if the capital gains tax was zero I wouldn’t pay then either. Millions of people could do something similar — it’d be great for accountants and lawyers, and a disaster for the country.
I’m having a hard time understanding how ARRA was a stimulus.
There are tons of detailed evidence at recovery dot gov, but in brief:
* It gave the states money so they could extend unemployment coverage. That protects the people most in danger of defaulting on mortgages or turning to public assistance, thereby exacerbating the housing bust and the strain on state budgets. Michigan has actually seen its welfare caseload drop, because people are getting unemployment benefits which keep them from qualifying for welfare. Without this money there’d be more foreclosures, more people on welfare, and states would be laying more people off to balance their budgets.
* It funded lots of infrastructure and research projects, hiring people who might otherwise be unemployed, spending less, and in danger of foreclosure.
I think a payroll tax cut would be good because it would put money directly into the hands of workers, who would hopefully spend it. But it wouldn’t do much to help the unemployed, which the ARRA does.
As short-term stimulus, which is what it was sold as, it is a total failure.
The Administration was up front about the schedule for ARRA spending before the votes were taken. I’d love to hear how they could be spending money faster. I can’t seem to drive more than a few miles without running into road construction.
Not only do we have three posts in a row that are wall to wall Jim but we get gems like this.
“The Administration was up front about the schedule for ARRA spending before the votes were taken. I’d love to hear how they could be spending money faster. I can’t seem to drive more than a few miles without running into road construction.”
So, how do you know all that road construction is stimulus derived?
And then this cognitive dissonance: “But it wouldn’t do much to help the unemployed, which the ARRA does.”
I guess the stimulus helps the unemployed, in ways other than getting them jobs.
And nice way to ignore that the stimulus was sold as a way to keep unemployment under a certain unemployment versus time curve. A goal that it completely overshot.
And here’s a prime example of statist thinking
“5) Canceling 90% of ARRA is an anti-stimulus plan.”
Given: Government plan Z intended to reduce A
Result: A increases
Sure correlation versus causation and all, but due to lack of repeatability and control experiments the rational conclusion is that Z is, at the very least, not effective at reducing A.
However Jim and his ilk see this and go.
But Z reduces A! And since A increased, we need MORE Z.
Nice little self fulfilling prophecy there.
Note that this handy formula can apply to gun control/crime, gov healthcare/healthcare costs, regulations/business health, and so on.
There’s no government induced problem that can’t be solved by more government.
401ks, pensions, etc. are already tax-free, so there’s no benefit to cutting capital gains taxes there.
That is so complete wrong as to be comical. Pension plans like a 401K are paid with pretax dollars. Only the growth (when that happens) is tax free. However, when you go to use your retirement savings, 100% of the withdraws are taxed because you didn’t pay taxes on the money when you put it into the plan. Lowering the tax rate on those withdraws will mean that a person’s retirement savings go further.
Pension plans like a 401K are paid with pretax dollars. AKA, “dollars not taxed” AKA “tax free.”
Lowering the tax rate on those withdraws will mean that a person’s retirement savings go further. Aren’t the 401k withdrawals taxed as ordinary income? So the capital gains tax doesn’t matter their either.
Eliminating corporate taxes is an invitation to abuse.
Total strawman. TFA said reduce, not eliminate. The only one saying “eliminate is you.
Well, I would advocate eliminating corporate taxes. Corporations don’t pay them — they only collect them, and having to do so adds a lot to accounting overhead.
I would too (advocate eliminating them, and for the same reasons), but I thought the point deserved illumination.
“It gave the states money so they could extend unemployment coverage. That protects the people most in danger of defaulting on mortgages or turning to public assistance, thereby exacerbating the housing bust and the strain on state budgets. Michigan has actually seen its welfare caseload drop, because people are getting unemployment benefits which keep them from qualifying for welfare. Without this money there’d be more foreclosures, more people on welfare, and states would be laying more people off to balance their budgets.”
So the stimulus extended public assistance to keep people off public assistance. Also, taxpayers are still going to pick up the tab, whether at the state or federal level. Stimulating the economy with borrowed money is a bad idea.
So, how do you know all that road construction is stimulus derived?
The signs that say “This project funded by the American Recovery and Reinvestment Act.”
And nice way to ignore that the stimulus was sold as a way to keep unemployment under a certain unemployment versus time curve. A goal that it completely overshot.
The projection underestimated that baseline (no ARRA) level of unemployment. There’s no evidence that it overestimated the improvement from the baseline due to the ARRA.
Total strawman. TFA said reduce, not eliminate. The only one saying “eliminate is you.
Right now corporate taxes are 35%. If you reduce them so that they are lower than a person’s marginal rate (typically between 28% and 35%), incorporating becomes an attractive tax dodge.
Also, taxpayers are still going to pick up the tab, whether at the state or federal level.
Obviously. But states have to run balanced budgets, so just when there’s the greatest need for public spending they’re cutting back. The federal government can and should fill the gap with counter-cyclical spending.
Stimulating the economy with borrowed money is a bad idea.
Yes, it would have been nice if Bush had kept running the surpluses that Clinton did, so that we’d have money set aside for a recession. But given that we don’t, saying that “stimulating the economy with borrowed money is a bad idea” is akin to saying that rescuing a drowning man with a borrowed boat is a bad idea.
Yes, it would have been nice if Bush had kept running the surpluses that Clinton did
By what fantasy do you imagine that those were “Clinton” surpluses? Do you really delude yourself to think that there would have been “Clinton surpluses” absent a Republican Congress?
:By what fantasy do you imagine that those were “Clinton” surpluses? Do you really delude yourself to think that there would have been “Clinton surpluses” absent a Republican Congress?”
The same fantasy where this comes from:
“The projection underestimated that baseline (no ARRA) level of unemployment. There’s no evidence that it overestimated the improvement from the baseline due to the ARRA.”
Wow… So in Jim’s world the stimulus worked perfectly. It saved as many jobs as advertised. Just that the economy was exactly worse enough that the delta from “baseline” still matches reality and his model.
Yay for magic!
And for the record. I called it
“However Jim and his ilk see this and go.
But Z reduces A! And since A increased, we need MORE Z.”
If the government want to stimulate the economy, it would do well to start with getting the basics right: Protect private property and enforce valid contracts. 0bama gives every sign of having little respect for private property or contracts. Rather, he is perfectly willing to invalidate both to favor his supporters.
As for corporate taxes, corporations spend income on:
– Growing the business. Good for the economy.
– Dividends, on which shareholders pay taxes.
– Other investments, the income from which goes back in the profit pool.
– Charity.
How do you justify adding an extra tax on money going to any of these?
Eliminating corporate taxes is an invitation to abuse. I could easily incorporate my small business (currently an LLC) and stop paying taxes by keeping profits in the company. At some point I could sell the company, with its stockpiled profits, and if the capital gains tax was zero I wouldn’t pay then either. Millions of people could do something similar — it’d be great for accountants and lawyers, and a disaster for the country.
I don’t know. Doesn’t sound like a problem to me and we’d all enjoy the benefits of your stronger, more profitable business. In my view, ncome taxes are a poor way to collect revenue anyway. I’m a fan of asset taxes myself. If it can’t move, then tax it. 🙂
2) Cutting the payroll tax is a great idea.
I agree with this.
4) I’m doubtful that announcing future Social Security benefit cuts would impress investors that much, especially since it’s Medicare (and not Social Security) that has looming solvency problems.
Medicare appears to be a problem because the benefit cuts haven’t happened yet. Same goes for Social Security. My view though is that if the US government took initiative and greatly reduced the size and scope of entitlement programs now rather than a more urgent later, investors would be more confident in the future of the US since there would be leaders working to improve the future of the US.
#1 and #2 were proposed, and aren’t terribly stimulative. If you think CRA caused the housing crisis (it didn’t) and are upset about GM getting government help, I have no idea why you’d support #3 (more “fascist” nationalization). #4 is pure hopium, and #5 is (by definition) not a stimulus at all.
I think you’re just wrong about #1 and #2. Tax cuts would reduce destructive wealth redistribution thrashing, in which money is shifted around to little effect. In case #1, the wealthy people, the ones doing the lion’s share of private hiring in the country would get a boost. They are by definition already the most economically successful people in the US and it’s much more likely that they’d put their savings to good use as a result. Or case #2, simultaneous increasing the take home pay for US workers and decreasing the cost of the workers to US business. That’s a double win that you can’t duplicate with increased government spending.
If Clinton actually ran surpluses, why did the national debt increase every year? The answer is they used typical Washington accounting tricks to achieve the surplus. It was typical smoke and mirrors accounting tricks that would have any corporate executive that tried lockstepped before a judge.
There are tons of detailed evidence at recovery dot gov
I already pointed out Democrats claim it is a stimulus.
It gave the states money so they could extend unemployment coverage.
It gave money to the states, but:
Report: States aren’t using stimulus funds as intended
“401ks, pensions, etc. are already tax-free, so there’s no benefit to cutting capital gains taxes there. The people who really care about capital gains taxes are well off, and for them this would be a windfall. Not only that, but it would prompt a huge one-time stock sell-off — good for the IRS coffers, but not for investor confidence.”
If you arew that stupid, Rand might as well perma-ban you now and save the board your inane dribblings. This is so wrong on so many levels it aint funny.
I am truly astounded that someone who I suppose assumes themselves to be intelligent could believe something so utterly fvcked-up.
It gave money to the states, but:
Report: States aren’t using stimulus funds as intended
The linked article says:
That’s exactly what was intended.
Mike Puckett writes:
If you arew that stupid, Rand might as well perma-ban you now and save the board your inane dribblings. This is so wrong on so many levels it aint funny.
By all means, do educate me — how does a cut in capital gains taxes help someone whose investments are in a 401k?
By what fantasy do you imagine that those were “Clinton” surpluses?
The “fantasy” that says Clinton was president when they occurred.
Do you really delude yourself to think that there would have been “Clinton surpluses” absent a Republican Congress?
So touchy! I didn’t say anything about why there were surpluses, just that there were, and that we’d be better off today if they’d continued through the Bush years.
If Clinton actually ran surpluses, why did the national debt increase every year? The answer is they used typical Washington accounting tricks to achieve the surplus.
These “tricks” are the way the budget deficit has been computed for ages, by both parties. With or without them, the government’s fiscal performance under Clinton was far better than it has been under any other recent president.
I didn’t say anything about why there were surpluses, just that there were, and that we’d be better off today if they’d continued through the Bush years.
Obviously. But that wasn’t going to happen, because “Clinton” left Bush with a popped tech bubble, an impotent terror policy that helped result in 911, and a recession. Not too mention the fact that Bush was a big spender himself (though Obama is making look like a piker).
the government’s fiscal performance under Clinton was far better than it has been under any other recent president.
Sounds like a recommendation to go back to a Democrat in the White House and a Republican Congress. Let’s hope you get your wish next year.
By all means, do educate me — how does a cut in capital gains taxes help someone whose investments are in a 401k?
Okay, how about this: 401k’s are largely built of mutual funds, mutual funds buy and sell stocks regularly as they shift their portfolios, paying capital gains every time they make a profit on a transaction. The costs of those taxes are passed on to the 401k owner by way of a lower return on the investment.
But I’m sure you’ll come up with some BS reason why this example isn’t valid, or tell me that “buy and hold forever” is the best investment strategy, and the only one 401k plans should utilize.
Jim, you have to read more than the first paragraph. I know reading is difficult for you, but you need to really try. Here’s the second paragraph:
The report, scheduled to be released Tuesday by the Government Accountability Office (GAO) at a House oversight hearing, also says many states aren’t meeting some goals and requirements of the economic recovery program. Some states, for example, are not sending transportation funding to the most economically distressed areas, and they are using education funds to prevent layoffs rather than fund innovative new programs, the report says.
But that’s just grading the stimulus on what it is suppose to do. Try this Jim, show me a graph (like I provided to you), that shows job availability increasing?
Some states, for example, are not sending transportation funding to the most economically distressed areas
That’s suboptimal, but if there aren’t shovel-ready projects in the distressed areas, and there are in other areas, it’s more important to get projects going now.
they are using education funds to prevent layoffs rather than fund innovative new programs
Preventing layoffs is exactly what stimulus funds should be used for.
Preventing layoffs is exactly what stimulus funds should be used for
Preventing layoffs is exactly what prolongs recessions, and destroys wealth. The resources have to redeployed to productive ends for economic recovery.
Jim, you can call it a stimulus bill all day long, but it just shows you have ignorance as to what is stimulus. Saving existing jobs in the hope the economy will recover is called stop-gap.
401k’s are largely built of mutual funds, mutual funds buy and sell stocks regularly as they shift their portfolios, paying capital gains every time they make a profit on a transaction. The costs of those taxes are passed on to the 401k owner by way of a lower return on the investment.
No, that’s not how it works. Mutual funds distribute their capital gains to shareholders at the end of each year, so it’s the shareholders that are responsible for the capital gains tax, not the funds themselves. If the shares are held in a 401k or IRA, there’s no tax. For more info, Google “mutual fund capital gains distributions”.
The question stands: how does a cut in capital gains tax rates help people whose capital gains are in tax-deferred retirement accounts?
Preventing layoffs is exactly what prolongs recessions, and destroys wealth.
Then you must be thrilled by the rising unemployment rate.
The resources have to redeployed to productive ends for economic recovery.
States aren’t laying people off because they aren’t productive. They’re doing it because there’s a temporary slump in revenue, coupled with a temporary burst of safety net spending, and a requirement that states balance their budgets in good times and bad. Laying more people off now makes the recovery more difficult.
Leoncarruther – paying capital gains every time they make a profit on a transaction. The costs of those taxes are passed on to the 401k owner by way of a lower return on the investment.
No – the capital gains are passed directly onto the shareholders of the fund. (The stocks are bought for the shareholders, not the firm that manages the fund.) The individual shareholders then either pay taxes or not depending on their individual tax situation.
The mutual fund managers make money by charging a fee to the shareholders for managing the fund. Either way, capital gains tax does not work the way you think it does in mutual funds.
Leland – you have an annoying tendency to call people ignorant. According to economic theories accepted since the 1930s, the stimulus bill is a stimulus. You may want to advance a new economic theory, but calling people using the accepted theory “ignorant” is not a presuasive argument.
how does a cut in capital gains tax rates help people whose capital gains are in tax-deferred retirement accounts?
Because reducing the capital gains tax rates increases the realized return on investment. This will positively impact the price of the stock, which would help stockholders, however they hold the stock.
I should add, that reducing capital gains increases the realized return on all financial investments, not just stocks.
Gerrib,
I provided links to evidence that job losses are increasing. If you did not click my links, then you are ignorant of that fact. If you claim that “economic theories” are facts, then you are ignorant of what the word “theory” means.
I’m sorry you are offended, but I’m just calling it as I see it.
Then you must be thrilled by the rising unemployment rate.
What a stupid comment.
The rising unemployment rate isn’t a result of people being laid off, per se. It’s a result of them not having other jobs to go to. In other words, the needed layoffs from lower-value activities are occurring, but government policies verging on the criminal are inhibiting the creation of new businesses and jobs.
I should add, Gerrib, my point is you can claim theories and call this a stimulus if you want. But your theories seem to be falling flat. If empirical evidence, such as increased job loss and loss of productivity, shows your theories for stimulus to be invalid, then indeed, you may not be ignorant. You could just be stupid. Or if you go with the AA concept that continually doing something and expecting different results: then you just might be insane.
Leland – we’re barely 4 months into the stimulus authorization. Much like trying to turn an aircraft carrier, things take time to happen. Nor is this the first economic downturn in history – stimulus packages have been effective in many other economic downturns.
Regarding theories – evolution is a theory. In science, “theory” doesn’t mean “guess,” it means “generally-accepted and tested concept.” Again, if you wish to argue a different theory, please do so.
In science, “theory” doesn’t mean “guess,” it means “generally-accepted and tested concept.”
No, it doesn’t. Many scientific theories aren’t generally accepted and tested. For instance, General Relativity was a theory long before it was accepted and tested.
So people advocating General Relativity were idiots? Not sure I’d go there…