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What's the smartest stimulus for the U.S. economy?

President Obama's economic team is considering another big stimulus in the form of tax breaks for businesses, according to sources. Here are some of the options currently being considered. Which one do you think would be the smartest for the U.S. economy?

By Jon DeNunzio  |  September 2, 2010; 7:39 PM ET Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati  
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What is best for America is not what we will get. As usual, the out of power party (this season its the Republicans, last season it was the Democrats), have more to gain politically by gumming up the works and obstructing progress towards solving problems.

It is simply astonishing to me that people actually believe that reducing the deficit now will get us out of the recession. Ignorance of basic economics, and distrust of the people who do understand economics, combined with constant outright lying about economic reality has created a significant minority who think our best economic policy is the exact opposite of what would actually work.

The underlying facts of the situation are:

1) More than a trillion dollars a year of our deficit is being created BY the recession. People out of work don't pay taxes, and the government has to spend more on mandated services.

2) Taxes are less efficient as a stimulus than direct spending on jobs. Taxes cuts stimulate by people spending the money. Every dollar saved is a dollar not stimulating the economy.

3) Taxes cuts for the poorest are much more efficient than tax cuts for the wealthy because the poor spend more of the tax cut.

4) Much of the rapid increase in the deficit since Obama took office was a combination of the TARP (Bush's legacy), and Obama being resolute in moving hundreds of billions of dollars out of the so-called emergency funding to the general fund. No more money was being spent, it was just that the cost of 2 wars suddenly became part of the budget, instead of being hidden by accounting gimmicks.

5) Obama miscalculated the right size of the stimulus package. It should have been double the size it was.

Republican's have locked themselves into a philosophy and political strategy that makes it simply impossible to solve these problems. Think I am wrong? Read some history about the Republican strategy in the Hoover administration (very similar to today's) and check out how well THAT worked.

Posted by: reussere | September 3, 2010 2:46 AM

The stimulus was likely way too small to begin with. First all money paid to states to prevent layoff of teachers, etc is not stimulus. Second there is probably at least 150 Billion not yet spent. Thus stimulus was really more like 500 B instead of 800 B. Over the last year and a half or about 300 B yearly rate.

Ronald Reagan who increased the deficit by around 250 Billion a year (yes new deficit spending is stimulus). After adjusting for inflation Reagan ran a bigger stimulus program than Obama and all of our manufacturing jobs had not been exported to China.

At this point the only new stimulus I support would be directed at moving manufacturing jobs back to the USA or really fixing the housing market.

Posted by: chucko2 | September 3, 2010 3:07 AM

@CHUCK02:
Two quotations from your post directly contradict each other:

"First all money paid to states to prevent layoff of teachers, etc is not stimulus."

"Ronald Reagan who increased the deficit by around 250 Billion a year (yes new deficit spending is stimulus)..."

I suppose you are saying that keeping teachers (and policemen) on the job is not,
in your words, "new deficit spending", since federal spending is merely replacing state spending. However, states must balance their budgets, so their spending on teachers and policemen is, by your definition, NOT stimulus. The federal government IS spending to keep these the teachers and policemen employed. This increases the deficit, so it IS stimulus, by your own definition.

I guess your would also argue that extending the Bush tax cuts past this year is not stimulus, since it is merely keeping in place current tax rates. But extending the tax cuts would expand the deficit, so it, too, would be stimulus (although less efficient than direct spending on job creation, as REUSSERE points out in his post).

Posted by: bertbkatz | September 3, 2010 5:19 AM

@REUSSERE:

"As usual, the out of power party (this season its the Republicans, last season it was the Democrats), have more to gain politically by gumming up the works..."

Could yo please be specific about how the Democrats were "gumming up the works" before 2006 (when they were a minority) and before 2008, when Bush was still president? In the latter case, Democrats generally supported TARP, while a large number of Republicans opposed it.

"Read some history about the Republican strategy in the Hoover administration (very similar to today's)"

By "very similar to today's", did you mean today's Republicans, or today's administration (Obama's)?

Posted by: bertbkatz | September 3, 2010 5:27 AM

maybe not in this order but the major problems are debt,housing industry,job market,idiot health care,stupid wars run by the cia in lieu of the military,education,and fat people which take up most of the health care problems creating laziness and looking for a govt to bail then out instead of losing 25 pounds and getting a job.get these things in order and we will turn things around,govt needs to say no on spending.

Posted by: krj1944cableonenet | September 3, 2010 6:17 AM

tax cuts for the poor? lmao,they will just buy another bag of doritos and get fatter and create more health problems.

Posted by: krj1944cableonenet | September 3, 2010 6:23 AM

Unfortunately, the engines of growth for U.S. economy has become the services sector and construction, and not the production of goods. In 2008, the number of workers producing goods in the United States was one million fewer than it was in 1970. In 2008, the number of workers in manufacturing was equal to the number of workers in the leisure and hospitality industry. If that isn't a mark of a major economic power with a screwed-up economy, I don't know what is.

As there is little the government can do to create jobs in the services sector, what's left is construction, which was propped up for nearly a decade by a real estate bubble, and is a sector that was particularly hard-hit in the Great Recession.

Long-term, the U.S. MUST produce more goods here in the U.S., instead of importing them.

Posted by: stellarfun | September 3, 2010 6:24 AM

It doesn't matter what stimulus measures the President comes up he won't get the votes going into November's election. And after the election upsets the Democratic party the only stimulus we may be able to count on would be the extension of the Bush tax cuts. But they also need to re-visit expandinding certain items for the middle class such as the child care credit & student loan interest deductions. And having a tax holiday for new hires won't work without a moratorium on the new healthcare law taking place. I also agree with the person who said that our biggest problem is outsourcing jobs. There is now a new normal for the middle class. Unionized manufacturing jobs are dissappearing. All thats left are lower paying service jobs and higher paying service jobs that require a B.A. or higher. There is now a shrinking middle class for people with just a H.S. diploma. This will forever change the income growth of the middle class in this country.

Posted by: kiboo | September 3, 2010 7:06 AM

I'd say keep the Bush tax cuts for everyone making less than $250,000. Anyone making more than that doesn't need one because they write more off than $250,000 each year or they have all their money off shore anyways.

Posted by: piemcj | September 3, 2010 7:29 AM

Cap lender's interest rate at Prime plus five, nationwide. Banks would still make a profit on their morally pathetic difference between what they pay (0.5%) and what they lend at(23% in the worst cases). Then tax them at 150% of the profit they make on commercial loans, and credit them with what they make on residential loans, and more to the point, credit them with 200% on residential loans underwater since 2009. Sorry, greed monkeys, some people did go behind. But let's face it. Why are you asking real people to not share the risk and the absolvement you are willing to excuse the financial experts to do?

Posted by: ChrisW1958 | September 3, 2010 8:31 AM

I'm thinking it would be good to avoid the Japanese style lost decade resulting from too little, too late stimulus. This is also was happening in the Great Depression but was cut off by massive spending for WWII. Through 2009 and early 2010 the stimulus was having an effect, but as those funds are petering out, so is the recovery. It is also clear that inflation is not remotely a problem at this time - in fact deflation, a far worse scenario, is more likely. Taken together, it is pretty clear the stimulus package was at least half of what it should be. So the policy should be to make the stimulus as large as it should have been in the first place.

Unfortunately, the GOP will deny all of this, regardless of the facts, and like everything else, will just say no, screaming about deficits. It's not like anyone wants deficits, but if your child needed emergency surgery, who wouldn't mortgage their house to the max? I wouldn't even think twice. It's the same here. Eventually, GDP and employment will bring a smile and we can worry about the deficit then. Economics 101: you have to spend money to make money. If your economic machine is broken you have to spend money to fix it.

But, my expectation is that dramatic action will not be forthcoming due to lack of support from the the opposition and lack of will from the majority. GOP wants to solve the wrong problem at the wrong time with the only arrow in their quiver (tax cuts). Tax cuts have a role but this is a major problem way beyond tax cuts.

Posted by: tfspa | September 3, 2010 8:32 AM

The only thing that brings an economy out of the doldrums is spending. Spending creates demand, demand creates shortages, shortages drive production, production drives investing and employment, employment creates income, income stimulates consumption, consumption is the engine of the economy.

Say what you will about Keynesian theory and the Great depression, the truth of the matter is that the U.S. and thereby, world economies, didn't begin to rebound, until the U.S. government began spending on defense mobilization at the onset of WWII. That spending created record deficits, while stimulating the economy and priming the pump of capitalism.

The government did do a relatively poor job of coping with those deficits after the war, which staggered the economy. They also added onto them with the Korean War spending. It wasn't until Eisenhower began massive infrastructure spending on highways that the the economy began to chug ahead.

Vietnam added more to the deficit and its rapid wind down jolted an economy that was built around defense spending. The economy stumbled along until Reagan began his record deficit spending on military build up.

The only post-WWII administration to have any success with the economy was Clinton's, which significantly cut the federal budget, raised taxes, and achieved a modest revenue surplus that began to slowly pay down the debt.

Then along came a Republican president and Congress that killed the surplus, cut taxes without budget offsets, created a $1T dollar unfunded medicare drug entitlement, and started two unfunded $750B wars. These, coupled with the Greespan/Wall Street housing bubble collapse, created the disaster we are now living through.

The only thing that will prime this economy's pump is government deficit spending. However, it cannot on a military-industrial basis. Infrastructure is where we need to invest. Fix the electric grid, bridges, highways, railways, and public water and sewer utilities. Kill the high income Bush tax cuts and spend to the tune of $600B a year for the next three years. This will pull the economy away from a military-industrial base and toward an industrial-sustainable energy base.

Posted by: old_sarge | September 3, 2010 9:01 AM

Best way to stimulate the economy is to stay out of it - Bush with TARP and now Obama spending everything in sight have done enough damage. Just stay out of it.

Posted by: birvin9999 | September 3, 2010 9:02 AM

when the government stops interfering with the free markets the economy will right itself. Everything the gov has done, Bush and Obam for you super political idiots, has only dragged out the down turn.

Posted by: djrhood | September 3, 2010 9:11 AM

Give tax credits for more efficient appliances. This will entice people to spend and at the same time lower their utility bills which frees up more money to spend. Pay for this by reducing the child tax credit. Why are we paying people to have babies? A large percentage of people get their delivery for free because they have no insurance, (payed for by the tax payers)then a nice check the first of every year.

Posted by: jmilner007 | September 3, 2010 9:19 AM

There's too much self-interest and stupidity at work here for the truth to be recognized & accepted: there's nothing that the US government can really do to spur the economy that is healthy in either the short or long-term. This is entirely up to the individual. Money is money. You don't get something for nothing in this world, and neither should you, either. "The economy" is pretty-much what you make of it, and the question reduces to why we are each as individuals either making money or not making money. But there's no sense in having the government step in to "improve the cash-flow". It can only do so at the expense of some other group. So are we to believe that it is justified for the government to steer cash away from one group for the benefit of another? That would imply that the first group generates their profits illegally, and as such the real problem is insufficient law-enforcement. But law-enforcement is reactive.

Ultimately it means passing new regulations to restrict the activities of certain groups and reduce competition to benefit other groups. And this comes down to basic politics. Unfortunately there's no way to make money out of thin air: when you run out of groups to exploit then you're left with brass-tacks. There's only so much money and only so many people will have it, in the end.

Posted by: tokenwhitemale | September 3, 2010 9:25 AM

When the free markets stop interfering with the government for the people, of the people and by the people, there will once again be a growing middle class in this country. Despite what the Republican Supreme Court says, Corporations are not citizens, they are the anti-citizen. Think about it..

Conservatives the out flowing tide created 01/20/2001 - 01/20/2009, lowered all boats by giving the store away to Wall Street and corporations that want to turn the American middle class into serfs. You are allowing them to succeed. Wake up!

Posted by: robertmerry | September 3, 2010 9:27 AM

Invest in green R&D, green energy, green products, organically grown food, and green infrastructure. Clean up the air, water, and soil. Make meat-eating and raising illegal. Outlaw oil drilling and production.

Decentralize electricity production by making every building produce its own electricity using new green technologies. Then physically dismantle and remove the nationwide electric grid, hydroelectric dams, nuclear power production facilities, close all coal mines, and sell the power companies assets.

Invest in science and engineering R&D, the arts, and education. Pay teachers what they are worth, which is about ten times what they get paid now. Provide universal health care like all the other civilized countries do except the U.S.

Posted by: foofoofoo | September 3, 2010 9:37 AM

Impeach Obama

Posted by: bingham60 | September 3, 2010 9:42 AM

reussere ... a lot of nonsense ...

The actual EVIDENCE disputes most of your assertions.

Obama's budgets greatly increased government spending on itself - at a time when such spending wasn't justified. Salary increases for government bureaucrats were NOT justified when private industry was under the gun of firings.

Obama's so-called Stimulus Bill was nothing more than a case of the president allowing Pelosi and Reid to cobble legislation that included hundreds of spending earmarks for favored Democrat special interests. .. many projects that would never get funding in the ordinary course of legislating. Few, if any, of these projects had anything to do with stimulating the economy. And too many of them were not 'shovel ready' as Obama falsely proclaimed. (yes, he intentionally lied!).

Our economy has been consumer oriented for decades; the current recession involves consumer credit problems which have interferred with the regeneration of consumerism. And Obama has done nothing to rekindle consumerism.

Tax credits for hiring are stimulative enough ... they aren't immediate relief.

The mishmosh Healthcare financing is another major negative on the economy.

Posted by: Hazmat77 | September 3, 2010 9:42 AM

"Tax credits for hiring are stimulative enough ... they aren't immediate relief."

I made typo .... meant to say that these tax credits are not stimulative ... they don't entice Employers to hire unnecessary employees.

Posted by: Hazmat77 | September 3, 2010 9:47 AM

A temporary PAYROLL tax break for hiring would be good and more infrastructure spending would be great.

If they wanted to throw in a smaller or equivalent tax break for payroll taxes on raises for existing employees making less than $250,000 (without a push above 1% in HC costs) that might be nice as well. If enough employers pushed existing workers salaries up and pocketed a bit of extra cash to offset it could help spur demand.

Posted by: theobserver4 | September 3, 2010 10:06 AM

Your Poll only tells me one thing; that you have something in common with the Obama administration and have no idea about what to do to stimulate this economy. In other words, you forgot to include “None of the above” category.

We need to realize that Obama uses the words “tax cuts” in a purely political sense. Just like they name card check union’s legislation the “Employee Free Choice Act”, which is all about control of the voting process and nothing about “Free Choice”. By “tax cuts” Obama means “welfare”, temporary handout that typically coincide with election cycles. Tax credits and temporary tax cuts do nothing to stimulate the economy and a lot to distort the economy, just like the “Home Tax Credit” did to the housing market. In order for real tax cuts to be effective they need to cut permanent marginal Tax cuts – and we cannot emphasize “permanent” enough - at all levels but mainly, and opposite of to the political necessities of the administration, higher bracket marginal and permanent tax cuts.

This is explained more comprehensively in the best piece I have found yet called “Do Real Economists Cry When Bernanke Speaks?”. You find it at http://www.robbingamerica.com

Posted by: JohnGalt9 | September 3, 2010 10:06 AM

Stop spending.

Don't do anything "new" or "creative"

Stability will allow businesses to grow.

Posted by: docwhocuts | September 3, 2010 10:09 AM

I think the best contribution to the solution here is to wring as much of the massive uncertainty out of the system as you can. Retain the tax cuts (for everyone!!). Clarify, de-fang and perhaps defer the full implementation of health care for 5 years. That sort of thing.

Posted by: DOps | September 3, 2010 10:20 AM

O'Bomba actually blurped out a great suggestion-I'm sure he'll retract it eventually;

Capital Gains Waivers!

I suggest following Mitt Romney's recommendation of across the Board, and for earnings LESS than $300,000.

Then, Two Things: First, a HUGE Tax Burden Windfall by REPEALING WRONGLY Naturalized DUAL Nation Children of Illegals and Transients! $Trillions Saved over the next Decade!
Second: (I can't believe I am saying this!) Federal Government Hiring!

Hiring Federal Agents by the Thousands!

To go out to Worksites EVERYWHERE, Screen Employees-AND FINE CRIMINAL EMPLOYERS!

Never mind the Workers, they will leave when they no longer have Jobs OR "Anchor Brats" sucking up Benefits they do not deserve!

The INCREASED Wages will be a GOOD Thing! More Taxes, and more Spending! Without all the Costs supporting 4 F'ing MILLION "Anchors", the Taxes can then be used Properly!

Your Welcome! ;~)

Posted by: SAINT---The | September 3, 2010 10:21 AM

Any "free" money people get will stimulate the economy temporarily through the money multiplier and its effect on the money supply; however, employers have learn that any benefits they see in their business will be short lived. Free money will provide a one-time stimulation of the economy and then the effect will dwindle.

Try as you may there is only one thing that will "heal" our ill and puny economy and that is WORK! We need work, and we have work, but we ship it offshore and even out-source very much of our office work, customer service, customer contact technical support, and on and on. Through this we are stimulating the economies of other countries, and actually are stunting the growth of our wealth.

We can live miserably on our accumulated wealth for a while, but only until an up and coming country takes us over. History has proven that repeatedly. It happens after a thriving country has done some very stupid things.

Simplified it goes like this: Ideas, work, jobs, wages, taxes, saving, spending. Eliminate any of the steps and the economy becomes ill and the people hurt.

There are no JOBS without work - we need to be producing thing that are in demand!
We need to keep our work here at home, especially our manufacturing work.

Posted by: ramseytuell | September 3, 2010 10:26 AM

The current talking point of the GNOPee is that businesses are not hiring due to uncertainty and that the uncertainty can be eliminated by leaving the Bush tax cuts in place so that investors will put that money into businesses that will hire new workers. It that's truly what we can expect to happen, why hasn't it happened already? Those tax cuts have been in place for about 9 years. What has the job growth been in that time span. I submit that it has been dismal to non-existent. The people at the top of the ladder do not use that money to create new jobs for the people at the middle and bottom of the ladder. They use that money to make more money and it almost never involves direct investment in job-creating businesses. A new WPA might, and I emphasize might, be one solution. With the disintegrating infrastructure around the country, public works projects will benefit all of us (even the rich have to use the toilet occasionally!).

Posted by: philasportsphan | September 3, 2010 10:30 AM

Stimulus, in todays economy, means our children and grandchildren will foot the bill and have a worse quality of life than we enjoy.

And that China will be collecting interest from our country for a few extra generations beyond that.

Posted by: r_leever | September 3, 2010 10:34 AM

How about making America more competitive and work to do away with a sea of regulation. Put a boot to the neck of trial lawyers who suck the blood out of manufacturing. Prosecute insurance and workmans comp. abuse. Think of the country as a household, how can a household not produce anything and just consume?

Posted by: AForgottenMan | September 3, 2010 10:37 AM

For those underwater - have the banks restructure mortgages to the true home value and basically start from scratch. Then, if/when the home sells, the bank gets a cut. More cash in the pockets of mortgage payers and the banks don't get totally screwed.

Posted by: msmccormick3 | September 3, 2010 10:42 AM

If Obama is going to try to sell any of these ideas, in combination with a tax increase on the "wealthy," the Democrats are going to have a very long, sad night in early November. This administration is adrift with a flawed economic vision, and needs some serious correction - which will be delivered in the form of the mid-term elections.

Posted by: JM80 | September 3, 2010 10:43 AM

The very best, and smartest, way to stimulate job growth is to cut unemployment benefits from their current level of 99 WEEKS (almost two friggin years)!!!! to 24 weeks (six months MAX).

Federal reports detail that fully 1/3 of the "unemployed" find jobs within one week of their benefits ending. Having been on unemployment myself I can tell you from first hand experience that unemployement benefits are generous enough that I passed on jobs that I could have had deeming them boring or deadend, etc..

For and added plus, cutting the number of weeks of unemployment benefits paid also cuts both Federal and State spending.

People repeat sheep-like the montra that Americas won't do X jobs or Y jobs. Having dug ditches, sold discount shoes, and handed out flyers - you'll do any job when the alternative is not eating.

Time to go back to Capt. John Smith's solution to the failing colony - no work, no eat.

I am all for helping the TRULY needed (widows, orphans, sick) but we've made un and under employment an acceptable lifestyle. We are destroying the soul of America with wrong headed "kindness".

Posted by: majcsmith | September 3, 2010 10:49 AM

best stimulus would be to extend Bush tax-cuts for everybody, including those evil "rich" making 200k or more fewer taxes mean more saving and investment, which is the real way to a prosperous future for us all.

Posted by: jibe | September 3, 2010 10:53 AM

As a small business owner and as a private citizen, what has negatively affected my personal finances the most over the past 3 years is the outrageous and immoral practices of the credit card companies. A significant portion of my income goes to servicing my debt at rates as high as 30%. I had perfect credit for 30 years, then I had the misfortune to go into business for myself just before the bottom dropped out of the economy. My credit is destroyed; I couldn't even get a loan to buy a cup of coffee at this point, so any attempt I make to repackage my debt to make it manageable is denied. Nothing that has been done has had a directly positive impact on me or my business. Bankruptcy is probably the only way I will be able to rebuild my life. Give me a loan at a low interest rate. I want to pay what I owe, I just want to pay a reasonable fee to someone for lending me the money.

I agree that bringing manufacturing jobs back to the USA would be a huge boon. But my observations as a retailer point to what I consider the major problem preventing that. Here is a typical conversation: "I don't want anything made in China. OK, here, I have some lovely things made in the US. Oh, they are too expensive!"

Consumers don't seem to be able to connect the dots that good paying jobs lead to more expensive products. Manufacturers don't have goods made overseas and charge the same prices that they would for goods made here - they have them made overseas so that they can charge prices that consumers will pay. And if we add tariffs to make foreign goods as expensive as American goods they will do the same to us, killing exports.

Honestly, I don't believe government can solve the problem. Consumers have to change their behavior. Maybe the government and business leaders need to put money and effort into educating people as to how their actions affect what happens.

And Good luck with that!

Posted by: semond612 | September 3, 2010 10:55 AM

Well, the present for the workers like wages although to make spirit.
The recent idea for small businesses support could be better than a big company, especially in management and for independent supervised. It's not banking industry but for the real life paperless innovative business. The important of mining industry should be urged to reform, especially for the all of the energy not only for machine but also for humanity.
The real good medicine and treatment are very important for our lifetime.

Posted by: andrebudianto | September 3, 2010 11:02 AM

President Obama is a community organizer. That is a professional person who is trained on coercing business or government into doing something for the complaining group.

President Obama knows nothing about creating jobs. He has never so much as run a lemonade stand or worked at a fast food restaurant.

President Obama has never signed the front of a paycheck until he became CEO of the USA.

Wow. We made a mistake. As Dem James Carville said: "It is the economy, stupid."

Posted by: cpameetingbook | September 3, 2010 11:05 AM

The important goal for any stimulus is that it should be an investment. That means it should be directed towards a specific goal of creating some sustainable business or asset that has some reasonable prospect of paying back the cost of the stimulus either directly though some kind of fee or asset sale or at least indirectly through taxes. That stimulus could include some kind of tax break. But, only if there is some real reason to believe that tax break would trigger specific business investments that have reasonable prospects of strengthening our economy. Certainly investments in infrastructure are desirable if that infrastructure has real value to our economy and particularly if it is possible to recover the cost of the investment through some kind of fee on its use. Investments that help seed the businesses of tomorrow are also desirable. What is not desirable is any kind of handout based on the concept that our economy can be fixed through some untargeted stimulus of demand for more consumption. Another kind of stimulus to be avoided is one targeted at the businesses of the past. Many of the jobs in our economy will continue to come from the housing sector and small busineses that provide a variety of consumer services. But, stimulating those sectors will not create the more globally competitive economy that we need. If we can make progress towards that economy, small business will benefit. But small business is not going to lead the way.

Posted by: dnjake | September 3, 2010 11:19 AM

"Could yo please be specific about how the Democrats were "gumming up the works" before 2006 (when they were a minority) and before 2008, when Bush was still president?"

I would ask that as well? Democrats never used the filibuster, while Republicans now use it at the drop of a hat, on nearly every bill.

Posted by: drindl | September 3, 2010 11:22 AM

@BERTBKATZ

I will agree that there is an apparent contradiction in my post. I try and keep posts relatively short and should have been clearer.

First I do stand by my assertion that all deficit spending is stimulus (provided the spending is not directed outside the economy). As an example, if we enter a recession (contraction) with a balanced budget and start running deficits to counteract the decrease in tax revenue that is in fact now stimulative to the contracted economy. Unfortunately this stimulative effect is very weak in promoting growth. This type of spending mitigates the contraction but does not do much to address new growth. Extending unemployment benefits (not considering humanitarian issues) is primarily anti-contraction and not particularly stimulative. It simply maintains demand not expand it. My point was that parts of the stimulus should not have been called stimulus in the sense that you are doing anything over and above maintaining.

Now the Reagan and Bush tax cuts were both classic stimulus. Again starting from a balanced budget example if one initiates either a reduction in revenue or an increase in spending and creates a deficit that is highly stimulative as it is net new government addition of activity to the economy. Tax cuts leave the spending decision in public hands while in new government spending the decision is made by the government.

As for the Bush tax cuts the argument that raising taxes in a recession is detrimental to recovery is true. The real question is whether the Bush tax cuts are economically efficient. As an extreme example giving a tax break to a hoarder is not economically beneficial.

Politically I am against the Bush tax cuts because I believe they contribute to the convoluted tax code we have. Taxes paid by most are far lower than the apparent tax rates because of all of the exemptions etc. In fact despite all the socialist rhetoric coming out of the far right, the USA is right at the top of countries with the lowest taxes and smallest governments.

Posted by: chucko2 | September 3, 2010 11:30 AM


Does anyone recall what doing the same thing over and over while expecting a different result is an indication of?

Lets TRY something DIFFERENT please....

Posted by: erodrik | September 3, 2010 11:35 AM

How to get the economy moving again? Here is how "Obamacare should be repealed" well lets think about this...
Obama promised the American people that the entire health care debate would be televised on C-Span. Maybe it is just the American in me but I do not like being lied too. So what we ended up getting because of Obama's lie to America is a watered down bill that very few people left or right want. Business sure doesn't want it and that is slowing hiring. Obama you are a liar. Until you apologize to the American people for your numerous lies you will remain just a lame duck joke of a president! I join my fellow Americans in laughing at you! If you cared about America you would go on television admit you have lied to the American people repeal health care and try to convince the public that from now on you will be on their side. If you care about America do something now! We can't afford your 400 page piece of PORK!

Posted by: Loxinabox | September 3, 2010 11:48 AM

The stimulus is misguided inasmuch as it is the growth of the private sector that can ultimately provide wealth and economic prosperity. Here the fundamental issue is investment in the US economy, or lack thereof. One massively underestimated core value in the US is our human capital, the capability of our labor force to be productive and generate profits. In fact, there are no profits without human capital, which is why the commoditization of labor and outsourcing are colossally self-defeating strategies for our national economy. This points to a dangerous divergence between the goals of private enterprise and of our national economic interest. We need to bring our tax, labor, and global investment policy more in line with our national interest, even if this comes under attack as protectionism or anti-globalism, so be it.

Posted by: AgentG | September 3, 2010 11:52 AM

"Smartest" is a little too vague.

If the end game is to stimulate aggregate demand as much as possible as soon as possible aid to the states and unemployment benefits are about as good as you can get.

Given that the recession is likely to be long-lasting though, infrastructure and R&D spending make sense too (transportation and ENERGY infrastructure). The spending will take longer to come on line, but it should provide some long-term economic benefits as well.

So the smart answer here is a robust stimulus plan that address both short-term and long-term objectives.

Posted by: JPRS | September 3, 2010 11:59 AM

Another stimulus band-aid is not going to save the USA that is bleeding to death through the trade deficit.

Posted by: Elisa2 | September 3, 2010 12:02 PM

Send unemployed workers back to school to learn new skills for a new job and a smarter financial manager for themselves.

Posted by: dummy4peace | September 3, 2010 12:04 PM

First time home buyer tax credit and "flipping" tax breaks (no capital gains on house flips) -- low interest rates and more mortgage interest deduction are all good stimulus packages for "all" Americans in debt and great for the country going forward.

Payroll tax holiday for hard working people -- who ever got ahead helping those "wretched" hard working people ... Research & Development -- who needs all that "brainy" junk when we could all make easy money in Real-Estate.

Posted by: free_np | September 3, 2010 12:29 PM

@Reussere

"Read some history about the Republican strategy in the Hoover administration (very similar to today's) and check out how well THAT worked."

You need to crack open those history books again. Hoover's approach was very similar to what Obama is doing. And we saw how well that worked.

What we should be doing is what Harding and later Coolidge did to get out of the 1920 recession. Nothing. They stayed out of the way and lowered taxes.

So what do the 20's and 30's teach us? Well, staying out of people's way gave us one of the most successfull decades in American History. Massive stimulus under Hoover and then FDR gave us 15 years of Depression.

But if you want to ignore history, by all means, do so. Just don't complain when the economy continues to stagnate.

Posted by: BradG | September 3, 2010 12:35 PM

Amazing. A trillion dollars in infrastruction spending has done nothing to restart the economy. Yet 46% think more infrastructure spending is the right course????

These must be the retards still clinging to the Obama raft.

Posted by: hokie92 | September 3, 2010 12:45 PM

This isn't that tough a question. You want to move in several directions at once. Put immediate cash in the pockets of those who need it (cut payroll taxes on the first x dollars of earnings), keep valuable public employees on the job (aid to the states with strings attached), offer some R&D support to business; offer significant tax advantages to emerging industries; deal with some of the intrastructure issues that will have to be addressed sooner or later anyhow. This diversified approach is pretty much what the first stimulous package attempted, and while it hasn't solved the problem, it has helped stabilize the patient. Essentially, we need more of the same medicine, perhaps fine tuned and better targeted. Those who imagine that the answer is doing nothing might note that in most cases if you don't fight a fire, it will burn itself out once it has used up the available fuel or the conditions change radically (heavy rain). The question is, are you willing to toss your economic future into this fire and hope it rains? I'm not.

Posted by: jdnathan | September 3, 2010 12:47 PM

hokie92,

The 2009 stimulus ARRA did not contain $1 trillion in infrastructure spending. Total infrastructure spending in the $787 billion package amounted to a little over $100 billion.

With respect to the impact of the stimulus bill, most independent analysis -- including the CBO's own reports -- demonstrate that the package saved as many as 3 million jobs; it boosted GDP by 4 percent.

The main problem with the original stimulus is that it was a $787 billion spending bill that came on line in a period when there was a $2 trillion drop in total aggregate demand. The impact was also off-set by cut-backs at the state level.

Posted by: JPRS | September 3, 2010 12:52 PM

BradG,

Hoover's approach in 1929 to 1932 was to balance the budget through a combination of spending cuts and tax increases. The net result was a massive increase in the federal debt as tax revenues plummeted. This is not something that Obama did in 2009.

With respect to FDR's policies look at GDP growth from 1934 to 1937. Unemployment fell by double-digits and there was robust GDP growth. When FDR attempted to cut back on the recovery and balance the budget, it put the economy back into recession -- but even then not to the levels experienced in 1932-33. Ultimately, a massive federal spending program motivated by WWII reduced unemployment to low single digits and helped to effectively end the Great Depression. This happened even though the U.S. public debt levels soared to 130 percent of GDP by the end of the war.

Part of the reason for sluggish growth now and then is that there is a massive overhang of PRIVATE debts which is putting tremendous down-ward pressure on domestic demand and a domestic recovery. Until the private debts are reduced to a sustainable level, you don't have the conditions for a private sector recovery. You can't reduce private debt levels if you simultaneously pull back on private and public spending. This is one of the lessons of the Hoover years when unemployment skyrocketed 20 percent in just 3 years and the economy shrank by one-third.

Posted by: JPRS | September 3, 2010 1:02 PM

@JPRS

I disagree that aid to states and unemployed is the best stimulus. My disagreement with calling this stimulus is not because I am against this type of spending. While they are very strong at maintaining or slowing the contraction of aggregate demand they are not particularly stimulative. In fact to the extent the money is spent on imports the

Labeling activities "stimulus" that are weak stimulative activities creates a political liability when the economic performance lags the expectations created. This is the pothole the Dems (and I vote mostly Democrat) have created for themselves. In aggregate deficit spending (that is not sent to an external economy) is stimulative to a depressed economy but the effect is very slow unless government raises spending dramatically above the previous norm. Unemployment that pays 50% of the unemployed former wage is still a net contraction of 50% of that worker's effective demand.

Posted by: chucko2 | September 3, 2010 1:47 PM

Fire the Marxist Regime!!!

Posted by: PauvrePapillon | September 3, 2010 1:53 PM

We did the cash infusion stimulus in 2009. Clearly, the 500,000 PER MONTH jobs losses of Bush / 2008 were put to a stop.

Now it is time to realize the full damage of those years. 15 million remain unemployed. Trying to cut off their stipends in service to an already exploded deficit, is not the right move for emergency times. The right step here is to keep them supported, with FDR-style public works jobs.

Community policing to reduce crime. Elder home care, child care - both are underserved and have positive social and economic impact. Badly needed infrastructure improvements. Many unemployed would be happy to give half a day to these roles as they wait for reintegration into the private sector.

Which is obviously going to take years. The solution isn't hard. Morons in Washington and a Media Inc. largely beholdened to the far right, are what is in the way.

Isn't it odd how the FDR solution isn't even on the table? Think Hoover Dam was a bad idea?

- Balkingpoints / www

Posted by: RField7 | September 3, 2010 1:59 PM

It is truly amazing that some morons believe tax cuts for the poorest are the best way to "stimulate" the economy.
ATTENTION: The "poor" not only do not pay any taxes, they actually get a check for being poor!!

Q: Why, since 1973, has the middle class not grown at all but the upper class has?
A: The upper class has been over taxed, my fellow Americans. Nobody works for the low or middle class....we all work for the upper class and the wealthy simply lay people off or charge more for whatever they sell rather than pay us more.

If any government could effectively stimulate any economy then the USSR would be the world's lone superpower. (And the Washington Post would be the mouthpiece...and turning a profit.)

Posted by: fm7319 | September 3, 2010 2:09 PM

The best stimulus? For those bailed out banks and corporations who are now sitting on billions to begin hiring and making loans to small businesses. What's happening is the rich are getting hugely richer, and middle class is getting stomped.

Posted by: tinyjab40 | September 3, 2010 2:21 PM

Some of you are referring to what President Hoover did for America. One crucial thing he did that we can all be thankful for is that he set standards for goods. That is he set the size of bricks, mattresses and many other items that are massed produced and used with other items. The point is he came up with ideas to help people and didn’t just throw money at problems, he came up with solutions. Most probably don’t know that mattresses were like cell phone chargers; all different sizes. This made it hard to purchase a new mattress when your bed was an unusual size. We need ideas like this to help America produce goods again. We need the government to actually help with manufacturing rather than trying to kill it.

Posted by: AForgottenMan | September 3, 2010 2:45 PM

Even if it is for political purposes, the only tax break or stimulus taht needs to be entertained in the near future is relief to the middle class. i still get upset that people that bought houses they could not afford or people that lost jobs and more were granted ultra low mortgages to keep their house. Let me convert my mortgage to 3% and I'll have another $400-500 hundred to put in the economy!!!!!!!

Posted by: oknow1 | September 3, 2010 3:53 PM

JOBS JOBS JOBS JOBS JOBS, WHAT PART ABOUT THAT DON'T YOU GET? IF PEOPLE ARE WORKING THEY CAN PAY TAXES. JOBS JOBS JOBS JOBS. EXECUTIVE ORDER KNOCK PRICES WAY DOWN, HEALTH CARE INSURANCE ALL INSURANCE COMPANIES TO BE REIGNED IN! BIG OIL CARTELS SHOULD BE OUTLAWED THEY CAN'T FIX GAS PRICES IN AMERICA OR WE WILL TAKE THEM OVER !

Posted by: JWTX | September 3, 2010 3:58 PM

It's the mindset of the 47% who voted for more spending that is responsible for where we are right now.

Are you serious people? More spending?

Posted by: reddog62 | September 3, 2010 4:10 PM

Jobs...
that will fix everything...
find a need...
find a way to pay for it...
hire hundreds of thousands of people...
watch the economy explode outward...
Let me know if you want to know more...

Posted by: DwightCollins | September 3, 2010 4:26 PM

The Only reason tax cuts for the American citizen's who earn the money that the government spends so easily are off the table for democrats, is that all of the American people would see that tax cuts for the rich do in fact stimulate the economy.

Tax cuts for the rich should be called tax cuts for the economy!

Tax cuts bring in more revenue to the U.S. treasury and that is not important to liberals. Liberals elitist democrats want to control people more than they want a prosperous nation

The Democrats act like all of the money that Americans earn, belongs to them, and they are just nice people so they let you take home a little.

Tax cuts that Kennedy,Reagan and Bush proposed worked, but that option to stimulate the economy is frowned at by the leftist at the Washington Post!

Obama's Keynesian economic policies are a complete disaster!

Posted by: JeffreyM23 | September 3, 2010 8:16 PM

The Criminal Globalist Privately $owned Bank- suggestionally called the "FEDERAL RESERVE BANK"! -- It is a Criminal Banknig Cartel from Europe,-- which creates "DEBT' - thru FIAT - Funny-Money,-- and the INTERST upon INTEREST that WE-the-People and Heirs will have to $PAY!! -- END this Criminal TRAITOR 'CRAP'- NOW AMERICA!! -- -- Since these ScumBag $BANKsters took over Our' Money Supply & Management-- the U.S. Dollar's Buying-Power has Dropped by close to 97%!!! "STUPIDITY TO THE MAX- AMERICA"!! --- And YOU, - yes YOU have allowed this to happen! --- Repeal the 'Federal Reserve Act'! -- And if Your' CONGRESS will Not Listen to, or OBEY YOU (the BOSS),- then order those Traitors to go with the Criminal Cartel $BANKsters back to Europe where they came from back in 1911-1913!!! --

Posted by: jward52 | September 15, 2010 8:15 AM

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