ATAR Notes: Forum
General Discussion => General Discussion Boards => News and Politics => Topic started by: brendan on January 21, 2009, 11:19:30 pm
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Stimulus Plans Might ‘Do Good,’ but Not Actually Stimulate
Casey B. Mulligan is an economics professor at the University of Chicago.
http://economix.blogs.nytimes.com/2009/01/21/stimulus-plans-might-do-good-but-not-actually-stimulate/
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http://online.wsj.com/article/SB123249646698200289.html
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http://www.forbes.com/2009/01/22/stimulus-keynes-taxes-oped-cx_bb_0123bartlett.html
Bruce Bartlett is a former Treasury Department economist and the author of Reaganomics: Supply-Side Economics in Actionand Impostor: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy. He writes a weekly column for Forbes.com.
I Liked this comment in response to the article:
Existentially, there is no such organism as "the economy," there are only individuals acting for their own self-interest. A state of affairs where individuals sacrifice their welfare for some notion of "what's good for the economy" IS a poor economy by that very fact.
http://www.forbes.com/2009/01/29/davos-economic-basics-opinions-contributors_0130_william_easterly.html
William Easterly is an economics professor at New York University and the author of The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good.
I Liked this quote from Jeffry Sachs:
"Without a sound medium-term fiscal framework, the stimulus package can easily do more harm than good, since the prospect of trillion-dollar-plus deficits as far as the eye can see will weigh heavily on the confidence of consumers and businesses, and thereby undermine even the short-term benefits of the stimulus package."
It's another reason why fiscal stimulus is viewed with a bit of derision in economics. Ultimately, any government spending has to be ultimately paid for.
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http://2.bp.blogspot.com/_djgssszshgM/SYXCzpR0MbI/AAAAAAAAAyY/VYle3udsueo/s1600-h/CalvinHobbs.BMP
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How Government Prolonged the Depression
Mr. Cole is professor of economics at the University of Pennsylvania. Mr. Ohanian is professor of economics and director of the Ettinger Family Program in Macroeconomic Research at UCLA.
http://online.wsj.com/article/SB123353276749137485.html#
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Free Trade
Douglas A. Irwin, a professor of economics at Dartmouth, is the author of “Free Trade Under Fire.”
http://www.nytimes.com/2009/02/01/opinion/01irwin.html#
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Neo-Socialism Down Under
http://online.wsj.com/article/SB123359648072740013.html
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The case against hand-outs
http://smallbusiness.theage.com.au/growing/finance/stimulus-plan:-handouts-912314580.html
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Japan’s Big-Works Stimulus Is Lesson for U.S. and Australia
http://www.nytimes.com/2009/02/06/world/asia/06japan.html?_r=1&hp
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Chicago Economists on the Stimulus Package
http://freakonomics.blogs.nytimes.com/2009/02/03/chicago-economists-on-the-stimulus-package/
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Libertarian ideas to stimulate economy
Jeffrey A. Miron is senior lecturer in economics at Harvard University
http://www.cnn.com/2009/POLITICS/02/05/miron.libertarian.stimulus/index.html
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Clash of the titans
http://www.smh.com.au/articles/2009/02/06/1233423496690.html?page=fullpage#
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Stimulus Plans initially create an image for the public that the Government is actually "doing something" to improve the economy. More informed people, however, dismiss such acts as simple "illusion" created by the Government and nothing else. They also dismiss as this as a waste of taxpayer's money, and are afraid of future problems in Government treasury caused by debts.
I want to focus my post on "public works", and little on handing out cash to the public. My opinion is that public works are a good idea, because it creates jobs. Although this will have bad impact on government wealth, it will have a positive effect on individual's well-being.
“You need projects with good jobs that will last through a bad economy.”
I think the major problem with the way Japan handled its stimulus plans was that little thought was placed upon its long-term benefits and creating lasting jobs. The blame should not only be pushed upon the stimulus packages themselves, but should be recognised that, through proper plans, stimulus packages can have a long-time benefits in the long-term.
One of the notable collapses caused by excessive lending is the IMF crisis in South Korea, where the nation's credit ranking was downgraded to a state where conglomerates ("chaebols", as Koreans call them) could no longer access external finances and forced to be bankrupted.
This situation can be avoided by vigorous risk-assessment prior to Government investment, and ensuring that money is spent in safe investments. One recommendation would be improving public transport system, which would benefit the society and create jobs for workers with little qualifications.
Other possible solution can also be achieved through cutting costs. To give examples, the Internet Censorship plan is costing millions of dollars. It will slow down internet, which will limit business efficiency, and is facing large criticism. Halting this project now would save money for more urgent issues. Another one is the Myki Card System, which is hardly proving to be necessary, yet costing taxpayers billions of dollars. This program could be postponed, and the fund could be diverted to more resourceful uses such as reducing ticket prices which will be more welcomed by the commuters.
I think the problem with just handing out cash, is that the Government loses control of the economy. People may save the sum for the future, which is detrimental to the economy as the cash movement is not increasing. They may spend too much on foreign goods, which would do little to improve the local economy. Protectionism is not a welcome solution here, as this would adversely affect on Australian exports as well. They may also spend it all at once, which would suddenly spike the economy and then slump back down which would depress market confidence. Spending may also be too focused on a particular industry, for example Gambling, which would mean that other business areas will suffer due to constant revenues with inflated currency. The problem I am addressing here is that handing out lump sums of cash to the public is not an ideal solution as people generally do not spend sudden money carefully nor do they consider the national prosperity more than their financial security.
Having said such, I cannot comment on how effective Obama's and Rudd's stimulus plans are going to be. Since the general consensus seems to be that Obama is an intelligent economist, I can almost deduct that the millions of dollars in his plan will be well spent towards saving the American, and consequently Global economy.
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Obama must fight the protectionist virus
By Jagdish Bhagwati
Published: February 4 2009 18:59 | Last updated: February 4 2009 18:59
President Barack Obama faces protectionist pressures. These are not just from the labour lobbies that have led Joe Biden, US vice-president, to chide “pure free traders” and to ask for “fair trade”; and which, astonishingly, have also led the US president to use his first meeting with President Felipe Calderón of Mexico – overwhelmed by the brutal fight against drug cartels caused by the US failure to legalise drugs – to urge on him tougher labour standards, a protectionist demand that is clearly aimed at raising Mexican costs of production. The pressures come also from the lobbies pushing for a Detroit bail-out that is inconsistent with the World Trade Organisation.
Through all this, the “no-drama” Mr Obama has kept a low, indeed invisible, profile. With his innate ability to moderate highs and lows, he has been America’s first “lithium president”. Fortunately, on Tuesday he stepped up to the plate on the Buy American provisions in the stimulus package, leaving little doubt as to where his sentiments, and his policy preferences, lie.
Yet, protectionism is a dangerous virus that requires a passionate response. Indeed, Mr Obama faces his two most serious protectionist challenges from the Buy American provisions that have infiltrated his stimulus package and from the China-bashing on “currency manipulation” that surfaced in the confirmation hearings of Tim Geithner, Treasury secretary.
The Buy American provisions, which would require that companies use US steel and manufacturing products in projects funded by the bill, seem reasonable. If the US has a stimulus package, why should the benefit of it extend to other countries? An influential columnist has suggested this is not what we economists call “beggar my neighbour” policy: the US is not diverting a given amount of aggregate world demand to itself at other countries’ expense. Rather, it is a case of not rewarding your neighbours when you stimulate spending and are adding to world demand: neighbours should reflate their own economies. Such protectionism by the US will therefore stimulate other nations into creating their own stimulus packages.
This is a naive argument, because other nations will not see the US action in this light. Instead, they will respond in kind, as they did after we enacted the Smoot-Hawley tariff in 1930 and as many are already threatening to do. So, if the Buy American legislation does get enacted, count on trade wars breaking out, so that Americans learn history, which they do not study enough at school, by seeing it repeated in their own lifetime.
Yet some do worry about thus undermining the WTO, which has inherited from the General Agreement on Tariffs and Trade the many roadblocks to re-enacting that history of mutually harmful outbreaks of trade barriers. They have argued, therefore, that the US can enact WTO-consistent procurement rules by excluding from US procurement China and India, among other developing countries, which have not signed the optional procurement code. But remember that these nations can also retaliate in WTO-consistent ways. They often have “bound tariffs” – ceilings, which are significantly above the “applied”, that is, actual, tariffs; and it is possible to raise the applied tariffs towards the bound levels without any restraint at all.
Nothing would prevent India and China from choosing to raise tariffs thus on items of export interest to the US. Besides, they could shift their own purchases of aircraft away from Boeing to Airbus, and of nuclear reactors from American to French companies. The response would, of course, be for the enraged US congressmen to start enacting their own retaliation. The game would become lively.
The accusation that China “manipulates” its exchange rate, which also promotes protectionism towards it, is another important cause for worry. Most senators are convinced the issue is clear-cut. It is not. The Washington magazine, The International Economy, once asked more than 60 economists: at what level should the Chinese currency be set? The answers, including those from some of our deepest thinkers on exchange rates, were revealing. Some wanted a float. Ron Mckinnon and Richard Cooper wanted to keep the currency at existing levels. And those who wanted revaluation fell into 11 groups ranging from 5 per cent revaluation to 40 per cent and above.
President Bill Clinton marred the first year of his presidency by indulging the Japan-bashers whom he had cultivated in his campaign. President George W. Bush succumbed also to steel protectionism in his first year. They had time to change, however. But Mr Obama, in the midst of a historic economic crisis, can ill afford to repeat this pattern: he has to fight protectionism right away or live to see the virus spread beyond control.
The writer is university professor, economics and law, at Columbia University and senior fellow at the Council on Foreign Relations, New York. His latest book is Termites in the Trading System: How Preferential Agreements Undermine Free Trade (Oxford, 2008)
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This was pretty rushed. Apparently it was so rushed that the proposal was filled with spelling mistakes. I'm pretty neutral about the whole thing, although I'd quite like $950. However, I thought that Turnbull's reply to this was actually very good. I agreed with him when he said that encouraging people to spend is perhaps irresponsible, given that debt is one of the things that caused the slowdown in the first place.
As for the huge budget deficit, I don't think there would be any kind of debt or funding problems. So much money has been saved in the last decade that it isn't as though the next generation will be inheriting enormous amounts of debt. That's a really poor excuse for blocking it in the Senate - there are much better excuses they could come up with, surely.
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There's No Stimulus Free Lunch
Mr. Becker, the 1992 Nobel economics laureate, is professor of economics at the University of Chicago and senior fellow at the Hoover Institution. Mr. Murphy, a MacArthur Fellow, is an economics professor at the University of Chicago and a senior fellow at the Hoover Institution.
http://online.wsj.com/article/SB123423402552366409.html
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Rudd's plan a dead weight on the future
http://www.ipa.org.au/news/1796/rudd%27d-plan-a-dead-weight-on-the-future
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yeah agree with above article, the spending package won't do anything to improve the economy
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Freedom Is Still the Best Policy
http://online.wsj.com/article/SB123449222292880677.html
Mr. Laar was prime minister of Estonia from 1992 to 1994 and from 1999 to 2002. He has advised the Georgian government on economics.
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brendan, do you know which countries follow the uhhh freedom and constitution and libetarian policies? like which country if any follow ron paul's type of politics.................i would assume very few......???????
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maybe hong kong?
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(http://4.bp.blogspot.com/_otfwl2zc6Qc/SZPdsKMar7I/AAAAAAAAJOw/G0M_QeEHUF0/s1600-h/taxcuts1.jpg)
http://4.bp.blogspot.com/_otfwl2zc6Qc/SZPdsKMar7I/AAAAAAAAJOw/G0M_QeEHUF0/s1600-h/taxcuts1.jpg
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http://www.cis.org.au/issue_analysis/IA106/IA106.pdf
Robert Carling is a Senior Fellow at the Centre for Independent Studies. He was Executive Director, Economic and Fiscal at the New South Wales Treasury from 1998 to 2006, and prior to that he was a Commonwealth Treasury official.
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Government Spending Is No Free Lunch
Mr. Barro is an economics professor at Harvard University and a senior fellow at Stanford University's Hoover Institution.
http://online.wsj.com/article/SB123258618204604599.html
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Obama's Rhetoric Is the Real 'Catastrophe'
Mr. Schiller, an economics professor at the University of Nevada, Reno,
http://online.wsj.com/article/SB123457303244386495.html
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Are you an economy?
Do you have 'performance' issues?
Try some stimulus!
http://www.youtube.com/watch?v=dEDIyztZGBA
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She Wants My ... Stimulus PACKAGE
http://www.youtube.com/watch?v=FwJduPtCvSM
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Stimulus Plans initially create an image for the public that the Government is actually "doing something" to improve the economy. More informed people, however, dismiss such acts as simple "illusion" created by the Government and nothing else. They also dismiss as this as a waste of taxpayer's money, and are afraid of future problems in Government treasury caused by debts.
I want to focus my post on "public works", and little on handing out cash to the public. My opinion is that public works are a good idea, because it creates jobs. Although this will have bad impact on government wealth, it will have a positive effect on individual's well-being.
“You need projects with good jobs that will last through a bad economy.”
I think the major problem with the way Japan handled its stimulus plans was that little thought was placed upon its long-term benefits and creating lasting jobs. The blame should not only be pushed upon the stimulus packages themselves, but should be recognised that, through proper plans, stimulus packages can have a long-time benefits in the long-term.
One of the notable collapses caused by excessive lending is the IMF crisis in South Korea, where the nation's credit ranking was downgraded to a state where conglomerates ("chaebols", as Koreans call them) could no longer access external finances and forced to be bankrupted.
This situation can be avoided by vigorous risk-assessment prior to Government investment, and ensuring that money is spent in safe investments. One recommendation would be improving public transport system, which would benefit the society and create jobs for workers with little qualifications.
Other possible solution can also be achieved through cutting costs. To give examples, the Internet Censorship plan is costing millions of dollars. It will slow down internet, which will limit business efficiency, and is facing large criticism. Halting this project now would save money for more urgent issues. Another one is the Myki Card System, which is hardly proving to be necessary, yet costing taxpayers billions of dollars. This program could be postponed, and the fund could be diverted to more resourceful uses such as reducing ticket prices which will be more welcomed by the commuters.
I think the problem with just handing out cash, is that the Government loses control of the economy. People may save the sum for the future, which is detrimental to the economy as the cash movement is not increasing. They may spend too much on foreign goods, which would do little to improve the local economy. Protectionism is not a welcome solution here, as this would adversely affect on Australian exports as well. They may also spend it all at once, which would suddenly spike the economy and then slump back down which would depress market confidence. Spending may also be too focused on a particular industry, for example Gambling, which would mean that other business areas will suffer due to constant revenues with inflated currency. The problem I am addressing here is that handing out lump sums of cash to the public is not an ideal solution as people generally do not spend sudden money carefully nor do they consider the national prosperity more than their financial security.
Having said such, I cannot comment on how effective Obama's and Rudd's stimulus plans are going to be. Since the general consensus seems to be that Obama is an intelligent economist, I can almost deduct that the millions of dollars in his plan will be well spent towards saving the American, and consequently Global economy.
Here's a general article I wrote on why spending money on public works doesn't stimulate the economy.
I think it's a nice response to the part where you fear that the "Government loses control of the economy". When you question the efficiency of government spending, I suggest the answer is to let the government lose control of it (less taxation and spending, in general), because people are more responsible with the money they earn (they have self-interest guiding them). This doesn't mean I'm in favour of bailouts and tax returns that go beyond deficits, however!
But anyway, here's the article:
A common misconception is that increases in government spending will stimulate the economy. The logic offered to support this argument often describes how government spending will end up being paid as income to either business owners or workers, who will then spend a portion of that extra income, which will then become somebody else's income and so on, causing the money to cycle through the economy, and create a multiplier effect and hence creating wealth and stimulating the economy. There is nothing wrong with this logic, but it doesn't quite justify public spending.
It's easy to see the multiplier effect in action as the government injects dollars into an economy. Our companies will make more sales, which encourages higher production schedules, encouraging employers to create more jobs. As a result, there will be higher levels of GDP and lower levels of unemployment. So what is there to complain about? There are hidden costs. Consider: where did that money come from?
It came from taxpayers. Taxpayers who would have used the money according to their own preferences and needs, directing the market to produce the goods and services that are the highest priority to these taxpayers. Additionally, these private spending patterns would cycle through the economy, like with government spending, creating the same benefits that government spending would. The difference, however, is that the economic activity spurred by private spending will signal the market to produce the goods and services that people actually need, rather than on what the government spends on behalf of the people.
Think about two possible ways that money can be spent:
1. Your money can be spent on yourself.
2. Someone else's money can be spent on someone else.
The first option is like most typical private spending habits. You spend your own money on yourself. Since you are spending your own money, you take care of how much you spend, keeping consideration of your limited resources. Additionally, since you are spending the money on yourself, you make sure you get goods and services that are important to you. Overall, this type of spending prevents waste, and guides the market to produce the goods and services that are important to society.
The second option is like most government expenditures. Someone else's money is being used on someone else. It's not your money (mainly), so you don't really care about how much you spend, and it's not being spent on you (mainly), so you don't really care what it's spent on either. This type of spending encourages waste, and haphazardly directs the market to produce goods and services that may not be beneficial to society.
So when government spends, it forgoes the opportunity of the far more efficient type of spending: private spending. Government spending joins the list of the many other "beneficial" programs where government intervenes, and unlocks steep hidden costs as an unintended consequence. It's not easy to envision the loss of government spending, as it improves GDP and lowers unemployment. However, private spending does it better, and by spending through the public treasury, we sacrifice the better option.
Respond here: http://www.facebook.com/note.php?note_id=45948797421&1&index=1
I won't check this, most likely. PM me if you really want me to see it.
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Government spending spree has no real-world benefit
http://business.theage.com.au/business/government-spending-spree-has-no-realworld-benefit-20090219-8clf.html
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John Taylor, Professor of Economics at Stanford University, on the Rudd Government's AU$42 billion stimulus package
http://www.abc.net.au/lateline/content/2008/s2493046.htm