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Originally Posted by Snake Doctor
You're assuming all government spending is "pork", when earmarks are less than 1/10th of 1% of the overall federal budget.
Also, individual consumers will not allocate money based on what is best for the country, but what is best for them....that may, and often does, include putting the money in a piggy bank, paying off a credit card, or buying products that were manufactured in another country.
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well of those three examples putting it an piggy bank/matress is not something someone who knows the value of investing is going to do.
paying of credit cards puts the money into the banking system to be lent out again (posititive)
and buying from another country when you have trade with and are therefore selling stuff to has a proportionately neutral effect (in the case of the US which has an over all trade surplus a positive effect).
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The union thing is hogwash. Unions vote democrat, period. The idea that government spending is less stimulative because union workers may do the job is ridiculous.
The private sector isn't going to build roads, bridges, tunnels, a new electricity grid, lay broadband lines in rural areas, etc....these are investments in the public interest that don't pay an immediate dividend to the investor.
Just like the interstate highways in the 1950's. There was no immediate return, no private entity could have made a profit by undertaking such a project, but the long term effects on our economy have been profound. (And there is also the short-term benefit of jobs for the people who build the roads, clear the land, etc)
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And that makes sense when the public infrastructure investment happens as a PLANNED growth event. However when it is pushed out as a stimulus package that is not what happens. Projects that were planned to happen 3 years from now are pushed forward today. Which means 3 years of life expectancy is wasted to create short term jobs for your supporters.
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This really made no sense. You're assuming the only reason someone would sell an investment is to pay off debt. You also assume that the bank will turn around and lend new money once an old debt is paid off.
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no it is not i was responding to your sell stuff to pay off debt point. I know people will sell off stuff to move it into a higher yeilding investment (which translates into capital funding most profit maximizing companies = more jobs long term). I was trying to show you the beneficial effect of something you were discounting as not being of value.
Lower capital gains reduced the punishement from moving your money from one investment to another which causes money to flow from bad investments to good investments more quickly. That has a net positive effect to the economy which creates jobs.
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Yet the banks have been given a shit pot full of new lend-able capital by the government, and that hasn't led to more lending. Also, my guess (and it's a reasonable one) is that the money someone would use to buy a stock, or a business, or whatever other type of investment, is currently sitting in a bank and not under a mattress, which means that it is already capital on a bank's balance sheet that can be lent if the bank so chooses.
Nobody has to sell a stock to pay off a debt so the bank can loan again. You really went off the reservation on that one gideon.
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The toxic assets is based on a lower than necessary asset reserves, which the infusion of capital was designed to resolve. The problem is when people pay off their credit card debts that is a LOST revenue stream from the banks. If they choose to recover it by investing that helps the economy. IF the best RIO comes from lending out that money that also helps the economy. WIN WIN either way.
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Banks not lending is a result of the trillions of dollars in toxic assets on their balance sheets. Cutting the capital gains tax so that someone will sell some stock isn't going to make that problem go away. (Especially considering that stocks have lost almost half their value in recent months, so almost anyone selling right now would be taking a loss and taxes wouldn't be a factor anyways)
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which means it only has a cost allocation if it successfully stimulates the economy (back loaded cost) vs infrastructure investement which has to be spent first.
IF the physicological effect of reducing the punishement for moving your money from a bad investment to a good investment is eliminated. and it causes people to not just sit on their current stocks in the hopes it will go back up. The business that are first to turn around will get more capital. That will speed up recovery. And only when that happens does the cost of the tax cut actually kick in.
You just gave another reason why tax cuts are better than public works.
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The top economists in the country have told President Obama that for every $1 of government spending we'll get $1.50 in stimulus, for every $1 in tax cuts, we'll get 75 cents of stimulus. (Because the tax cut money may not be spent at all, or it could get invested overseas, etc)
The reason for the tax breaks to individuals is more a function of giving people a break during tough times than it is about stimulating the economy. (From Obama's point of view anyways)
Yet there are still all of these people screaming for across the board tax cuts, capital gain and dividend tax cuts, and whining about all of the "wasteful spending" in the stimulus plan.
We've tried the "republican way" for the past 8 years and now we're in the mess we're in, dontcha think it's time to try something different?
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at least quote him properly
he said $1 will generate $1.50 in DIRECT stimulus.
There is a difference, because their is a massive multiplier effect from indirect (out of system stimulus).
Take the example of canadian auto industry, putting the stimlus into US auto industry caused the canadian government to do the same thing. The difference is the canadian plants BUY their parts for the car from the American Parts plants. The end result in the US gets a portion of our stimulus package (the value of the parts). Since the profits from the sale of the cars go back to the head office in the states you get a second part of our stimulus package.
When those net transfers the total value of a $1 going to business, is WAY more $1.5.