Stimulus doesn't work, but tax breaks for the rich do?

[joobz]

Big surprise here—the same criminals who imposed this massive, fraudulent scam upon the American people, embezzling and squandering billions of taxpayer dollars on it, have put out a report to explain how this scam “helped” us. And it's no wonder that someone foolish enough to have been taken in by the original scam is also foolish enough to believe the scammers when they try to justify it.

P.T. Barnum was right. Or at least he would have been if he had actually said the famous quote that is popularly attributed to him.

The conspiracy runs deep. It seems that national autoworkers association is in on the scam
http://www.usatoday.com/money/autos/2009-07-30-cash-for-clunkers-program-suspended_N.htm
as is Duke University
http://www.rff.org/News/Press_Releases/Pages/did-cash-for-clunkers-work.aspx

 

[Bob Blaylock]

The conspiracy runs deep. It seems that national autoworkers association is in on the scam
http://www.usatoday.com/money/autos/2009-07-30-cash-for-clunkers-program-suspended_N.htm
as is Duke University
http://www.rff.org/News/Press_Releases/Pages/did-cash-for-clunkers-work.aspx

Did you actually read those articles?

Of course the autoworkers would support this scam. They were the ones in a position to benefit the most from it, at the expense of the majority of those of us forced to pay for it. The main gist of that first article seems to be about how “successful” this scam was, with “success” being defined by how quickly it spent the original billion dollars allocated to it.

The second article points out a short-term increase in automobile manufacturing and the jobs related thereto, at the expense of manufacturing and jobs that would have existed later. It also points out the high cost of the alleged environmentalist-whacko benefits.

“The program indeed provided some short-term stimulus to the auto market. However, if the program were to be judged as an environmental program, the implied costs of reducing gasoline consumption and CO2 emissions are quite high: the best case scenario suggests a cost of over $91 in government revenue for each ton of CO2 avoided and almost 90 cents for each gallon of gasoline consumption.”​

 

[Hlafordlaes]

@drkitten,

I must say I admire your perseverance in the face of repetitive, unanalytical dogma. Let's agree to the basics of your arguments and address some of what are still serious issues regarding stimuli and infrastructure spending.

Specifically, the other and far more worrisome deficit (trade) is further worsened when household consumption is increased by government spending, especially when that is in the form of unemployment insurance (which I am in 100% favor of while admitting to its side effects). And Yes, agreed, in spite of this stimulus spending still makes sense in a Great Recession, but this is the first of two factors to keep in mind.

The second issue regarding modernizing infrastructure is that, to the contrary of supply-side theories (hoaxes), even when businesses or investors either have lowered taxes, new subsidies or simply new orders in the form of govt spending in an attempt to upgrade infrastructure, investment in new US jobs and a permanent increase in the technology base may not result. The reason is that much of the newer tech is now based overseas, be it wind power (eg Spain's GAMESA is counting on ten of $millions in sales from the new Obama I&D initiative), high-speed rail, and so on.

Certainly it would be and is a shame when a stimulus program delivers jobs mainly overseas, directly increases the trade deficit, and fails as well to create or enhance competitive domestic private industries.

Rather than seek to bash stimulus spending, I'd like to discuss ways to lessen the impact on the trade deficit while respecting intl trade agreements, and build and/or reinforce the growth of US domestic green tech, hi tech transport, communications etc.

Your thoughts?

 

[volatile]

Did you actually read those articles?

Of course the autoworkers would support this scam. They were the ones in a position to benefit the most from it, at the expense of the majority of those of us forced to pay for it.

:headdesk:

Do you want to think about what you just wrote? Do you understand even the most basic tenets of macroeconomics? Hell, do you even understand the most basic tenets of *reality*?

 

[A Christian Sceptic]

:headdesk:

Do you want to think about what you just wrote? Do you understand even the most basic tenets of macroeconomics? Hell, do you even understand the most basic tenets of *reality*?

Can you explain more of what you're saying about what Bob Blaylock wrote? Thanks.

 

[Dorian Gray]

No, the premise behind stimulus is that if you don't want to spend your own money on what the government thinks you should spend it on, the government will take it from you and spend it as it dictates. The ripple in the pond is the side effect of the entire water level being lowered to begin with.

I think you're confusing the premise of the stimulus with the premise of taxes.... because what you described is exactly what the government does with taxes. I think we can all agree that there are areas we don't want to pay for, but that nevertheless we are paying for them. Even aspects of areas - for example, we might agree we need a military, but if we don't agree we should invade Iraq, we are simultaneously paying for something we want and something we don't want.

In fact, the complaint about the stimulus is really just a complaint about what the government is doing with the tax revenue it collects. It's just that people who don't think are being told the stimulus is somehow different from all the other taxes by the right, and they are believing it because economafinancethingy is harrrrd.

 

[Dorian Gray]

Cash for clunkers destroyed wealth? Gee, then so did moving to computers from typewriters, moving to cars from buggies, moving to anything new from anything old.... because what do you think happened to all those typewriters, buggies, etc.? They were destroyed. And THAT was in the private sector with marginal government involvement at best!

You wanna argue that you'd be better off if you still had a typewriter? Because wouldn't that be ironic? Yes, it would.

Consider a huge game like Halo. Most people make a few purchases per year of a video game because they're expensive. Halo comes out and has world editors, multiplayer, etc., etc. and makes $200M on the first day. It has an extremely long shelf life for a game. Know what that means? People won't spend nearly as much money on other games, because Halo has such a long shelf life.

So take used cars. People won't buy new cars if there are a lot of used cars out there. Fewer new cars equals fewer dollars for car manufacturers. Possibly more dollars for aftermarket and mechanics, but still. So the government says "hey, we'll give you a boost if you buy a new car and trade in your old one, particularly your really old one." And people do it. It stimulates the purchase of more cars. There are multiple car companies. GM is one of them. The more money GM makes, the faster it gets well, solvent, economically viable, or whatever. The faster it gets well, the faster it goes on the market and gets out of government ownership!

And isn't a certain group of people complaining that the government owns GM?

Why, I believe they were and are complaining vehemently and loudly! So, remind me.... how is Cash for Clunkers bad, again?

 

[Bob Blaylock]

Cash for clunkers destroyed wealth? Gee, then so did moving to computers from typewriters, moving to cars from buggies, moving to anything new from anything old.... because what do you think happened to all those typewriters, buggies, etc.? They were destroyed. And THAT was in the private sector with marginal government involvement at best!

You're talking about things being taken out of service because they are obsolete, and no longer useful enough to justify keeping them in use.

This has nothing whatsoever to do with the “Cash for Clunkers” scam, which gratuitously destroyed billions of dollars worth of automobiles that were still valuable and useful; and which, if not for this massive, fraudulent scam, would still be in service.

 

[Bob Blaylock]

So take used cars. People won't buy new cars if there are a lot of used cars out there. Fewer new cars equals fewer dollars for car manufacturers. Possibly more dollars for aftermarket and mechanics, but still. So the government says "hey, we'll give you a boost if you buy a new car and trade in your old one, particularly your really old one." And people do it. It stimulates the purchase of more cars. There are multiple car companies. GM is one of them. The more money GM makes, the faster it gets well, solvent, economically viable, or whatever. The faster it gets well, the faster it goes on the market and gets out of government ownership!

And isn't a certain group of people complaining that the government owns GM?

Why, I believe they were and are complaining vehemently and loudly! So, remind me.... how is Cash for Clunkers bad, again?

It's good, if you work for the automobile manufacturing industry. It's good if you're in a position to take advantage of the government handout to help buy a new car, when you otherwise could only have afforded to buy a used car. Some people did benefit from this scam. Nobody's denying this.

But the vast majority of people did not benefit. Those who benefitted did so at the expense of all of us who had to pay for it through taxes. Most of us had to pay taxes to support this scam, and got absolutely no benefit whatsoever in return.

Further, those of us who were in the market to buy a used car, but not in a position to be able to afford to buy a new car even with the help of this scam, were further harmed, because the supply of used cars has been diminished, and their price, as a result, increased.

If Big Brother were to take a thousand dollars in taxes from one person, and give a thousand dollars in handouts to another, you could say that the net effect was neutral; one person gained exactly as much as someone else lost. That is not the case here. Government spent billions of dollars to buy up valuable cars, at prices above their market value, just to destroy them. Those who previously owned those cars gained. Those in the business of manufacturing and selling new cars to replace those that were destroyed gained.

Everyone else lost. And because wealth was directly, deliberately destroyed, in the process of redistributing it, those who gained gained less than was lost by those who lost. This is less than a zero-sum game. On the whole, this left us, as a nation, poorer by the value of all the cars that were destroyed.

Instead of being like my earlier example, of government taking a thousand dollars from one person in taxes, and giving a thousand dollars to another as a handout, this is more like government taking a thousand dollars from someone in taxes, throwing five hundred dollars of it on to a bonfire, and then giving the other five hundred to someone as a handout.

 

[A Christian Sceptic]

So take used cars. People won't buy new cars if there are a lot of used cars out there. Fewer new cars equals fewer dollars for car manufacturers. Possibly more dollars for aftermarket and mechanics, but still. So the government says "hey, we'll give you a boost if you buy a new car and trade in your old one, particularly your really old one." And people do it.

Cars older than 25 years were not allowed to be traded in. Apparently gas guzzlers that people drive older than 25 years old weren't as evil as all the other gas guzzlers under 25 years old.

 

[volatile]

Can you explain more of what you're saying about what Bob Blaylock wrote? Thanks.

What do you think happens to the money *after* it's in the pockets of the auto-workers that now have jobs, and the suppliers who have more business... And what do you think happens to the money after that?

If you think about the whole economy, you'll see what a nonsense "the expense of the majority of those of us forced to pay for it" is.

 

[volatile]

It's good, if you work for the automobile manufacturing industry.

And if you supply food, or clothes, or housing, or leisure goods to people who work in the automobile manufacturing industry; or if you supply to people who supply to the automobile industry, or if you supply to the people who supply to the people who supply... well, you get the idea.

Why are right-wingers unable to understand that they do not live in a vacuum? Money spent on new cars (hell, money spent on anything, as Dr. K keeps pointing out) is good for EVERYONE. Read an economics textbook - or even just think about how many hands the dollar bill in your wallet has passed through before it got to you, and how many more it's going to pass through once you hand it over to buy a newspaper.

 

[A Christian Sceptic]

Why are right-wingers unable to understand that they do not live in a vacuum? Money spent on new cars (hell, money spent on anything, as Dr. K keeps pointing out) is good for EVERYONE. Read an economics textbook - or even just think about how many hands the dollar bill in your wallet has passed through before it got to you, and how many more it's going to pass through once you hand it over to buy a newspaper.

EVERYONE is pretty all inclusive - wouldn't you say.

If someone takes $1000 from me and divides it up with everyone else - that's not good for me. Why am I not part of EVERYONE?

CfC was funded by borrowed money and taxed money. Did every tax payer take part? NO. Will every tax payer get that money from CfC exchanges? NO.

 

[volatile]

EVERYONE is pretty all inclusive - wouldn't you say.

If someone takes $1000 from me and divides it up with everyone else - that's not good for me. Why am I not part of EVERYONE?

CfC was funded by borrowed money and taxed money. Did every tax payer take part? NO. Will every tax payer get that money from CfC exchanges? NO.

Please, read a book about macroeconomics.... for your own good.

Yes, "everyone" is all-inclusive. You are part of "everyone". There is money flowing through whatever business you work for that originates, somewhere down the line, from the stimulus. That's how economies work. You seem to lack the ability to see beyond the deduction line on your payslip, but that's just a problem you'll have to learn to get over.

Dr. Kitten has explained this far more eloquently than I can, but let me re-iterate: in recessions, the problem is primarily one of liquidity, so steps taken to ensure money is moved around the economy are a top priority. You do understand that auto workers need to eat, and thus keeping them in jobs benefits everyone, don't you? When they spend a dollar at the grocery store, the auto worker is better off and the grocer is better off. When the plant buys steel, the plant is better off, the steelyard is better off, and everyone who supplies and works for the steelyard is better off. You understand that no man is an economic island, and that we live in a social economy, don't you? You understand that you cannot ringfence the stimuls spending and claim "only a few benefited", don't you? You understand that one dollar of stimulus spending or one dollar of welfare benefits creates a good deal more than one dollar of economic activity, don't you?

ETA: Do you know what "growth" is, in economic terms? If economics worked in the way you seem to think it does, growth would be impossible!

 

[Malerin]

Please, read a book about macroeconomics.... for your own good.

Yes, "everyone" is all-inclusive. You are part of "everyone". There is money flowing through whatever business you work for that originates, somewhere down the line, from the stimulus. That's how economies work. You seem to lack the ability to see beyond the deduction line on your payslip, but that's just a problem you'll have to learn to get over.

Dr. Kitten has explained this far more eloquently than I can, but let me re-iterate: in recessions, the problem is primarily one of liquidity, so steps taken to ensure money is moved around the economy are a top priority. You do understand that auto workers need to eat, and thus keeping them in jobs benefits everyone, don't you? When they spend a dollar at the grocery store, the auto worker is better off and the grocer is better off. When the plant buys steel, the plant is better off, the steelyard is better off, and everyone who supplies and works for the steelyard is better off. You understand that no man is an economic island, and that we live in a social economy, don't you? You understand that you cannot ringfence the stimuls spending and claim "only a few benefited", don't you? You understand that one dollar of stimulus spending or one dollar of welfare benefits creates a good deal more than one dollar of economic activity, don't you?

ETA: Do you know what "growth" is, in economic terms? If economics worked in the way you seem to think it does, growth would be impossible!

Do you know how much cash businesses are sitting on?

 

[oggiesnr]

Do you know how much cash businesses are sitting on?

At one level, scary amounts, at another level prudent amounts. I am sitting on cash (OK I'm small beer) but if I spend it I do not know whether there will be enough liquidity or demand to buy what I am then selling (or I might just be in the wrong line) and whether if I need a cash injection to help me over a hump (or invest in a better line later) the banks will be forthcoming at a price that makes commercial sense to me.

In uncertainty I hoard cash and buy at the last minute.

From the macro economic POV this is a disaster because I've stopped that cash circulating (and indeed I may be contributing to a double dip) but from my POV it is perfectly logical.

I'm a market trader (as in Market Squares not Stocks etc). I've recently made a mistake, a new line is not selling through and taking up limited stall space for no return. Because I paid cash I can take it off display, pay cash for a replacement line (already done) and I'll move this one at cost over the Christmas period. It's a small example but that's what a lot of businesses are doing. Having cash also means that I can survive (like last year) if markets don't happen for a couple of months because of bad weather.

When it's your house on the line Economics 101 takes on a whole new meaning

Steve

 

[Dorian Gray]

It's good, if you work for the automobile manufacturing industry. It's good if you're in a position to take advantage of the government handout to help buy a new car, when you otherwise could only have afforded to buy a used car. Some people did benefit from this scam. Nobody's denying this.

But the vast majority of people did not benefit. Those who benefitted did so at the expense of all of us who had to pay for it through taxes. Most of us had to pay taxes to support this scam, and got absolutely no benefit whatsoever in return.

Further, those of us who were in the market to buy a used car, but not in a position to be able to afford to buy a new car even with the help of this scam, were further harmed, because the supply of used cars has been diminished, and their price, as a result, increased.

If Big Brother were to take a thousand dollars in taxes from one person, and give a thousand dollars in handouts to another, you could say that the net effect was neutral; one person gained exactly as much as someone else lost. That is not the case here. Government spent billions of dollars to buy up valuable cars, at prices above their market value, just to destroy them. Those who previously owned those cars gained. Those in the business of manufacturing and selling new cars to replace those that were destroyed gained.

Everyone else lost. And because wealth was directly, deliberately destroyed, in the process of redistributing it, those who gained gained less than was lost by those who lost. This is less than a zero-sum game. On the whole, this left us, as a nation, poorer by the value of all the cars that were destroyed.

Instead of being like my earlier example, of government taking a thousand dollars from one person in taxes, and giving a thousand dollars to another as a handout, this is more like government taking a thousand dollars from someone in taxes, throwing five hundred dollars of it on to a bonfire, and then giving the other five hundred to someone as a handout.

Can I assume you've chosen to ignore my comments about taxes being the exact same thing because you cannot possibly hope to address them in any meaningful lucid way?

Hundreds of billions of dollars have been spent in Iraq. Who did that benefit here? And did I have a choice in how the money was spent? And was it not a colossal waste of money?

Yeah, I'm not surprised you had nothing to say to that.

 

[Dorian Gray]

Cars older than 25 years were not allowed to be traded in. Apparently gas guzzlers that people drive older than 25 years old weren't as evil as all the other gas guzzlers under 25 years old.

Well, cars that old tend to turn themselves off, unless they are restored, in which case they're toys, not transportation.

 

[Bob Blaylock]

Can I assume you've chosen to ignore my comments about taxes being the exact same thing because you cannot possibly hope to address them in any meaningful lucid way?

I'm not sure what you expect me to say about your lies and irrelevancies.

Hundreds of billions of dollars have been spent in Iraq. Who did that benefit here? And did I have a choice in how the money was spent? And was it not a colossal waste of money?

I suppose if you believe that the “Cash for Clunkers” scam was good for the economy, then perhaps you also believe that the 9/11 attacks were also good, for the same reason—that huge amounts of valuable assets were destroyed, creating the opportunity for economic activity to replace them. From that point of view, then I suppose you would see it as incredibly wasteful to spend money on military activities to prevent many, many more 9/11-type attacks.

 

[Robin]

I suppose if you believe that the “Cash for Clunkers” scam was good for the economy, then perhaps you also believe that the 9/11 attacks were also good...

Reductio ad 9/11. That is a new one to me.