Obama stimulus plan could be worth as much as $1 trilion

7 posts / 0 new

Sun, 2008-12-14 12:44

Doug

Sort of bad news and good news at the same time - the American economy is in more of a hole than it was thought, but the new administration plan to respond.

Obama aides, who were considering a half-trillion dollar package two weeks ago, now consider $600 billion over two years "a very low-end estimate," the newspaper said, citing an unidentified person familiar with the matter.

The final size of the stimulus was expected to be significantly higher, possibly between $700 billion and $1 trillion over that period, it said, given the deteriorating state of the U.S. economy.

http://www.reuters.com/article/newsOne/idUSTRE4BC1PV20081214

Sun, 2008-12-14 13:27

M. Spector M. Spector's picture

Doug wrote:

Obama stimulus plan could be worth as much as $1 trilion (sic)

Or it could be worthless, yet still cost $1 trillion in public funds.

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Sun, 2008-12-14 15:14

Doug

Possibly - but Keynes made the point that you could just pay people to dig holes and fill them in again and accomplish economic stimulus. The point is getting the money out there to stimulate demand. If something useful happens as a result, that's just a bonus.

Sun, 2008-12-14 16:19

Dogbert

Doug wrote:
Possibly - but Keynes made the point that you could just pay people to dig holes and fill them in again and accomplish economic stimulus. The point is getting the money out there to stimulate demand. If something useful happens as a result, that's just a bonus.

Yeah, as long as they actually spend the money. If they wind up giving it to rich folks who shove it under their matresses, it doesn't stimulate much. Hopefully they're a little smarter than that. :P

Sun, 2008-12-14 17:33

M. Spector M. Spector's picture

Doug wrote:
Possibly - but Keynes made the point that you could just pay people to dig holes and fill them in again and accomplish economic stimulus. The point is getting the money out there to stimulate demand. If something useful happens as a result, that's just a bonus.

No, the point of Keynes's remark is that you can give the money directly to the consumers rather than to their employers and you will thereby accomplish economic stimulus without (a) producing any additional commodities or (b) enriching the employers.

Giving $1 trillion to the failed capitalist class to pay their shareholder dividends and executive salaries and produce uncompetitive commodities that nobody wants to buy is certainly not what Keynes had in mind when he made that remark.

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Sun, 2008-12-14 17:53

Fidel

Herbert Hoover claimed, and after the damage was done, that his government was actually practicing Keynesianism. But Hoover's government did the opposite. They raised taxes on the middle class and lowered them for the rich.

I think U.S. "supply siders" today still suggest that one of the main causes of the depression was that manufacturers weren't producing enough goods for people to buy. Galbraith and New Dealers said that rich people had too much money and ordinary Americans not enough to spend in order to increase demand. Trickle down Reaganomics worked to a point but much more slowly and is proven to be more costly than if they were to encourage a labour induced recovery. I'm not sure but it looks like Obama could be trying on something along the lines of Reaganomics. Watch for US national debt to soar under Obama.

Sun, 2008-12-14 17:59

Doug

That's been done. I don't think we'll be seeing a repeat of TARP. Most of that money hasn't been used yet and that which has been used hasn't been used for what the Treasury Secretary said it was going to be used for. However, government support for the auto industry could turn into a second black hole if it's done wrong. But we'll have to wait to see what happens on that. They've been given just enough money to burn through to later next year when they'll return cap-in-hand - maybe without private jets this time.