Thursday, February 5, 2009

Stimulus Porn: Commonsense Observations

I do not pretend to be an expert on stimulus plan, but it seems to be too little, misdirected, too much infected with tax cuts, and filled with special interest nonsense.

The Republican speak authoritatively as if tax cuts are the best way to get investment going, but real investment, the kind that results in the production of goods has been terribly anemic in spite of decades of tax cuts.

I do note that one of the most direct ways during the recession is to eliminate costs, including debts, that hold the economy back. Letting assets falling value raises the rate of profit, once the realization sets in that the asset prices have hit bottom.

Leaving banks fail and writing off debts will cause some dislocation, but they will leave both the economy and society stronger.

In terms of getting money spent, putting it in the hands of the poor and the unemployed seems far more reasonable likely to create spending than to give to the rich, who may just pump up asset prices once they feel confident, undoing some of the stimulus.

In terms of public works, Gray Brechin, has been doing remarkable research showing how much the public works of the New Deal have contributed to the country to this present day. The government has the opportunity to sell bonds at less than 3%. Interest costs of public works represent a significant part of the total costs. Taking advantage of the bargain basement cost of credit now represents a major savings, increased jobs, plus the opportunity to make a significant contribution to both the economy and society.

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