I have been, in my short political life, generally a proponent of fiscal conservatism. I also listen to Rush / Hannity every day, so I hear anti stimulus package remarks for the majority of the day.
Why I think it will work
The recent tag line they are using is that if we took all the money from the rich, it still wouldn’t pay for our debt. That point is 100% true. However, creating money and spending it, if you are the government, actually can.
Imagine the scenario of the government handing out money for public transit. In this transaction, every single piece is taxed. Government gives money to company A. Company A pays corporate taxes on it, and all of their employees required pay taxes on it. The supplier for the construction materials and vehicles also pays taxes. Their employees, who also pay taxes, probably buy things for their families. They also pay taxes when they receive their paycheck, and again when they pay sales tax.
In addition, people who could not previously afford transit may now be able to get to work. This creates more productive citizens, and a larger supply of workers, allowing companies to product goods at a lower cost. The houses knocked down for right of way decrease the supply of homes on the market. The decreased supply of homes, combined with the increased value of living within reach of public transit, revives that housing market. There are so many advantages in this idea.
If you can create projects which the majority of money will be spent in a manner in which the people involved will spend the majority of it domestically, the economy will grow without actually losing money.
Inflation to the rescue
The other aspect of this, is that inflation is not inherently evil. When our dollar is strong, or even gaining against foreign currency, it is a better idea to hang onto it. If our currency starts losing value, this would be a great boost to the ailing real estate market. In order to fight inflation, you have to invest in assets rather than holding cash so that you grow with the inflation. Inflation also decreases imports as foreign goods are not as affordable as domestic goods. This will create a boost of manufacturing as people will need to invest to keep their value, and the demand for domestic goods would increase.
In short, not everything is black and white, so just question what these guys say. These ideas have not traditionally worked before, because the world has never seen this level of worker productivity. We can now produce more food than can be consumed, more cars than can be driven, more houses than can be lived in, and more computers than can be operated. The world has changed since the previous economic models where derived.
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#1 by quamper on February 27, 2009 - 11:52 am
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“The supplier for the construction materials and vehicles also pays taxes”
Just to clarify a small point for you on that statement it’s not necessarily true (or at least always true). Materials used in a project are typically only taxed once as the final product, the component materials used are generally tax exempt since they final goods/building etc are taxed.
#2 by close on February 27, 2009 - 11:56 am
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While everything you said is right… the fact that so little of the project is infrastructure and so much of it is pork barrel spending negates that. If they did a stimulus bill that was $500 billion (half the amount), all for improving our country’s infrastructure, new roads, new mass transit, maybe even something like a smart grid for power, then maybe they would be solving this problem. However, this bill is double the amount and very, very little of it is for infrastructure.
#3 by Steven Harms on February 27, 2009 - 12:03 pm
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Yeah I am pretty broad with this one, it’s easy to be right and wrong on 1000 different points I suppose. It was mostly in response to the radio arguments that I hear about how spending can’t possibly work. Smart grid for power would be a dream come true.
#4 by Michael on February 27, 2009 - 1:30 pm
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Please take a look at http://jessescrossroadscafe.blogspot.com/ and
http://www.gata.org/
http://jsmineset.com/index.php/2009/02/26/hourly-action-in-gold-from-trader-dan-74/
A whole different view.
Regards & lot of respect,
Michael
#5 by Shaun Bennett on March 20, 2009 - 11:18 am
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Take a look at this video about the stimulus bill:
http://www.youtube.com/watch?v=VvQgLhzf8KQ
#6 by Stephenson Equipment on August 10, 2009 - 4:33 pm
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Unfortunately, it’s months after the your original post and we haven’t seen a significant portion of the stimulus impact our clients, or us.
Initially we were hopeful, but maybe that was naivete?
#7 by Obama's Stimulus Package on October 13, 2009 - 6:02 pm
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Interesting point…I’d like to see where we would be if Bush was still in office!
#8 by Johnny anony on November 19, 2009 - 4:47 pm
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I think the government is always wrong because it tries to do what is best for many people. I only care for myself.
#9 by j on March 10, 2010 - 6:35 pm
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To me it does make sense that if transportation was targetted as being part of the stimulus package, then a lot of good things can happen. With transportation being built, such as new highways, light-rails, ect, hundreds of jobs can be created. People will be paid and will start to pump that money they earn back into the economy. Also, with more public transportation, individuals will be ale to get to work in a cheaper fashion and will have extra money to spend on whatever they want.