Monday, February 09, 2009

What's wrong with the stimulus

So, we've been talking about fiscal policy and wall street bailouts, now let's talk about the Democratic "stimulus" plan.

I'm against it.

Look, I like the taxcuts for lower income people. Especially when the Bush tax-cuts for the upper income people will expire soon, great i think, balances revenue a bit. The problem with tax cuts is two-fold. The last two tax cuts and rebates that Bush pushed for, went to paying down debt, not stimulating the economy. I actually encourage that. This does put more money in the pocket of the American consumer, but 1. they can't spend it and 2. even if they did, it would only temporarily help the economy.

Most people are forgetting is that consumer debt (non-mortgage) is about 2.5 trillion dollars. For the next two decades we are going to whittle this down. Even if Americans get a 10% pay raise, a lot of that money will go to the Wall Street greed mongers to pay back what we borrowed to buy HDTV's, computers, clothes and other things for the last 10 years. The levels of consumption that we have had for the last 10 years, which was the artificial "growth" of the economy was based on consumers taking on more and more debt. It was not real growth. Present and recent historical levels of consumption are financially unsustainable.

The other sink-hole of American wealth, if lining the pockets of wall-street fat cats and credit-lending institutions wasn't enough, is the national trade deficit. Thanks to the promotion of free-trade and outsourcing both mid-high skill manufacturing and low-skill call center jobs the economy exported 4.5 million jobs to Mexico, China, India, Taiwan and all the countries that now make products that used to be made in the US. That probably doesn't include the jobs that would have been created like the eateries that pop up around places of employment and suppliers for those goods.

So the reason the tax cuts won't stimulate the economy is that smart consumers will pay down debt (like the banks did with bailout money) and if they spend that money, a lot of that money will be exported to other countries (Saudi Arabia, China, etc).

Social Policy
There's a good bit of money going into the coffers of state and local governments that doesn't create jobs, it just stops the hemorrhaging of jobs that would be due to layoffs from decreased government revenue. I don't agree that all this 'stimulus' money should go to pay for healthcare, unemployment benefits and the like. I think it much wiser to fund intelligent infrastructure projects that will be coming soon to a road or utility near you. Instead of padding unemployment, the government should fund training programs specifically for the upcoming greening of America. This can range from short-term weatherization to long-term programs to build the capacities to manufacture high-speed trains domestically. We're decades behind Europe and Japan in this respect, and instead of paying people to look for work, pay them to have the skills necessary for the medium-term and long-term infrastructure projects. That's not spending, that's investment.

Not big enough. If it was up to me, we'd have tax cuts and infrastructure only. I count training programs for skills needed to build infrastructure as part of infrastructure projects. The infrastructure I'd be looking at building is mass transit, high-speed rail, smart grid electricity, large-scale DC power lines from middle-american wind-farms (vastly different from smart-grid technology) and the like. All of the infrastructure projects would be green projects unless it is for road, bridge, water, swere repair. Building new roads to handle capacity would be replaced by installing mass transit systems. Paying billions of dollars so that people can watch TV (converter boxes)? Really? I mean really?

So I'm against the stimulus plan. Just becasue supposedly we have to 'do something' does not mean that we have to do everything. Obama talked about prioritizing. It seems that his priorities is to create something that's palatable to the Democratic base that got him elected. But i didn't vote for that. I voted for someone who wasn't afraid to make the 'hard decisions'. Instead of spending money on Bush's war, you're now spending it on Obama's society. If he was bold, two-thirds of the bill would be in infrastructure spending.

I think he thinks we'll get to that point sometime. I'm pretty sure that he thinks the move to spend on priorities is a gradual process.

It isn't.

Go green, go now.
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