One thought on why the stimulus isn’t/didn’t work

[Tarnished_Brass]

In 1932, when the American public voted President Herbert Hoover out of office, they were searching for an end to the economic chaos and unemployment that had gripped the nation for two years. They turned to a man promising a better life than the one they had known since the beginning of the Great Depression — Franklin D. Roosevelt.
When FDR took office, he immediately commenced a massive revitalization of the nation's economy. In response to the depression that hung over the nation in the early 1930s, President Roosevelt created many programs designed to put Americans back to work. http://www.u-s-history.com/pages/h1586.html

President Franklin Roosevelt needed innovative solutions if the New Deal was to lift the nation out of the depths of the Great Depression. And TVA was one of his most innovative ideas. Roosevelt envisioned TVA as a totally different kind of agency. He asked Congress to create “a corporation clothed with the power of government but possessed of the flexibility and initiative of a private enterprise.” On May 18, 1933, Congress passed the TVA Act  http://www.tva.com/abouttva/history.htm

These are two examples of the programs that were funded by the government during the “Great Depression” some would argue though that   not have been successful without the US becoming involved in WWII.
Parallel today and the massive spending the Government is doing to get jobs going again and the two war efforts that has cost and will continue to cost Billions of dollars. Why isn’t it working? Here are my thoughts, back then the US made everything we needed and wanted, and when a dollar was spent it stayed in the US and created more jobs here. This created an upward spiral and we became a very prospering nation again.

Today only a fraction of a dollar spent stays here because we are so greedy we want cheap goods while demanding high wages and maximum return on investments. It is not the government’s fault or the large corporation’s but yours and mine. It is up to us to fix it by STOP buying things made in China, India, Mexico and other countries that do not pay wages that we would want to live on. We need to shop at the Mom and Pop stores, not the huge stores that buy direct from those nations. We need to seek out and buy what is made right here in the USA and be ready to pay a higher price.

Increasing the taxes on those that make high wages will only go to stifle the spending they do and reduce the willingness to invest in jobs right here and employ you and me.

[teko]

The fair tax may or may not be an option, I would have to research more as I frankly dont know that much about it. As far as the tax cuts being continued, and them creating jobs? Where are the jobs as a result of the tax cuts? I dont see all this hiring going on. I do not like to be held hostage by the rich either. If you dont give me what I want I will not hire ?. Bush put these tax cuts in place, so where are the jobs? Seems to me they have plenty of money on hand but refusing to hire, make loans, etc. They (all), simply go back to paying what they should be after the cuts expire. Ya gotta go some to call that a tax hike imo. Not to mention that it goes to the highest what 3 percent? I am simply not buying it,. Nor are the majority of Americans. As far as buying only American, absolutely! But in all reality, people are self serving and will still buy walmart. In the end, they only care about their own household expenses and when your on a budget, your gonna go cheap. Just the nature of the beast so as logical as that sounds, I dont see it happening, Back to square one.

[Tarnished_Brass]

I agree with onthefence we do need to do away with the IRS and all the lobbyist and tax attorneys and go to a consumption tax. It would bring in dollars from all the illegals that don’t pay taxes as well as taxes from those that work under the table. The rich would pay when the buy luxury items. I was thinking there is an Idea out there how to do this and just found it http://www.fairtax.org

I notice that there has been no discussion about buying what America builds and the willingness to pay more for goods. I do think that is the key to all of this. IF companies start losing money because we refuse to buy items produced in foreign countries then they will move the jobs back here.

I also wonder what it would be like if Ross would have been elected. I remember his charts and how people made fun of him, but I think it was because they knew he was right. Remember his phrase, with NAFTA we will be hearing a sucking sound from the south, referring to jobs going to Mexico.

I am a middle class person but I know that if it were not for my "rich" boss that put everything she had on the line in the beginning I would not have a job. She also does not plan to expand if the tax rates go back up. She also said that the additional taxes will be passed on to the consumer in higher prices making us even less competitive to imported goods. So, is it really a smart thing to do? It looks like a lose-lose to me.

[teko]

Well, I think everyone is entitled to their own opinion for sure. There is never one decision that is right for everyone, but must decide on what is best for the masses. That is why we vote. In order to put sense to what has and is going on tho, means you have to have an understanding of how it all comes together. Of late all we hear are simplifications of a complicated process. For instance, in budgeting my household, it makes sense I quit spending and start saving. But for running a country the opposite in fact is true. I am tried and true as well and we all speak from experience and what has effected our own lives. But if things go forward, you will only see the rich and the poor slaves of the rich. I kinda like having a middle class myself. Not in no big hurry to get rid of it. Deregulation will bring about the thing people fear most. Watch and see.

[onthefence]

some ppl need the goverment to hold their hand, and that is ok for Them, the time when it becomes a problem is when they start deciding "what makes sense" and what is right for everybody. And then calling it progress, personally I have never had credit , never will , use cash for everything, dont own a home never will, (been transient), most ppl looking at my life and what i survive on would think i would be a democrat voting for and wanting any handout i could get , but its actually just the opposite, .

I chereish and respect the fact that this Great country was and is founded on Rugged Individualsm.

[teko]

None of that makes any sense. So once you do away with the IRS, how do we raise the taxes we need to run the country?

I have been where you are and have done the Ron Paul thing, and as they say hindsite is always 20/20. As good as he sounds, his theories do not work in todays world. He is radical in that it simply does not work NOW. Do I want to go back 100 years? Nope not me!

So take all the government entitlements and all that away. What ya left with? You think we got problems now? No one is taking my social security unless its out of my dead cold hands! And if you want to go back a hundred years, learn to carry cash, no credit. Only cash. Do you really think this will work in todays world? Its crazy!

I kind of like having regulations. Checking to make sure my food is safe, drugs, dogfood.
I kind of like regulations limiting what credit card companies can do to me in the way of interest and penalties. I kind of like having an ambulance, fire department and even county run hospitals. I kind of like the idea of after paying into social security all these many years that I can rely on that when I am old and cannot work. Or health programs in place to protect the children, or even being told I have to have my kids vaccinated. I like the police department, education, veterans affairs and all that!  I like the regulations set in place now keeping people from gouging me if I try to buy a home, a car etc. I think this is progress myself.

[onthefence]

I am certainly not intelligent enough to answer , although I believe there is a man that does have the answers, and his name is Ron Paul, I also wonder where we would of been if Ross Perot would of been elected.

I think we should get rid of the IRS and change the way we tax, we should tax consumption Not productivity, .
Iam not sure if we could of kept the jobs here but Nafta probably didn't help, .

also the Gold standard should still be in place (Nixon) and I hope the Federal Reserve does get audited HR-1207.

Thats just a few things that come to mind,

[teko]

So in a nutshell, it depends on who you listen to. But if you believe that things are not working as implemented, and only a war will straighten things out then, I have one more question.


Who shall we declare war on? The Muslims?

[teko]

The Great Depression was a period of worldwide economic depression that lasted from 1929 until approximately 1939. The starting point of the Great Depression is usually listed as October 29, 1929, commonly called Black Tuesday. This was the date when the stock market fell dramatically 12.8%. This was after two previous stock market crashes on Black Tuesday (October 24), and Black Monday (October 28). The Dow Jones Industrial Average would eventually bottom out by July, 1932 with a loss of approximately 89% of its value. However, the actual causes of the Great Depression are much more complicated than just the stock market crash. In fact, historians and economists do not always agree about the exact causes of the depression.
Throughout 1930, consumer spending continued to decline which meant businesses cut jobs thereby increasing unemployment. Further, a severe drought across America meant that agricultural jobs were reduced. Countries across the globe were affected and many protectionist polices were created thereby increasing the problems on a global scale.

Franklin Roosevelt and His New Deal
Herbert Hoover was president at the beginning of the Great Depression. He tried to institute reforms to help stimulate the economy but they had little to no effect. By 1933, unemployment in the United States was at a staggering 25%. Franklin Roosevelt became president on March 4, 1933 and immediately instituted the first New Deal. This was a comprehensive group of short-term recovery programs. It not only included economic aid and work assistance programs but also the end of the gold standard and of prohibition. This as then followed by the Second New Deal programs which included more long term assistance such as the Federal Deposit Insurance Corporation (FDIC), the Social Security System, the Federal Housing Administration (FHA), Fannie Mae, the Tennessee Valley Authority (TVA), and the Security and Exchange Commission (SEC). However, there is still question today about the effectiveness of many of these programs as a recession occurred in 1937-38. During these years, unemployment rose again. Some blame the New Deal programs as being hostile towards businesses. Others state that the New Deal, while not ending the Great Depression, at least helped the economy by increasing regulation and preventing further decay.
In 1940, unemployment was still at 14%. However, with America's entry into World War II and subsequent mobilization, unemployment rates dropped to 2% by 1943. While some argue that the war itself did not end the Great Depression, others point to the increase in government spending and increased job opportunities as reasons why it was a large part of the national economic recovery.

[teko]

Your right, people can speculate, which is exactly what has been going on and still does to this day. What I would like to know is what you would see as having been a solution. What do you think the pres should have done and what in your opinion would have been the outcome. Keep in mind that we had a surplus under Clinton and take it from there. Recession, two unfunded wars, and the tax cuts under bush all being in place 2 years ago.


Me, I can handle a depression if need be as I am old enuff to know what to do to survive. I would be very interested in your solutions. How would you have kept all those jobs from going overseas for starters.

[onthefence]

people can speculate all they want, but there is alot of ways it could of gone, for instance Gm might of been taken over by penske and other investors, do you think it was a fair bankruptcy when the bondholders got a few cents on the dollar and the union walked with the majority of holdings, when it was the legacy costs that drove them into the ground, albiet poor management descisions.

and whose to say 8 million more would be out of work, sounds like not just repubs listening to doom & gloom scare tactics........

[teko]

So, say we didnt do the stimulus or the tarp, let the auto dealers crash, not bail out the big banks, or the mortgages what would have happened. Now seriously, looking back I wish we had let it all fall where it may but realistically what do you think would have happened eh? We would not be in a recession right now, but rather a depression. 8 million more people at least would have been out of work instead of what we have now. Is that really a better scenario ya think?

And if your hearing the whining now, just imagine what it could have been, or still could be.

[onthefence]

The New Deal Didn’t Work the First Time, Let’s Try it Again
http://geekpolitics.com/the-new-deal-didnt-work-the-first-time-lets-try-it-again/

spending your way out of a recession will never work!

dec. 7th 2008  


Obama is planning a new public works project similar to that of FDR’s New Deal. He has apparently done a good job studying the history of how the New Deal was implemented. He wants to raise taxes on the rich to create jobs that are out of the scope of what the federal government is supposed to do.

Creating jobs sounds like a great idea. The problem is the government doesn’t have the money to be able do this without raising taxes or continuing to go deeper into debt. Raising taxes will not help the economy, and going deeper into debt to China is also a really bad idea.

The other problem is that the government is really inefficient. At everything. They will take your tax money and create lots of inefficient jobs. This is exactly what happened during the Great Depression. This is what extended it.

For the last few months we have had bad companies taking handouts from Washington. Now we are going to have congressmen trying to bring home the pork to their districts. They will vote for these things, create jobs in their districts, and make the recession worse. However, since the congressman in Ohio is taking federal money from taxpayers in Tennessee for his district, his district is happy with him. He will get re-elected because of this. He will continue to vote with Obama because of this. However, does this help the country as a whole, taking money from people in one place and giving it people in another while the government wastes some of it on the way?

What is going on here is that Obama hasn’t learned from history. The New Deal did not work. Don’t trust my opinion? How about Henry Morganthau, Secretary of Treasury for FDR. He said this in 1939:

    We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and now if I am wrong somebody else can have my job. I want to see this country prosper. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises. I say after eight years of this administration, we have just as much unemployment as when we started. And enormous debt to boot.

Transferring money from one person to another doesn’t create jobs. It doesn’t create more money. It just changes who has the money. Henry Hazlitt described it as the broken window fallacy:

    Let’s say that we have a nice suburban area sort of like we have here in Washington, DC, out in Chevy Chase. And we have some guy there who has a nice picture window, and some kid goes by, a hoodlum, and throws a rock through that window, breaks it. And let’s say that it costs $500 to replace that window. Well, our first reaction might be: What a horrible thing. Let’s catch the perpetrator.” But what if somebody else came up and said, “Wait a minute. The window’s been broken, some time has elapsed, we haven’t caught the guy, but maybe we shouldn’t catch him to throw him in jail. Maybe we should catch him to pat him on the back. Because I’ve observed what’s happened in that house and what’s happened is this: He broke the window, but the guy who had the window broken called up the glassmaker and the glassmaker put the window in and installed it for $500. Then the glassmaker took that $500 and bought a DVD player. He also bought a couple DVDs. And then he bought a reclining chair to sit back and watch the movies, all with that $500. So that broken window has generated business and now we have more DVD sales, more reclining chair sales, and it’s generated business all around town. So isn’t this a good thing?”

    Where’s the problem with this argument? The valid point here is that the guy whose window was broken also might have wanted to buy a DVD player and a reclining chair. Or he might have wanted to buy a suit of clothes and some insurance. So that guy, and the tailor, is out $500 because instead of buying a suit and a shirt, he now had to pay for the window. You never generated real business because the guy who had the window broken is out $500 and the guy who had replaced the window is up $500, but the guy who had the window broken would have also been spending $500. So there’s really no net gain.

This gets worse when the government is in the middle. When the money goes into the government before it changes hands, there is less money coming out on the other end.

If Obama can’t learn from history, we are doomed to repeat it. When FDR took office in 1933 unemployment was over 24%. In 1939, it was 17.2%. In 1943 it was 1.9%. In FDR’s seventh year in office, unemployment was still over 17%. That doesn’t really seem to me like something that worked really well. World War II on the other hand did get us out of the Depression. It made unemployment go away. The New Deal did not. I certainly do not want another world war. Obama’s New Deal is also something I could do without.

Now 2 years later do you really think we are better off than if we would of been true capitalists and saw what rose out of the embers............

[teko]

And for all those reasons, I think we need to get on the clean energy bandwagon, and quit allowing all our jobs to be sent overseas. People over the age of 50 are stuck. And that is a large proportion of our work force. These are the people that did the manufacturing jobs all these years and cannot adapt into the new age of computers etc. It is also the age that is getting older and will be putting a major dent into the social security system. I read an article that we are funded with SS till the year 2039, which means it has been used as a scare tactic and a political football to gain points. We also need to realize that 60% of our overall budget goes to medicare, ss, and medicaid/welfare. The tax deductions for dependents are out of whack as well, add to that the tax cuts and folks, you got the lowest taxes in 50 years. So that pretty much sums up the cutting taxes ploy that we have been hearing. If we want to be realistic, we must understand that there are things that need to happen to get us back on balance. Last year I talked to a couple of people with children, they got back copius amounts of money because they had children. The feds paid them instead of them paying the feds. Now you gotta admit, anyone that knows basic math, knows that dont work. Healthcare is another hot button issu that has been draining us for years and years. It will take all sacrificing and getting real to make anything different. imo

[brice1967]

The stimulus.... I imagine it is doing something, but certainly not what was promised.  The simple economics of it is, if you're trying to buy $40 worth of groceries with a $20 bill....your trip is going to prove fruitless, or at least partially fruitless.  And I kind of agree with teko, but I think its taken longer than a decade to get here.  I mean, you just cant blame Bush for this.  If you are going to blame Bush for this, youre going to have to give him credit at the same time because of the TARP funding that occured on his watch, but went into effect in Obama's term.  Obama had been elected, but the fucning had already aquired.

Tarnished...your point about WWII and us making everything we needed is pretty precise.  It is also about this time (give or take a decade) that we started some trade policies that benefitted all parties involved, that are now antiquated, and henceforth affect us in a negative fashion.  

Revamping politics has to be more than changing a few faces.  Our elected officials need to weed out bad policies, policies that are no longer effective, and can them.  If it costs money and there is a poor return or no return, the policy is outdated and needs to be put to rest.  There are a ton of bad policies that cost us money every day.  Something that adds to this is shady legislation.... adding things that do not belong on certain bills, and then getting the original bill passed. (That is something that was promised on the campaign trail....."more transparency in government" and is still common place....what else did he say, "trim the fat"?)

Until we change the way we do things, our future is as good as it is right now.  Changing faces but retaining horrible policies = bad politics.  

[teko]

Altho I agree somewhat with your thoughts, my thinking is that the stimulus is working, however not as strongly or as quickly as we would like. I like to look back and see where we would have been right now is the stimulus was not implemented. I also think that it took a decade to get where we are and we will not have an overnite cure. It is going to hurt. The tax cuts that were implemented did nothing to keep our econemy getting where it is, in fact it hlped get it here and it makes no sense to continue tax cuts for the wealthy that do not need them. It has been called a tax hike, which is not true, moreso going back to paying what they did before the cut. Why borrow all that money, add to the deficit to continue them? It did not work before, and will not now. And on that note, I am all for discontinuing all the tax cuts that were set to expire later this year. If you dont have more money coming in than ya got going out, (right now it is even), the economy will not improve. So anyways, those are my thoughts.