Republicans are, of course, going to lose the battle to reshape, or to materially influence in any way at all, the $825 billion spending bill that’s being dressed up as “economic stimulus.” That’s $825 billion now. Stay tuned for new totals to come.Ignoring for a moment that Republicans are just as guilty of "dressing up" government spending (faith based initiatives anyone?), my gut tells me Jim is right about main street feeling leery of new "stimulus".
It wasn't that long ago the so-called experts told us all that if we didn't give the banks oodles of money, we would experience a storm of sewage not seen since the locusts and frogs hit Egypt. Yet, months later, the financial institutions still refuse to let money flow.
We are getting a little tired of the government saying the only solution is to throw our money at the problem.
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Is there another solution, beyond letting everything fail? I think that's the scary elephant in the room.
That's what they said about the banks. How's that working for ya?
And so little of this bill is actually stimulus (using their definition) and even that won't be spent immediately. This is just another pork filled Congressional wish list.
Check out the Wall Street Journal's thoughts on the bill
It's almost as if the Republicans were still in charge. :-)
The banks are still being tight with their money, yes. However, they stopped failing left and right.
Cash as a percentage of assets throughout the banking system was extremely low before the bailout. At this point, it's around 4-5%, which is still pretty low imo, but it's a much better position to be in than 1%. Trust me: it doesn't matter what other assets banks have if they don't have the cash they need to operate and manage those assets.
At the very least, commercial paper is flowing again. When commercial paper stops, that's like the economy having a heart attack.
I would consider it good news that the banks are being more conservative with their lending than they were this time last year.
The experts said back then that if we didn't do anything and let everything fail, then everything would fail. Our representatives listened and did something -- and not everything failed. There were no promises that we wouldn't see job losses, or that things wouldn't get worse before getting better.
Part of the point of infrastructure spending now is to provide a needed boost to the economy. Doubts as to whether it can work are understandable -- it's easy to accept the infrastructure we have as "part of the scenery," or something that doesn't crumble, or something we don't depend on. However, we have access to jobs, clean water, etc., precisely because it's a government investment in the economy. Much of the infrastructure we do depend on today is old and crumbling. How else is infrastructure going to be built and maintained?
Failure is the necessary stick to the carrot (wealth creation) in capitalism. It is necessary.
For instance, how many lenders and borrowers are as enamored of interest only loans as they used to be? Think that market will pop up like it was?
Say you have a cancer patient in Stage 2. Giving chemo is like failure, it sucks in the short term, but is a better long term. The stimulus package is like giving them blow and vodka. GREAT in the short term (woohoo paaarty!), but eventually you have a alcoholic coke addict with Stage 4 and it's too late for the chemo.
Maybe I wasn't clear. I think what everybody fears but nobody wants to say out loud is that there is no solution. Bailout, no bailout, other options...it's all going to lead to the same massive failures and chaos and horribleness.
Joe, I don't doubt the credit situation is incrementally better, however having someone personally involved in one of the most personal financial decisions, auto loans, the banks may not be failing but they aren't just being conservative - they are being Scrooge-like. Like much government spending, we just don't seem to be getting much bang for our book. Eventually we'll hear wolf cried one too many times.
As far as the stimulus, I don't have a problem building bridges and what not. Condoms? Not so much. As Buzz pointed out, there's a lot of crap in their that isn't bridges.
The biggest problem with stimulus bills and bailouts — even when done without all the pork the most recent stimulus bill contains — is you can't prove they work, and you can't prove they don't work.
If there's no stimulus/bailout and something fails, you can say "a stimulus package might have helped!"
If there is a stimulus package and something fails, you can say "stimulus packages don't work!" even if something would have failed no matter what from poor management.
I tend to err on the side of not opening my wallet to the government when they can't prove what they're going to do will work.
DaleC: If it were the case that failures affected only the investors, then I would buy the argument that the stimulus wasn't necessary.
Our economy is in the unfortunate situation of having banks "too big to fail." Having one or more of those banks failing ripples throughout the economy.
You're correct, though, to point out that interest-only loans aren't as attractive as they used to be. That's even in light of the bailout. Thanks for strengthening my argument.
Grift -- I agree with you that condoms should not be part of the stimulus package. That should be in different legislation. Having said that, I can certainly understand the argument that not having unwanted babies would be good for the economy.
Regarding the "bang for the buck" argument: I've come to believe that one of the key reasons government spending is less efficient than it could be is because of the philosophical objection to government spending at all. Many people, but small-government folks especially, tend to want the government to do things indirectly rather than directly: We give money to banks so they can loan it out, we insure (or don't insure) certain things to encourage investment, we fund organizations to provide needed services, we cut taxes to stimulate spending. People have a phobia about acting directly, and that has its costs.
I read recently in the Times about a program for the chronically homeless that gives them apartments. Just gives them to them. And it's much cheaper than funding the shelter that provides the housing and so on. Now we can discuss whether government should be involved in giving homes to the chronically homeless, and I understand about the whole give-a-man-a-fish thing, but at least in these circumstances, the problem is solved more efficiently by simply solving the problem.
To me, the biggest problem with the stimulus isn't the pork (though I hope it's excised) but that it focuses too little on direct action. People need jobs. Let's give them jobs, and maybe we'll get safer bridges and new rail lines and repaired MARTA elevators while we're at it.
Well... I don't quite agree, Mike. You're referring (I assume) to Housing First programs, which, as you mention, have been far more cost-effective than shelters and soup kitchens.
But I would not apply the concept of direct action universally. Not by a long shot.
We would move from a bad situation -- that there are some banks in the private market so big that they're "too big to fail" -- to a worse situation: Just one Bank/Don't Dare Fail.
Having the federal government buy securities and invest in the banking system is a little more direct than what I'm comfortable with.
As Rusty mentions, showing that some initiative or another works is tough. When all that information has to be filtered to the public through the news media, demonstrating effectiveness is more difficult. To me, it's not a reason for cynicism; it's a reason to learn about how some of this stuff works.
Economics -- especially public sector economics -- is like evolution. Can't prove much, but at least there are theories that fit the facts and can be used as an accurate tool for prediction.
I agree, Joe. I don't think that direct action can or should be applied in all circumstances, and I certainly don't profess to know enough about the banking or commercial credit systems to say what would work best. What I do think, though, is that people who complain that government doesn't get enough bang for the buck should recognize the inefficiencies we intentinally build into the process.
I think failure of many institutions is inevitable, the question is failure now or after $ 3 or 4 Trillion in debt is piled up.
Great thread.
This whole idea of "too big to fail" is quite interesting to me. If in fact, we are willing to accept the premise that some corporations are "too big to fail" then we must also demand accountability and responsible stewardship of those companies.
If a company is unwilling to be accountable, then perhaps they will think twice before expanding.
Joeventures - Paraprase Pogo - I have seen the investors and he is us.
Everyone with a 401k, 503b, IRA or pension is invested in the businesse which will o will not fail. Not sure what you mean by "only the investors".
From a friend today;
Economic Stimulus explained;
Q. What is an Economic Stimulus Payment?
A. It is money that the federal government will send to taxpayers.
Q. Where will the government get this money?
A. From taxpayers.
Q. So the government is giving me back my own money?
A. Only a smidgen.
Q. What is the purpose of this payment?
A. The plan is that you will use the money to purchase a high-definition TV set, thus stimulating the economy.
Q. But isn't that stimulating the economy of China ?
A. Shut up.
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