stimulus

[kimatha]

In today's paper there was an article about what Montana is going to get from the Stimulus Package.

I notice that one of the things is tax refunds of $400 for individuals (or $800 for couples, which works out to $400 a head, so i don't know why they distinguish it).

Anyway. I don't think pissy little refunds like that stimulate anything. To paraphrse Lewis Black, a little payment like that doesn't do anything except make you realize how totally fucked you are.

There's other stuff too, though - college aid, Head Start stuff, highway construction, etc.

I don't know though, if this is the right way to fix the economy. I sort of think that some of the bad debts just need to go bad and clear out of the system.

Since banks and other lenders seem to be too dumb to realize that lending money to people who can't pay them back is a Bad Idea, I think there ought to be some more regulation in lending.

If there's going to be spending, I would like to see it in ways that would actually create industry and real wealth. I'm not sure how to do that, but I definitely don't think giving every Joe Schmo $400 is going to do it.

What do YOU think needs to be done to fix the economy?

please, be mean and contentious and have flame wars! It will help divert me from my worrying about Freyja, so it's all for the good.

Comments

[burgundy.livejournal.com]

Doing nothing risks us getting into a nasty vicious circle: people don't have money so they don't spend so companies lose money so they lay people off so people have less money so they don't spend so...

Ideally, a stimulus will work like a shot of adrenaline and get the system back on line so it can then be rehabilitated into something self-sustaining. So the big thing, the biggest thing, that it needs to do is create jobs. I really like the infrastructure projects, because that needs to be done anyway, because we as a country have really been neglecting infrastructure maintenance for a long time, and we're only going to see more bridge collapses if we don't do something. And it puts people to work. Ditto, investing in green energy. Money to states and cities isn't a bad idea, because in a tax crunch these entities see declining revenues at the same time people need more services, and unlike the federal government they cannot run deficits.

Refunds/tax credits really have minimal effects, especially when they're distributed across the board. Money given to poor people is money that will be spent and circulated in the economy, because poor people can't afford to save shit. Money given to people who are not desperate is more likely to be saved, which ironically is not what we need in the short term. Crazy borrowing got us into this, but for right now spending is good (and what we're starting to see is that even people who are not making less money are spending less, because they're freaked out.)

The problem with scaling back our reliance on credit is that it's going to require a major readjustment of the economy, and that's going to be painful. That doesn't make it a bad idea, but I think we need to take steps to limit the collateral damage (if, for example, the demand for high-end electronics decreases, it's the people who assemble and sell them who take the biggest hit.)

I disagree that the CRA drove the foolish lending practices. People saw that there was money to be made and went for it and it turned into this sort of moebius house of cards.