Comments about ‘The stimulus fallacy’

Corporate American currently has 1.8 trillion in free cash sitting around. Banks have 1 trillion on deposit at the Fed in excess of the reserves they are required to keep. There is plenty of money to hire, build, and invest. The money doesn't get spent, however, because there is insufficient demand to justify the investments. That's why we need more stimulus, not less.

Now listen up D-news: private investment cannot come back because consumer demand is collapsing (why should businesses invest if the public won't buy?). Why is that happening? For a variety of reasons, but most notably it is happening because housing prices are collapsing eroding consumers' one real asset. The only thing keeping the whole economy from complete collapse are these stimulus measures. If you want to help shove the economy over the cliff, just cut off this stimulus funding for education.

"The money, however, would be a one-time fix for an ongoing problem."

Yes, the federal government does, in fact, expect the private economy, as well as state and local governments, to eventually pick up the slack and get back to normal. This money is meant to assist in the transition from a sour economy to a robust one. As RK points out above, the banks have the money to lend and now it is up to private enterprise to do their part.

"The best way to stimulate the economy is to encourage private-sector investment. At the very least, this means not letting the Bush tax cuts expire, not even on the wealthiest Americans."

If you want to talk about fallacies, here it is. This notion was first presented by the Reagan Administration but they quickly raised taxes on businesses and payrolls soon after they discovered their plan wasn't working. And the Bush tax cuts have only exacerbated an already distresseed economy. Please provide any evidence that this strategy has worked.

The DN is following every conservative politician in their practice of "taking the money" but continuing to complain about its source. Show us another workable plan.

As long as Utah receives more money from the federal government than it sends to Washington in taxes, this DesNews editorial makes no sense.

Utah should take the stimulus money and the governor and legislature should show their support for teachers and fire fighters by voting to accept and distribute the funds accordingly. A "no" vote would send a strong negative signal to teachers and fire fighters in the state, people who are critical to a functioning society and economy.

Since the GOP is likely to vote to extend the Bush tax cuts on the extreme wealthy in this country, a "no" for teachers and fire fighters and a "yes" on tax cuts on the extreme wealthy will set a terrible president just before the election that the GOP favor the extreme rich over common middle class folks.

Finally, not taking the money will drive up the unemployment in the state, dropping consumer spending (hurting local businesses) and tax revenues flowing the state -- yes, employed people pay taxes to support the state -- which in turn helps Utah keep state jobs (e.g., teachers, fire fighters) next year.

Tax cuts don't help people directly who are out of work as they aren't paying taxes. Incentives (as opposed to general tax cuts) are needed to encourage businesses to spend money on local jobs.

I keep hearing how the Bush tax cuts stimulate the economy. Over and Over.

Someone please explain how we are in the mess we are in. The economy has been on the decline for several years now.

The Bush Tax cuts have been in place for almost 10 years now.

Why did the economy take such a downturn?

Due to inflationary concerns, I agree that we do not need more stimulus now. However, many of the investments made were to shore up the banking system and otherwise provide confidence in the economy. Wall Street has stabilized and GM looks to be viable. The jobless rate, though not good, would likely be much higher had we forgone the economic rescue.

That said, stimulus is simply borrowing by an entity that can (govt.) for the entities that can't or won't and then pushing that money into the economy. It is not so much as new fuel to the engine as it is a flywheel effect - giving the engine enough momentum to keep spinning until its own fuel begins firing and providing power again. But just as a large flywheel takes a lot of energy to get moving once the engine has slowed down a lot, heavy borrowing creates a drag on future economic growth.

There has to be a balance and we have probably hit the balance point. Where does the economy go from here? Likely up, but very slowly. This was a major recession. The recovery will be slow.

All borrowed money! That is why the so called stimulus isn't creating jobs that Democrats promised it would. Every business leader and every banker knows this and would be foolish to invest money into a house of cards built on sand as the national debt approaches the total GNP. All intelligent, thinking Americans knows this is unsustainable. The only way out of this problem is for the government to live within its means.

Roland has it exactly right. The reason corporations and wealthy individuals aren’t investing in expanding their businesses or starting new ones isn’t because they are being taxed to death. They have plenty of money, but can’t figure out what goods and services they can produce that consumers actually want. Our economic woes aren’t a failure of the government–they are a failure of private entrepreneurs to invest the money they have to produce stuff people can afford and want.

The current situation unfolded in the environment of Bush’s low taxes. That being the case, how can the Deseret News possibly argue that high taxes are the real problem?

Perhaps the real problem is that tax rates are too low. If tax rates were to significantly rise for the wealthy, they’d be more motivated to avoid (or at least delay) the taxes by reinvesting in their businesses rather than taking all of the profits as personal income.

Right now the economy is the worst its been since WWII. Right now the tax rates on the wealthy are they lowest since WWII. Coincidence?

At what point does the US debt become so large that it actually exceeds our GDP? We are getting close which means we can't even make minimum payments on the debt... and then what? What does the owner of our debt (China) do? What can they do? Democrat's - lead by Obama- have this insane idea that throwing money and raising taxes will somehow work wonders but so far both have done the opposite. At what point does America stand up and say NO MORE to Obama - I think we are already there!

The adjusted monetary base currently stands at $2 trillion. The adjusted monetary base is defined as "The total amount of a currency that is either circulated in the hands of the public or in the commercial bank deposits held in the central bank's reserves." As Roland correctly points out, about $1 trillion of that is held is excess reserves. But where he errs is in saying that there is insufficient demand to justify borrowing it. This is simply not true. Banks are afraid to give out the money except for highly secured loans. It's extremely difficult to qualify for loans these days because of the fear bankers have of loan defaults. They would rather keep the money in reserves at near zero interest rates because it's better than losing it through risky loans.

The states are clamoring for the money. Your characterization is wrong. And if you want to avoid cuts in education in Utah, you either raise taxes here or take the money. The feds feed all kinds of money to Utah, but you gladly take it. Why turn your nose at it now? Why the hypocrisy? Politics?

By the way, the first round of stimulus spending hasn't done a whole lot because the states have not spent much of it yet. I saw a figure last week where only about 10% had actually been spent. Facts, not partisan hyperbole, would be nice for a change from this GOP rag.

JoeBlow,
if the bush tax cuts are to blame, why did it take until 2007-8 for the economy to start to tank (right after the dems took control of both houses of congress)?

Why are we in this mess? people used their houses as piggybanks rather than as homes in order to live beyond their means, greed on the part of house flippers and mortgage companies, and politicians from both sides of the aisle lusting for power.

Baron Scarpia,
tax cuts don't directly help over 40% of us because we pay no taxes, they do help employers who provide jobs. Yes, we have a "terrible president". Did you mean precedent?

Roland,
take a look at the political cartoon running in the on-line version of the DN. It's a perfect illustration of why all that capital is sitting on the sideline.

In keeping with the conservative republican pledge to defeat the democrats at all costs, even to destroying America, the conservatives “have said the state should just leave the money alone and walk away“

And of course they must continue to propagandize about business:

“The best way to stimulate the economy is to encourage private-sector investment. At the very least, this means not letting the Bush tax cuts expire, not even on the wealthiest Americans. If investors regain their confidence, and if businesses have more money with which to expand, the end result will be an increase in tax revenues”.

Even though all the evidence proves the notion about business with money creating jobs is false, they must continue.

Business is rolling in money and through out my lifetime, small business has been given continuous breaks on taxes and costs by our government and they still scream for more.

The only way to help the economy is to have spending by the consumers. Saving jobs is the way to do that.

Obama, Pelosi, Reid, etc. will all be remembered in shame.

* 'Republicans kill Senate jobless aid measure' - By Andrew Taylor - AP - Published by DSNews - 06/24/10

Line:
'The rejected bill would have provided $16 billion in new aid to states, preserving the jobs of thousands...

* 'Senate Republicans again kill bill for jobless aid' - By Stephen Ohlemacher - AP - Published by DSNews - 06/30/10

Line:
'Without an extension, 1.7 million of the 7 million people who have been without a job for at least six months will have lost their unemployment benefits by the end of this week, according to the Labor Department.'

* 'Republicans block small business lending bill' - By Stephen Ohlemacher - AP - Published by DSNews - 07/29/10

Line:
'The bill would create a $30 billion government fund to help community banks increase lending to small businesses...'

D News editorialists: you can't have it both ways. You can't rail against the "stimulus", telling us all the ways it's bad and/or doesn't work, and then tell us we should accept the money anyway. That doesn't make sense.

To Patriot: While I don't particularly want to defend Obama, I have to ask you: where have you been the last twenty years?! It was Bush-Clinton-Bush who set up this ruinous arrangement with the Chinese (they buy our debt and we buy their junk). Moreover, Bush II fought two major wars off budget, funding them with loans from the Chinese.

@a bit of reality: this subject has been discussed before on these boards. The reason that businesses aren't investing is because of something called "regime uncertainty." They are reluctant to invest because they don't know what the business climate will be in 6 months, 12 months, 2 years, etc. The Obama administration has created a climate of investment fear and uncertainty. There are surveys to back up this claim.

I hope all of you who voted for Obama are happy now. His plan for the immediate future is to blame Bush in an attempt to try and keep his pathetic party in office this Novemeber, he has no other plan to create jobs or rescue the economy. He is a disaster beyond anything we have ever experienced in the White House.