This is like listening to Ray Charles and Stevie Wonder debate the differences between red and yellow.
So you would rather have them spend the money and keep piling on debt? That's the problem with economic thinking today. The economy won't grow until we get rid of the debt and start investing more. Spending isn't going to do anything except get us into more debt. It's sad that both parties think the same on this issue.
We are not really at disagreement as to the problem with credit card debt. It still makes more economic sense to have the middle class pay off that debt than to give the wealthy tax cuts they don't need, when they already have enough to invest and spend on our economy.
Not that I would ever agree with him, but I don't think he meant to imply that Stevie and Ray would necessarily be at odds in their discussion of color. I still want someone to discuss the Texas State budget. Here, I'll give you a head start. "Well, all states are in fiscal crisis!" Here's another: "Democrats say that the Texas governship has no power, so how can you say his policies affected the budget?" Well, he did tinker with Texas taxes, did he not? Please tell me how this did not affect the Texas deficit or why it does not matter to the state of Texas?
What you define as "giving the wealthy tax cuts", I define as increasing the efficiency of our capital markets, thereby lowering the cost of capital for corporations. This will increase equity valuations and allow for cheaper capital investment projects, thus creating jobs. Furthermore, it is a much more permanent stimulus than simply giving money to what you define as the "middle class". Why are the liberals so fixated on a short-term solution to the point where they ignore longer term impacts?
The thing is that there is debt across the spectrum, from the poor to the corporations. If the corporations stay in debt then they will have to have layoffs- we've seen this already. What the Fed needs to do is raise interest rates so people have an incentive to stop spending so much money they don't have.
This is the worst idea in the history of man. A tight money policy in times of an economic downturn would stifle any hopes of growth. Increasing the money supply through low interest rates is the most proven method of generating economic growth. Every single move that Alan Greenspan has made in his tenure as Federal Reserve Chairman goes against what you just said. Raising interest rates right now would send us into *deflation*, whereby no one would spend a dime. Check out Japan's economy when you have some time. No one spends money today because the goods and services will just be cheaper tomorrow.
I followed your reasoning until the higher interest = deflation and Japan arguement. Wasn't Japan continually lowering interest rates rather than addressing the debt problems?? Help me on this Jorge. I expect you're right about tightening the money supply being a bad idea, but my impression was it might lead to high inflation/high unemployment like in the late 70's early 80's.
In times of a shaky economy cutting taxes for corporations and wealthy individuals is a bad idea. They're not going to invest the extra money in risky ventures that create jobs, they're going to put the money in low-risk long-term growth bonds and mutual funds. More smart thinking from Bush.
They're not going to invest the extra money in risky ventures that create jobs, they're going to put the money in low-risk long-term growth bonds and mutual funds. BINGO! We have a winner. If companies can't sell what they already produce, they aren't going to invest in producing more no matter how much money you give them.
That's it? It's not just extra money, its cheaper money. The cost of capital drops. What happens when the cost of capital drops?
It's not just extra money, its cheaper money. The cost of capital drops. What happens when the cost of capital drops? Depends on what you have to spend it on. Cheaper capital could be just turned into higher profits and extra cash could just go into the pockets of the CEO and company. If I have a factory producing basketballs, and people aren't buying the basketballs I'm already producing, I'm not going to invest in a second factory to produce basketballs until I get near or at capacity. First, you have to get people buying my basketballs, and that means getting money into the hands of the middle, and to a lesser extent the lower, classes. Supply-side economics probably works during a supply-based recession. This is now a demand-based recession because of the growing unemployment and lack of consumer confidence. That requires "demand-side" economics, in my opinion.
This is exactly why it is a *good* idea! Channelling money towards the credit market (bonds) and the equity market (mutual funds) helps corporations raise money. This in turn provides a lower cost of capital for them and encourages investment. Investment at the corporate level has been sorely lacking (specifically IT budgets) and it will eventually lead to massive productivity losses. By channelling this money towards its most efficient end, we will benefit by greater investment, lower cost of capital, and increased jobs. You made your point and didn't even know it! I couldn't agree more.
The fact is that corporations can already re-invest, and again the point I'm making which nobody seems to disagree with is the fact that the rich already have enough money to invest, and giving them more won't help creat jobs, or stimulate the economy. If they are rich they already have enough to buy consumer goods, invest etc. The idea I was supporting which isn't a short term fix, is giving money back to people where it makes a difference in their disposable cash. And if they pay their credit card debts that will help the economy as well as their personal economy more than to the wealthy who can already invest at leisure.
when the cost of capital drops the board of directors will congratulate themselves, scale back on the layoffs, and give themselves nice bonuses. I was working at Dell during the last part of 2000 when they fired every single temp agengy manufacturing plant worker they had a week before christmas after they were done building the majority of the christmas orders. It worked out great and 5 months later they hired them back to gear up for the back to school rush. Isn't that compassionate of them? That's how real corporate economics work.
Increasing the money supply is the most proven method of growing the economy? Really? The ridiculous boom-bust cycles that we have had over the past century show that to be FALSE. Since the Fed was given the power to increase the money supply, the result has been boom then bust. Yes, I know I am going against Greenspan, and look at how well the rate cuts are working for us know. Believe me, we don't have a risk for deflation. When the money supply is increased by billions of dollars in a decade the result is inflation. As far as Japan- guess what their interest rates are? Almost ZERO. And Greenspan is leading us down the same path. I hope that puts the "print more money" idea to rest.
