Is stimulation really the best solution?

Discussion in 'Politics, Religion, Social Issues' started by MacNut, Jan 26, 2009.

  1. MacNut macrumors Core

    MacNut

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    #1
    So Democrats and Republicans say we need to stimulate the economy to get us out of the recession. Is that really going to solve anything or just prolong the problems. I don't see how throwing more money at a corrupt system will fix the problem. Am I the only one that thinks the only way to fix everything is to let it crash and weed out all of the dead weight. If we threw money to stop the great depression would we have ever gotten out of it or would it still have happened 10 years later. I don't see how a stimulus is nothing more then a band aid and not a real fix. The dead weight will still be there in the end just more bloated.
     
  2. Aea macrumors 6502a

    Aea

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    #2
    We threw money at the problem during the Great Depression through public works projects. The economic consensus is that it prolonged the problems, but reduced the severity.

    I personally believe that length for severity might be a good tradeoff unless we're making the economic loss more painful.

    I don't think we're in a Great Depression style of situation (Great Recession, Anyone?) and that the economy will be able to right itself given time. However at the same time some entities simply can't be allowed to fail (Dear Congress, if you don't pair the bailouts with regulations you're morons of the highest level).

    I think Obama's "Stimulus" has a fairly good chance of turning out to be a blunder and I don't think it's necessary. That said I did vote for him since I think that the stimulus won't be a total failure when supported by the rest of his very civically progressive policies.
     
  3. Ugg macrumors 68000

    Ugg

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    #3
    Yes, you're the only one.
     
  4. mactastic macrumors 68040

    mactastic

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    #4
    If the system itself is corrupt, it won't matter how many bits of dead wood we extract from the system, the re-growth will simply become corrupted once the system begins to function again.
     
  5. MacNut thread starter macrumors Core

    MacNut

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    #5
    So lets fix the system. Part of the problem was over spending, throwing more money is just adding to the problem. We as a country are wasting so much money on pointless things that now that the money has dried up everyone is complaining. Why not just cut back as a country until we get back on our feet and trim out the stuff we don't need. Everyone will have to cut back. We can't just keep on the road we are heading.
     
  6. Ugg macrumors 68000

    Ugg

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    #6
    Millions of jobs are based on that over spending. Are millions of people supposed to simply remain unemployed until the system is healthy again? What do you want to do with them, process them cryogenically and thaw them out when needed?

    There needs to be some kind of transitional assistance.
     
  7. MacNut thread starter macrumors Core

    MacNut

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    #7
    What if this second stimulus fails. What do we do then. How are we going to pay this back if people are out of work or barely getting by. I just see us digging the hole deeper.

    The economy will never reset if we keep adding to the problem.
     
  8. Ugg macrumors 68000

    Ugg

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    #8
    How would it fail?

    Many have trashed the EU over the last 30 years for not being aggressive enough in stimulating their economies. They've simply never had the peaks the US has had, but, they've also never had the deep troughs. Mainly because of their high taxes on energy as well as their deep safety net and high public spending.

    Even China is pouring billions into domestic infrastructure, knowing full well that it will be better off in the end and that it needs to replace jobs that are being lost from falling exports.

    Rebuilding schools hardly seems to be a path to failure.
     
  9. MacNut thread starter macrumors Core

    MacNut

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    #9
    The last round of stimulus was supposed to help and how well did that go?

    I have no problem fixing the infrastructure but how fast will we see a turn around. And what happens after these projects are finished?
     
  10. Ugg macrumors 68000

    Ugg

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    #10
    Do you mean the tax rebate or the bank bailout?

    As far as your impatience for results is concerned, I don't think anyone knows. When an entire economy has been functioned solely on smoke and mirrors like ours has, it's almost impossible to make any predictions until the smoke clears.
     
  11. mactastic macrumors 68040

    mactastic

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    #11
    Giving people extra tax money is a very weak stimulus mechanism for several reasons. One, you're giving money to everyone rather than targeting it at the people who truly need it. Second, once it's spent, it's gone; whereas if you have a job, the money keeps coming in. And finally, $600 just isn't that much money for any one individual.

    By the time we finish all the infrastructure fixes that are needed in this country, we'll be well into the next economic cycle. There is plenty of work to do to see us through this downturn.
     
  12. SactoGuy18 macrumors 68020

    SactoGuy18

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    #12
    There is one thing we can do right now that will stimulate the economy: fix the broken income tax system.

    Why? Because Americans are going to spend probably around a mind-boggling US$300 BILLION this year trying to comply with 2008 Federal income taxes, what with 67,000-plus pages of Federal tax code so complex that even the IRS can't figure it out! :mad: And you wonder why Americans don't want to save and invest on cash terms, want to hide their assets legally and illegally to keep it out of the clutches of the IRS, and force American companies to "offshore" their corporate headquarter and manufacturing operations to keep their tax burden down, all of which are bad for the American economy.

    There are three ways to fix our income tax system:

    1) Reduce the maximum marginal tax rate to 20%, but cut out most of the deductions and credits now available. That would essentially reduce the tax form to something about as complex as the 1040A short form.

    2) Impose a 5-6% flat tax, but cut out all deductions and credits now available. That would reduce the tax form to a single page document far simpler than even the 1040EZ short form.

    3) Phase out the entire income tax system altogether and replace it with a 23% national sales tax on all new goods and services (sales of used goods are excluded), with a "prebate" payment to cover the cost of the 23% sales tax up to the Federally-defined poverty level. This is the so-called FairTax system, and there will be no more tax form filings on income.

    While all three ideas are not perfect, it's certainly a lot better than what we have now for Federal income taxes.
     
  13. iAthena macrumors regular

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    #13
    It's terrible that most of us have to pay someone to do our taxes for us.

    I'm thinking about using the excuse of the new Treasury secretary and blame Turbo Tax when my accountant retires.
     
  14. SactoGuy18 macrumors 68020

    SactoGuy18

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    #14
    While your message has a facetious tone to it, :) you are more on the mark in reality than you think. See, I do semi-permanent status work for the California Franchise Tax Board processing any tax return that the FTB computer system deems inaccurate for possible errors (deliberate or not!) and forwarding the returns if needed to other departments for additional actions. Given how complex even the California state tax return is, there's lots of work for me to do, to say the least. And given how much longer the IRS 1040 form is, the number of returns that has to be checked for errors because the IRS computer may have found an error is ENORMOUS.

    In short, why are on this merry-go-round that is costing Americans US$300 BILLION in 2009 to comply with the 2008 Federal tax code? (I can imagine something around an additional US$100 billion trying to comply with all the state and local income tax codes, too.) And this results in too much emphasis on debt financing (which we now know is a terrible idea) and too much money taken out of the "economic loop" through "offshoring" of financial assets (legal or not!) and also going into the nebulous underground economy in order to save on taxes.

    That's why it is way past due we need to do a massive change in the revenue stream for government, if only to save Americans US$400 billion per year (and climbing!) trying to comply with Federal, state and local income tax codes.
     
  15. crackpip macrumors regular

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    #15
    This is by no means economic consensus. A few conservative people making the rounds on the Sunday talking heads try to say this. Paul Krugman corrects George Will on this point here: Krugman schools Will.

    crackpip
     
  16. Thanatoast macrumors 6502a

    Thanatoast

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    #16
    In this particular problem, we don't all disagree on what wastefull spending is. For instance, I believe that spending seven hundred billion dollars a year for a million-plus standing army to defend our nation against invasion by those admittedly barbaric Canadians and blowing up poor, brown people halfway across the world is incredibly wasteful. Others believe that defending against Canadian incursions and neo-con paranoid delusions are the only thing keeping us alive and that spending money on healthcare for the poor or schools for our children is incredibly wasteful.

    I like to think I'm the sane one but how do we reconcile these two positions in a way that saves rather than spends money?
     
  17. Desertrat macrumors newbie

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    #17
    MacNut, history says you're correct. However, there is some merit in the tradeoff between length and severity, and I don't have any answer for that.

    mac, I see that only some 3% of the $825 billion stimulus will actually go to infrastructure construction. About the same amount of money as Boston's "Big Dig" project.

    One aspect of all this stimulus via deficit is the future decline in the buying power of the US dollar. Our government is doing the same thing as the sub-prime borrowers: "Buying what they can't afford with money they don't have." With so many countries owning US debt-paper, we need to be very afraid that they'll start selling it--as China already is. That will exacerbate an already-existing problem.
     

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