A key question is how much those stimulus checks are boosting consumer spending in May and June.
Seems like the worst case scenario is that consumers save those stimulus checks and that extra $160 billion or so of public debt doesn't generate any additional tax revenue.
When the stock market or anything else is booming and bubbling and generating capital gains, the government skims the cream. When booms and bubbles bust, then those investors start to have net losses for the tax year, and their tax payments go to zero.
Also, federal gas taxes are cents per gallon, not a percentage of the price. We drive less, and the government gets less.
That's alot of money we have to borrow from the Arabs.... better jack prices up to $200/barrel in order for them to have the funds to loan back to us. Funny how that works eh.
Well of course the checks had some effect, and things would have been even worse without them.
The problem is that they are a really inefficient way to stimulate the economy. The best forms of economic stimulus is something that economists have studied in great detail for a long time. Random one-time tax rebates are very low on the list.
Much better is extending unemployment benefits, revenue sharing with local governments, and public works improvements.
We could have gotten more stimulation with less of an increase in the national debt, but right-wing ideologues in the Senate and President Bush killed these objectively superior proposals.
ac said:
Seems like the worst case scenario is that consumers save those stimulus checks and that extra $160 billion or so of public debt doesn't generate any additional tax revenue.
That's where you're wrong, ac.
The 1% that people will earn in their savings accounts (Thanks Ben!!!) will generate 1.6 billion dollars of taxable capatal gains, and at 15% that comes to a healthy 240 million dollars in tax revenue.
So for 160 billion, they would have a healthy 0.15% ROI.
I think.
Greg Weston, more welfare is not the answer. How about the only truly sound stimulus: less government interference in the economy, i.e. free markets (not this mixed economy crap).
Greg Weston: I agree with your premise, but the problem really is that there's nothing to stimulate. We're heading to the bottom of consumerism.
The most effective bang for stimulus buck would be to the local government to cultivate arable land. They did this in central LA on a small scale, but for different reasons. My logic? It would provide bridge employment, reduce oil expenditures by reducing transportation of some foods, would increase agricultural exports at time when food prices are high, and save thousands of lives worldwide. The exports could also strengthen the dollar by reducing the CA deficit...
Local governments right now are getting ready for massive layoffs. In fact they will be worse later this year because they pulled out all the stops to avoid them in 2007/early 2008.
Opening up empty urban lots to farming is an interesting idea in that regard, especially if it can be done without additional spending.
With regards to the economic stimulus, here is a good non-partisan primer on ways the government can stimulate the economy.
The clear conclusion is that some methods are vastly better than others, and right now we are not using the methods that have proven most effective because of the Republicans in the Senate and White House.
Greg Weston, more welfare is not the answer. How about the only truly sound stimulus: less government interference in the economy, i.e. free markets (not this mixed economy crap).
Herbert Hoover for president!
The consumer spending reports don't really conflict. Wal-Mart, BJ's (snicker), and Costco are the cheap places to shop. Spending there could be up while spending at other stores is way down.
I'm looking forward to some cliff diving charts once we get June's consumer spending numbers.
Rupert writes:
Greg Weston, more welfare is not the answer. How about the only truly sound stimulus: less government interference in the economy, i.e. free markets (not this mixed economy crap).
Rupert | 06.11.08 - 3:54 pm | #
LOL. Free markets (free of gov't) works great on deserted islands as long as they stay deserted. Once you have more than one person you have gov't intervention of some sort or another.
'Mixed economy crap'... Get used to it - it'll be around for awhile (like 'forever').
Record budget deficits are good for the dollar, n'cest pas?
I mean, you gotta to print a lot more of 'em, and everyone knows that supply makes its own demand, right? Dollar prices are bound to sky-rocket.
I don't care whether markets are free or enslaved. I just don't want to be crucified on a cross of oil. But I wouldn't mind if the government was enslaved to fiscal and monetary discipline. Then I might be free.
Costco is an interesting case for a couple of reasons. First, they make their money off of memberships. The profit margin is deliberately limited. (I'm a shareholder, so I've researched it).
Second, you can shop Costco upscale or midscale. They have chichi designer stuff for a good deal, and they also have great deals on toilet paper if you are willing to buy 30 rolls.
So there is a reason for people to hang on to their memberships even when times are tight - and Costco keeps making money on them.
Since we're driving the dollar into the ground anyway, how about the government just pay off everyone's mortgage? I don't have any other debts, so I wouldn't care if they immediately change the currency afterward.
And for the kids I work with no mortgage? Pay off their student loans!
To answer Smart Buddy...when inflation goes up it assists folks in debt for we repay with cheaper dollars, and hurts folks living on wages and fixed incomes and is semi-neutral to folks with assets for while they obtain gains, their taxes will be higher when they sell for future cheaper dollars.
As a landlord who saw this coming and sold the best properties I had 2 years ago so I'd have cash to invest at the bottom (most of which I grew by using it to short financials and mortgage companies while I waited) and raised more cash by borrowing all the money I could long term fixed rates, I am salivating at the prospect of inflation which I firmly believe we will see.
Inflation will raise the rents while my debts are held in place and by the time I retire in a few years my cash flow will have doubled....tho bread will be $10 a loaf so...so for me, a benefit and a cost, for my heirs...wonderbar!!!...they inherit at the stepped up basis value.
Wouldn't balanced budget legislation bring the buck roaring back? Maybe a candidate can think out of the box instead of joining the borg mentality. He could tell Americans that even though government services would take a hit it would be offset by the increased purchasing power for those with income or savings. What a novel idea.
when inflation goes up it assists folks in debt for we repay with cheaper dollars
Generally, I would say this is true, but when the debt is owned by OPEC/China, they get pissed. So they do crazy stuff like manipulate currency or drive oil up to $200 through their SWF.
Michael McKinlay writes:
The debt spiral goes deeper ...
Combine this with the trade data and what we have is a debt spiral that will blow up in our faces sooner rather than later.
Absolutely right. Especially when these are combined with the rapidly approaching crisis in medicare and emerging mortgage bailout schemes...
That's why I'm expecting this recession to be long and painful -- while we're coping with an ordinary 2-to-3-year recession these debts and unfunded liabilities will blow up in our faces and stretch the bad times times into a 7-to-10-year Economic Reckoning.
Ya know, he said that Reagan taught him that "Deficits don't matter". Sure, they don't matter if you are entering early-stages of alzheimer during public service or planning to move to Dubai after your last stint in public service.
OIL at $150 in two weeks
Re: "etailers posted stronger-than-expected same-store sales "
This is based on hyperinflation and higher cost goods!
Hoocoodanode?
A key question is how much those stimulus checks are boosting consumer spending in May and June.
Seems like the worst case scenario is that consumers save those stimulus checks and that extra $160 billion or so of public debt doesn't generate any additional tax revenue.
Holzer Holzer & Fistel, LLC Announces That a Class Action Lawsuit Has Been Filed Against Lehman Brothers Holdings, Inc. (NYSE: LEH)
CNNMoney.com: 404 Page Not Found
Here we go, hold on to your hats!
When prices go up that is good for us because GNP goes up?
Only serious answers please.
When the stock market or anything else is booming and bubbling and generating capital gains, the government skims the cream. When booms and bubbles bust, then those investors start to have net losses for the tax year, and their tax payments go to zero.
Also, federal gas taxes are cents per gallon, not a percentage of the price. We drive less, and the government gets less.
Meredith whitney...
I love you.
Weimar.
In this monthly budget review, http://cbo.gov/ftpdocs/93xx/doc9347/06-2008-MBR.pdf , what is the signifigance of the reference to gains on the value of securities held by the Fed?
warp 9 writes:
Meredith whitney...
I love you.
She's married .. go rent a movie.
was'nt meredith kinda defending leh when she ripped bsc? or was that someone else/
"When prices go up that is good for us because GNP goes up?"
Ben says Positive Inflation is good for deflation!
That's alot of money we have to borrow from the Arabs.... better jack prices up to $200/barrel in order for them to have the funds to loan back to us. Funny how that works eh.
The $319.4 billion deficit total for the past eight months is more than double the $148.5 billion deficit for the same period in 2007.
And since it's an election year, one more hit of stimulus crack for everyone.
Well of course the checks had some effect, and things would have been even worse without them.
The problem is that they are a really inefficient way to stimulate the economy. The best forms of economic stimulus is something that economists have studied in great detail for a long time. Random one-time tax rebates are very low on the list.
Much better is extending unemployment benefits, revenue sharing with local governments, and public works improvements.
We could have gotten more stimulation with less of an increase in the national debt, but right-wing ideologues in the Senate and President Bush killed these objectively superior proposals.
Jan.-May '08 Federal receipts down 3% year over year.
May '08 Federal receipts down 24% year over year.
An accelerating decline in Federal receipts.
Hoocoodanode?
Os--- is going to be inheriting quite the mess.
ac said:
Seems like the worst case scenario is that consumers save those stimulus checks and that extra $160 billion or so of public debt doesn't generate any additional tax revenue.
That's where you're wrong, ac.
The 1% that people will earn in their savings accounts (Thanks Ben!!!) will generate 1.6 billion dollars of taxable capatal gains, and at 15% that comes to a healthy 240 million dollars in tax revenue.
So for 160 billion, they would have a healthy 0.15% ROI.
I think.
The economic fundamentalism of Richard Cheney:
Deficits don't matter (implies) debt don't matter (implies) mortgage credit crisis mus'n't matter.
Look for more undisclosed economics when Cheney cashes in on the rubber chicken circuit.
Greg Weston, more welfare is not the answer. How about the only truly sound stimulus: less government interference in the economy, i.e. free markets (not this mixed economy crap).
Greg Weston: I agree with your premise, but the problem really is that there's nothing to stimulate. We're heading to the bottom of consumerism.
The most effective bang for stimulus buck would be to the local government to cultivate arable land. They did this in central LA on a small scale, but for different reasons. My logic? It would provide bridge employment, reduce oil expenditures by reducing transportation of some foods, would increase agricultural exports at time when food prices are high, and save thousands of lives worldwide. The exports could also strengthen the dollar by reducing the CA deficit...
Just got to remove the social collective tinge...
Local governments right now are getting ready for massive layoffs. In fact they will be worse later this year because they pulled out all the stops to avoid them in 2007/early 2008.
Opening up empty urban lots to farming is an interesting idea in that regard, especially if it can be done without additional spending.
With regards to the economic stimulus, here is a good non-partisan primer on ways the government can stimulate the economy.
http://www.urban.org/UploadedPDF/1001127_fiscal_stimulus.pdf
The clear conclusion is that some methods are vastly better than others, and right now we are not using the methods that have proven most effective because of the Republicans in the Senate and White House.
Rupert,
Show me one place where your libertarian economic system works. Better government is the key -- not less government...
Os--- is going to be inheriting quite the mess.
jg | 06.11.08 - 3:43 pm | #
Back in the Senate???
Greg Weston, more welfare is not the answer. How about the only truly sound stimulus: less government interference in the economy, i.e. free markets (not this mixed economy crap).
Herbert Hoover for president!
The consumer spending reports don't really conflict. Wal-Mart, BJ's (snicker), and Costco are the cheap places to shop. Spending there could be up while spending at other stores is way down.
I'm looking forward to some cliff diving charts once we get June's consumer spending numbers.
Rupert writes:
Greg Weston, more welfare is not the answer. How about the only truly sound stimulus: less government interference in the economy, i.e. free markets (not this mixed economy crap).
Rupert | 06.11.08 - 3:54 pm | #
LOL. Free markets (free of gov't) works great on deserted islands as long as they stay deserted. Once you have more than one person you have gov't intervention of some sort or another.
'Mixed economy crap'... Get used to it - it'll be around for awhile (like 'forever').
Record budget deficits are good for the dollar, n'cest pas?
I mean, you gotta to print a lot more of 'em, and everyone knows that supply makes its own demand, right? Dollar prices are bound to sky-rocket.
I don't care whether markets are free or enslaved. I just don't want to be crucified on a cross of oil. But I wouldn't mind if the government was enslaved to fiscal and monetary discipline. Then I might be free.
Costco is an interesting case for a couple of reasons. First, they make their money off of memberships. The profit margin is deliberately limited. (I'm a shareholder, so I've researched it).
Second, you can shop Costco upscale or midscale. They have chichi designer stuff for a good deal, and they also have great deals on toilet paper if you are willing to buy 30 rolls.
So there is a reason for people to hang on to their memberships even when times are tight - and Costco keeps making money on them.
Since we're driving the dollar into the ground anyway, how about the government just pay off everyone's mortgage? I don't have any other debts, so I wouldn't care if they immediately change the currency afterward.
And for the kids I work with no mortgage? Pay off their student loans!
We're toast
To answer Smart Buddy...when inflation goes up it assists folks in debt for we repay with cheaper dollars, and hurts folks living on wages and fixed incomes and is semi-neutral to folks with assets for while they obtain gains, their taxes will be higher when they sell for future cheaper dollars.
As a landlord who saw this coming and sold the best properties I had 2 years ago so I'd have cash to invest at the bottom (most of which I grew by using it to short financials and mortgage companies while I waited) and raised more cash by borrowing all the money I could long term fixed rates, I am salivating at the prospect of inflation which I firmly believe we will see.
Inflation will raise the rents while my debts are held in place and by the time I retire in a few years my cash flow will have doubled....tho bread will be $10 a loaf so...so for me, a benefit and a cost, for my heirs...wonderbar!!!...they inherit at the stepped up basis value.
Ala
We need an abrupt change of govt. policy on taxes and spending.
No longer can we go spending more than our revenue. We must change this now.
Also cant go on making big spending promises.
DD
Wouldn't balanced budget legislation bring the buck roaring back? Maybe a candidate can think out of the box instead of joining the borg mentality. He could tell Americans that even though government services would take a hit it would be offset by the increased purchasing power for those with income or savings. What a novel idea.
when inflation goes up it assists folks in debt for we repay with cheaper dollars
Generally, I would say this is true, but when the debt is owned by OPEC/China, they get pissed. So they do crazy stuff like manipulate currency or drive oil up to $200 through their SWF.
The debt spiral goes deeper ...
Combine this with the trade data and what we have is a debt spiral that will blow up in our faces sooner rather than later.
Public and private debt is now at 350% of GDP. This is beyond uncharted territory, this is a new dimension.
when inflation goes up it assists folks in debt for we repay with cheaper dollars
only if wages go up.
Michael McKinlay writes:
The debt spiral goes deeper ...
Combine this with the trade data and what we have is a debt spiral that will blow up in our faces sooner rather than later.
Absolutely right. Especially when these are combined with the rapidly approaching crisis in medicare and emerging mortgage bailout schemes...
That's why I'm expecting this recession to be long and painful -- while we're coping with an ordinary 2-to-3-year recession these debts and unfunded liabilities will blow up in our faces and stretch the bad times times into a 7-to-10-year Economic Reckoning.
deficits don't matter.
Ya know, he said that Reagan taught him that "Deficits don't matter". Sure, they don't matter if you are entering early-stages of alzheimer during public service or planning to move to Dubai after your last stint in public service.
Note that receipts are now growing below inflation and definitely below growth in spending.
US Witholding Tax Receipts.
6 month rolling basis y-o-y change.
May-08\t1.9%
Apr-08\t2.4%
Mar-08\t3.2%
Feb-08\t2.6%
Jan-08\t2.8%
Dec-07\t4.6%
Nov-07\t3.5%
Oct-07\t3.0%
Sep-07\t4.2%
Aug-07\t5.7%
Jul-07\t5.9%
Jun-07\t6.8%
May-07\t7.7%
Apr-07\t8.6%
Mar-07\t7.5%
Feb-07\t8.9%
Jan-07\t8.1%
Dec-06\t7.8%
Nov-06\t8.5%
Oct-06\t9.1%
Sep-06\t9.1%
Aug-06\t9.6%
Jul-06\t10.7%
Jun-06\t11.1%