Obama considers $1 trillion plan to jolt economy

[Turborama]

Source: AP

WASHINGTON – Anxious to jolt the economy back to life, President-elect Barack Obama is considering a federal stimulus package that could reach a whopping $1 trillion, dwarfing last spring's tax rebates and rivaling drastic government actions to fight the Great Depression.

Obama has not settled on a grand total, but after consulting with outside economists of all political stripes, his advisers appear determined to make the stimulus bigger than the $600 billion they initially envisioned, aides said Wednesday.

Obama is promoting a recovery plan that would feature spending on roads and other infrastructure projects, energy-efficient government buildings, new and renovated schools and environmentally friendly technologies.
There would also be some form of tax relief, according to the Obama team, which is well aware of the political difficulty of pushing such a large package through Congress, even in a time of recession.

While a stimulus of $1 trillion over two years is under discussion, a more likely figure seems to be $850 billion. There is concern that a package that looks too large could worry financial markets, and the incoming economic team also wants to signal fiscal restraint.

Obama advisers, including Christina Romer and Lawrence Summers, have been contacting economists from across the political spectrum in search of advice as they assemble a spending plan that would meet Obama's goal of preserving or creating 2.5 million jobs over two years.

Read more: http://news.yahoo.com/s/ap/20081217/ap_on_go_pr_wh/obama_stimulus

[jody]

1. Bush has pumped money into the pockets of the 1% who own over 50% of our financial wealth for nearly

eight years via tax cuts etc. and today we have $10 trillion debt and several trillion more facing us for future costs of his war on terror.

I fail to see how more corporate handouts or make-work jobs for the unemployed will CHANGE our economy in any substantial way.

When Carter became president, our national debt was about $700 billion.

[Tansy_Gold]

2. Jobs. Jobs. Jobs. Real jobs. Jobs making things. Doing

something other than taking money from working people and handing it on a silver platter to already filthy obscenely rich people.



I was talkin' to a friend the other day, a friend whose daughter and son-in-law have seen their income drop from approximately $300K/year to about $40K. She said, "They spent about $10,000 on their kids last year for Christmas. They're going nuts trying to figure out how to spend that much this year."

I told her: "They spent this year's Christmas last year. They spent next year's Christmas last year. They spent Chrismas 2010, 2011, 2012, and maybe 2013 last year. Now they can have memories.)


That's what it's all about, of course. Collectively we've spent our future and now we have to live on what we bought last year and the year before and the year before that. Sorry, no new shoes until the 47 pair in your closet are worn out. Sorry, no more jeans until the 58 pair in your closet are tattered. Sorry, no more plasma tvs; you'll have to watch 'em one at a time and make 'em last, so no more gettin' up in the morning and turning all 8 of 'em on so you can watch the soap operas as you move from room to room in utter boredom.

As a nation, as a society, we frittered away too much money on junk, and we were content to pay low-wage workers in other countries to provide us with all that junk. Then the companies we used to buy our stuff from shipped OUR jobs to other low-wage workers, but because we were so addicted to all that cheap crap, all those cheap shoes and cheap shirts and bottled water with status symbol labels and everything else we just couldn't live without, well, we destroyed ourselves.

If Obama wants to "stimulate" the economy, he's going to have to bring back the jobs that got shipped to Mexico and China and Guatemala and Bangladesh. He's going to have to tell the leaders of those countries that no longer are we, the good ol' USofA, going to be the slave owners.

He's going to have to install measures to curb the obscene concentration of wealth in this country. Tax inherited wealth. Tax un-earned income. Give tax breaks to those who work, really work, who contribute materially to the economy. Not just to the miners and millworkers, farmers and factory workers, but to the teachers who prepare our children for the future. To the doctors who keep us healthy. To the reporters who keep us informed.

What would really happen if Obama declared a biblical jubilee and cancelled all personal debts effective 1 January 2010? What if all the medical bills were wiped out, all the school loans, all the credit card balances, all the mortgages, all the car loans?

What would happen if all estates over $2 million were taxed at 25%? (Insurance companies would benefit from the purchase of fat policies to cover the taxes on those huge estates, for one thing.) Charities would benefit. Ownership would be distributed prior to death. The list would go on.

What about abolishing corporate personhood? If not, then tax the corporations like real people. either give real people the same tax breaks or make corporations obey the same limitations as a person when it comes to income taxes.

None of these fixes are easy or pretty or glamorous, but they're much more likely to work than a give away that's little more than the clowns in a parade throwing out candy. The benefits will be minuscule, random, and very, very short lived.


Tansy Gold

[Lorien]

3. He'll also have to get us the f*ck out of Iraq

that has just been another giant wealth transfer from taxpayers to the uber rich.

[ozone_man]

4. It sounds like you don't want a Democrat then.

Because a Democrat (Clinton) got us into this mess. ;)

What would really happen if Obama declared a biblical jubilee and cancelled all personal debts effective 1 January 2010? What if all the medical bills were wiped out, all the school loans, all the credit card balances, all the mortgages, all the car loans?

I agree completely, but choosing credit card Joe Biden was not the way to kick off an administration that might impose interest rate limits upon the credit cards, or interest limits on mortgages. And I'm not pleased with the choices of Geithner or Summers. That thinking (Rubinomics) is what got us into the present situation.

Consumer debt is the heart of our problem, as well as national and corporate debt. I doubt that total debt forgiveness will fly, but limits to interest rates might. It would take some guts to pull it off though. I'm not sure Obama with Goldman Sachs as his largest contributor will be up for that task. But things may get so bad that it will happen regardless, such as through an act of Congress, which is precisely what has to happen. If the CC banks like AMX or JPM go bankrupt, so be it. They're blood suckers on humanity and don't deserve to live. :evilgrin:

[sarcasmo]

5. Sorry, but it was Ronnie Raygun and his trickle down economics that got us into this mess.

[ozone_man]

15. Sure, but Democrats are supposed to be better than that.

So Clinton reappoints Greenspan and appoints Rubin and then Summers to be Fed chairmen. And NAFTA, etc. All of this contributed to the huge stock market bubble created under Clinton and then the crash in 2000. That was Clinton, not Bush. So, we are reliving that 2000 crash after eight years of deficit spending, making it far worse than it would have been had it been left to settle down then.

My point was that the recent Democrats haven't been acting like Democrats should be, like they should be if they want to be convincing that they're substantially better, not just the lesser of two evils. So far, Obama has not been convincing with his financial appointments. It looks like more of the same Clinton people or their understudies. We have to get beyond bubble economics. To do that we can't keep trying to inflate the bubble with more deficit spending, which is what got us into this mess. Living beyond our means, living off of debt and leveraging it. Well, there is a lot of unwinding of that leveraged debt still to go before we hit bottom.

[Tansy_Gold]

9. Yeah, well, I was criticizing the Summers and Geithner picks

before it was cool. And I never said Clinton wasn't partly responsible. And I never said Biden was a good pick when it came to regulating debt.

Just sayin'


TG

[silverojo]

10. Tax inherited wealth and un-earned income??

Fuck you! Do you know how many people aren't able to work and can't get on disability (or maybe are too old to work), and DEPEND on the life insurance benefits left to them by a deceased spouse or family member? Or how about people who CAN'T FIND WORK, and depend on such income to get by?

Great way to go after the little guy. LUCKY fuckers like you who are able to work, YOU pay the taxes. You're lucky enough to be healthy, so quit trying to throw the tax burden onto those of us who can't afford it!

Take that shit to Freak Republic, where it belongs!

[SammyWinstonJack]

16. I don't expect any of that happening from Obama. Is he even considering

a rollback of the bu$h tax cuts or is he just going to let them expire at the end of 2010? Just letting them expire would be a costly mistake.

[WriteDown]

17. Uh,,,,

A lot of your wipe out solutions would result in 100's of 1000's of jobs being lost. Not all debt is illegitimate. And tax breaks for dr's? So they can get a new Porsche for the trophy wife?

[midnight]

6. The financial markets have designed the collapse. So I don't

care if they think this-"While a stimulus of $1 trillion over two years is under discussion, a more likely figure seems to be $850 billion. There is concern that a package that looks too large could worry financial markets, and the incoming economic team also wants to signal fiscal restraint."

[Psephos]

7. What an excellent idea. Excessive borrowing got us this mess, so excessive borrowing will cure it!

What ever happened to the promised Pay-Go, in contrast to exploding repug deficits?

oops

[Odin2005]

12. Read John Maynard Keynes. deficit spending is what you are supposed to do in a depression.

Pay-as-you-go will have to wait until we are out of this downturn.

[Psephos]

13. I have read him, and what he says is not quite what you think

As Keynes noted, velocity (the rate of money turnover) is the key to avoiding the death spiral of deflation.

Currently, velocity is falling faster than the Fed can pump up the money supply. Record low market interest rates mean there's been almost no net increase in liquidity despite running the bilge pumps at full capacity.

Keynes deduced that under these kinds of conditions, the federal government must act decisively to raise spending in the economy in order to increase velocity. This means incurring a budget deficit, but that's only part of the answer. Spending just to buy financial assets does very little good (no velocity stimulus).

Tax rebates in 1974, 2001 and 2008 have shown that rebates don't do any good, either. People either save the money or pay down debts. Thus, rebates just become another form of exchanging assets that add little to spending (and hence velocity).

Keynes argued that the federal government must use its resources specifically to purchase goods and services. It must buy tangible things--asphalt, machinery, paper, trucks, corn, steel - anything as long as it is real. The government must spend the way individuals do, by buying things. It must draw real resources out of the economy - that's the only kind of spending that will work. Buying bad mortgages, bailing out insurance companies, and sending out more rebate checks not only won't do any good, it will do deep harm by diverting resources from actions that actually can help. For a specific example, consider the automakers. Keynes would argue vigorously against a bailout in the terms being discussed by the economically Neanderthal Congress. The government might as well just flush money into a vacuum, because it would evaporate just the same. Instead, Keynes would say the government should hand automakers a giant purchase order. Buy a million cars. (That would work out to about 20 billion dollars. Compare that to the 15 billion they're about to hand over.)

Government must also employ labor, because much of what people spend money on today is in the form of services. This doesn't mean putting workers on the federal payroll, where productivity is tough to measure and competition with the private economy is nebulous. Instead, it must purchase services. When the government purchases services, it helps raise spending (and thus, velocity) in the economy.

When government is spending enough to make a difference, interest rates will start to rise. Saving seems to many like a financial process, but in reality, saving represents things--labor and raw materials that are used to produce products and services people want.

Once the federal government increases its purchases of goods and services, it preempts resources that private businesses would otherwise use in production. As they compete with each other for those resources, their prices will rise and interest rates will rise.

Deflation can thus be averted, and normal Federal Reserve policy will start working again. When prices and interest rates rise, liquidity traps evaporate and money begins circulating more rapidly - velocity rises. As Keynes saw, this is what ends an economic crisis. It wasn't until World War II that the federal government spent enough on real resources - because they were needed for the war - to make Keynes' theory work in practice.

The challenge for Obama will be to implement a spending program that takes significant amounts of real resources out of the economy as quickly as possible. A massive public building program would be one way, but the lead time may be too long. We need something today that can affect the economy within months. And it must, as Keynes deduced, involve the purchase of real things. That rules out make-work and public works projects that do not compete for resources against the private economy, all manner of financial deals, and deals that take months or years to put into place.

[tama]

14. No borrowing

but printing. Then Treasury borrowing "US" dollars from Fed. Result: Fed banksters own US.

You are all prisoners of Fed in your own country. When the Bastille day comes, you should know where to go - the tower of Sauron is the Fed.

[Skink]

8. The Fed is going to beat him to it.

They are now the only institution lending so they are going all in.

[Odin2005]

11. Say hello to the new New Deal.

:woohoo:

[OhioChick]

18. No Jobs...No Recovery.

How about sticking to all those promises made of closing tax loopholes and such to bring jobs back?

People need jobs now.....not months or years from now.