Spend directly or give to people who will spend

Marginal prospensity to save is what economists call the fact that if you give a rich man a hundred dollars he probably won’t spend it and if you give a hungry man a hundred dollars he probably will. This is why food stamps have the highest stimulative effect and why tax cuts for corporations effectively have almost no stimulative effective. So when you’re designing a stimulus you want to give money to people who will spend it, or you want to just spend it yourself. And, in fact, if the government spends it it gets spent a lot more effectively in many cases. The government isn’t going to run out and buy a TV made in China, after all, it’s going to insist on buying American as much as possible. The stupider the stimulus bill for Americans, the happier foreign manufacturers will be.

I would like to see Obama push for the minimum wage to be raised to $10 an hour. THAT would stimulate the economy greatly.

He talks of creating 3.5 million jobs…but what kind of pay rate?? I suspect it would be much less than a living wage…

and the buck stops where???

We don’t actually want it to stop anywhere.

Right now dollar is falling because we ship a lot of them overseas in exchange for oil & Wal-Mart goods. That helps China and some other countries grow like crazy. They tend to move towards more sound more Americanized economies and possibly Democracies.

This causes Americans to buy from overseas at good prices, but our own employment begins to suck eggs and our incomes fall until our economy struggles.

Then, and this is where Bush went terribly wrong (probably for personal reasons), you don’t let this go on too long or let it get too close to the edge or you collapse.

Next step is to reverse this (to some extent) and grow the American economy like crazy while the others slow. The dollar rises. Americans earn more for producing more.

Everybody would be happy during most of the moments in this dynamic.

Keep the dollars flowing and keep people working and keep trade going. That’s a big part of what made America a nation instead of 50 states with trade barriers.

Of course, the financial market bubble was just insane and somehow our MSM failed to notice it or tell us until it had burst — and even then they seemed to NOT know what caused it to begin, grow or burst.

Those who still believe in market equilibrium might reflect on the hypothesis that it’s a fractal world. Got to watch out for those non-linear equations. Computer models … feh! “the map is not the territory!”

A cautionary tale: in 1964, Cincinnati’s 35-year-old bond issue finished. The money was raised for a subway system that wasn’t. About half a dozen stations were done in the central business district, and the tunnel extended north to about near the Viaduct. Moral of the story: if you start an infrastructure stimulus project, make sure it gets finished and used …

Now, another economist to read is: Steve Keen (Australian) who applied Minsky’s ‘financial instability hypothesis’ and recognised the bubble problem in late 2005.

I want high speed trains. Once you have used them…… what we have in this country you might as well go back to coal fired steam trains…..

Palley wrote that piece that selise quoted at comment 8 in April of this year. So I guess another wonky economist who saw where things were going.

http://www.thomaspalley.com

actually, i love to get stiglitz, galbraith, baker, krugman, roubini and probably a few others like naomi klein into a room for a weekend to come up with an alternative plan. hugh and ian could facilitate / moderate. oh, and i’d like to be a fly on the wall.

The only reason I’m saying force them to create industry here, is that without industry, we are toast…and there will be no economy at all to support projects that are good for things like the environment.

i completely agree with the goal – just want to advocating thinking about pursuing it in a different way. also, when it comes to organizing labor, especially in anti-authoritarian ways, i think we are light-years behind. might be a benefit to us if we have allies to learn from.