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calia 14 and mousehop, thanks for your thoughtful responses.
The loss of 2 trillion suddenly from the economy being the basis for the recession is the best explanation I've heard yet for why a stimulus package might work. But does it seem that we have been building our prosperity on a house of cards versus a solid foundation? Rather than trying to put the cards back up, should we do it the slower, hard, old-fashioned way and build on real things? Why were banks ever allowed to get "too big to fail." Isn't that what the anti-monopoly laws are supposed to prevent? I'm not sure we need new laws, just better enforcement of the existing ones. (What Bernie Madoff did was illegal already). There was great potential for profit but also loss with mortgage based securities (especially for risky mortgages). As has been asked, why do we allow privatization of profits but socialization of losses?You buy your ticket, you take your chances.
Besides, it seems stimulus/bail out has already been tried and hasn't worked. The tax rebates last Spring were supposed to be a stimulus. TARP does not seem to be doing what it was supposed to. Even gas prices dropping has provided an extra $282 billion stimulus based not only on cheaper oil but also food and consumer goods. As for the Republican solution of lower tax rates providing economic stimulus, that is true, but only up to a point. As a brilliant guy on another blog pointed out, there is something called a Laffer curve which shows there is a point of diminishing returns on cutting tax rates. Maybe lowering what supposedly are very high corporate tax rates, or capital gains taxes would help, but in general it seems we've gotten all the good we are going to get from tax rate cuts.
Last I checked I've made $.02 so far, so I can literally say, "that's my $.02"!
posted by
WhorledPeas
on January 29, 2009 at 3:07 PM
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Magnitude
One thing to consider regarding the economic stimulus is that the collapse of the Mortgaged Backed Securities, and other such financial instruments, pulled a few trillion dollars out of the world economy. Essentially, that money just disappeared. That's the basis of the recession. So now banks are afraid to loan money, because there isn't as much as there used to be. Hence the $700 billion TARP. And now another $825 billion to get some work going. I don't know if it will work. Some economists say it's not enough. But, like you, I worry about the effect of the accumulated debt. So in a year or so, I guess I'll have to start lobbying my senators and representative to start paying it all back, something government all finds harder to do that borrow and spend.
posted by
mousehop
on January 28, 2009 at 7:47 AM
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I think that if Obama and his administartion
make good choices of where to spend the bailout, it will gradually pump the economy back up. From what I've heard, Obama wants to upgrade equipment and technology in schools and hospitals, fix eyesores and roads, and make houses and buildings energy-efficient. If all of the money goes to these kinds of causes, I can see it doing a lot of good.
posted by
calia14
on January 25, 2009 at 11:52 PM
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TexasGem, unfortunately I agree with you
I was kind of hoping my fears were unfounded paranoia.
You said much more simply in one sentence than I did in three paragraphs - there will come a day of reckoning. But as you also said, I need to put my faith in God. Thanks for the reminder.
As an update, I just read in the Sunday "Parade" section of the newspaper, that consumers are winners now because "A $2-per-gallon drop in the price of gas saves American motorists $282 billion a year, and lower oil prices translates into cheaper food and consumer goods for everyone." Thus making, "the fall in oil prices...a sort of de facto tax cut--an automatic stimulus package," according to energy analyst Daniel Yergin.
Do we really need another $800 billion stimulus package on top of the automatic $282 billion one we just got. Maybe I will point this out to my Congressman, Senators.
posted by
WhorledPeas
on January 25, 2009 at 7:01 PM
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For teh first time in my adult life....
I fear for my country. It is hard to say whether the bailout will actually help or not. The thing that I am most concerned about is as I told a good friend today, there is going to have to be a pay day some day and how will we do it? It will be interesting! God is our only true hope!! Thanks for your post!
posted by
Texas_Gem
on January 25, 2009 at 6:40 PM
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