Why Isn't The Stimulus Stimulating?

[Mint]

I disagree. I think the problem was that most of the money hasn't even been spent yet. Really they should've done something like Bush's stimulus where they mailed out rebate checks (bigger ones obviously) combined with significant investments in infrastructure. I don't know if they did this, but they should encourage the states to spend on education, particularly college to reduce its price.

However, I think it would cause enormous inflation in the coming years if the stimulus was 1.5 trillion dollars.

I think that's a horrible solution for several reasons. First of all, a huge chunk of the rebates went to people who don't even pay income tax in the first place. If you look at the fine print, many people making $3,000 or so got several hundred in the mail. Besides being a backdoor welfare check, this really doesn't do anything to encourage productivity in the same manner a tax cut would. Secondly, the rebates are temporary which makes their effects even more limited. Third, the root of this problem is unsustainable spending and borrowing in the first place. The last thing we should be doing is trying to increase consumption, because even if that 'succeeds' (I don't buy that) it will only set us up for failure again later down the line. The way out of this mess is to encourage production and savings again while clearing the zombie banks and bad debt off the market. That means if there is to be intervention, it needs to be targeted at reforming the regulatory system and establishing a non-bubble economy. Obama's talked a lot about green jobs on the campaign trail, how about spending money getting bio-tech, alternative energy, etc. off the ground?

[Mint]

This is precisely what you want in a stimulus, Mint!  Your rightwing delusions get in the way of dealing with reality.  The idea is to give the money to Spenders, not owners/savers/privileged.  Poors spend.

'Poors' only spend because of a combination of inadequate services (odd coming from a libertarian leaner, but undeniable) and a consumer culture that really didn't exist until the '80s at earliest. Do you really think it's healthy for people to be $10,000 in debt on credit card debt alone (on average!) in addition to their mortgages, tuition, etc.? Can you point to any other country that lives like this? I can't think of any. I hate to sound like Carter here but he had it right, at some point people  need to learn to live with less.

What we need is re-structuring of the economy coupled with significant government incentives for future growth. Basically, a period of controlled liquidation and scaling back of government in certain areas alongside more investment into viable industries. As I said before, I liked Obama's talk about 'green jobs' and more funds/tax cuts (or credits) for scientific research in this country. We have tons of industries we could have developed by now, but haven't despite so many Democrats calling for that since at least the mid-'80s. It's essential that we start doing that now.


TL;DR: If we want to get out of the bubble/burst cycle we need to do two things: 1) Start living within our means more and 2) Establish a viable, 21st-century manufacturing base again.