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Comment by gaius | Hacker News Reader

Well as I said when Northern Rock collapsed, the best financial stimulus would be to refund everyone the income tax they paid for the last 12 months.

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What exactly does that do for the people who've been out of work? 100% rebate on 0 is still 0, right?

Not to make a political statement out of things but you're saying you'd prefer they didn't get their unemployment, giving that money back to me and you as tax rebates instead? Trying to see how your suggestion is relevant to the article.

In this scenario, anyone who'd just lost their job would have a lump sum of 40% of their previous salary, plus whatever entitlements they had for unemployment. Anyone still in a job would have that cash to either pay down their debts or to spend on goods and services that would sustain/create more jobs. It's a win/win scenario.

So, cut taxes while increasing benefits?

You should run for Congress :)

The money would come from not bailing out the banks. Or rather, bailing them out via individual bank accounts. Power to the people!

We turned a profit on bailing out the banks, actually. Or close to one, maybe lost a negligible amount when you weigh AIG against the profitable bailouts.

The issue with stimulus via tax cuts (which actually constituted 1/3 of the stimulus bill we did get, you don't hear about that much, because it undercuts the obama as devil-socialist narrative), is that, as pointed out above, you're primarily putting money back in the pockets of rich people. They'll invest it and maybe that will trickle down a little but it's nowhere near the multiplier effect for the economy that direct consumer spending gets you. Poorer people spend the money, that gets it bouncing around in the economy.

As a general ideological predisposition, tax cuts for the rich as a primary policy goal could theoretically make sense (although I'd suggest a hard look at the last 30 years first), but as fiscal stimulus for a down economy it just plain doesn't add up.

You are also shoring up the banks balance sheets, remember. As others have said, money invested isn't dead - it is actively lent to others.

Money spent on Stella, kebabs and fags doesn't really count.

Poor people don't buy Stella, dude.

And you missed the point like 4x in this thread.. people weren't saying that funneling money to banks was unstimulative, they were saying that giving money to people who will consumer-spend it is more stimulative. This is pretty much accepted in the economic community.

Sounds like a fine idea to me, but not very stimulative. More money would be returned to high income individuals who are more likely to hold onto the extra cash.

I'd personally rather it go to infrastructure projects -- faster cheaper internet access, high speed rail, space elevators ;) -- and basic research.

"hold on to extra cash" is intuitive but it is not how our economy works. Anyone saving money has that money circulated into the economy, through stocks, bonds, or bank lending. In fact, it is the wealthy who have the surplus capital available to invest in ventures like those you mention. It is extremely stimulative.

Nostromo specifically said, " not very stimulative. More money would be returned to high income individuals who are more likely to hold onto the extra cash." Which is exactly correct -- poor people spend basically every penny they get because they're forced to, while wealthier people will either pay down debt or save. Thus for a fixed stimulus, your best bang for the buck is income supports for unemployed / poor because they will immediately spend it. Note also a big portion of our current economic climate is a lack of demand.

Try reading a couple months of Paul Krugman -- he explains this particularly well.

Krugman is a buffoon, his solution to every problem is " print more money".

I guess we should define "stimulative." I was talking about it in a job-creation sense.

Yes, wealthy individuals will put the money into stocks, bonds, or bank accounts - not under the mattress. But public companies' market cap rising a bit has a much less direct effect on jobs than creation of demand for local goods and services. Putting extra cash in a bank account is even worse -- a much simpler way of getting banks to lend is to reduce the prime rate, not to increase the savings rate.

Oh my I'm afraid your understanding of economics is very poor. Infrastructure funding can only come from tax money. Tax money can only come from the private sector. The private sector makes by money by using capital (savings). That is how it works. That is why savings are good and taxes are bad.

If his understanding of economics is poor, yours is even worse. All he saying is you get a better multiplier by giving it to people who will spend the money first on goods and services then on people who will put it directly into savings. And he's right, which should be obvious.

That is not true. That is redistribution wealth. You are taking the money away from the people are are making and giving to the people that are spending it. That makes no sense. Savings is what drives the economy. Without savings there would be no capital. omg.

Please tell me where this multiplier comes from? If money was multiplied through taxes the USSR would still be around and booming as they had an effective tax rate of 100%. So do tell please.

Actually, higher income individuals are more likely to spend income tax rebates. Lower income individuals are likely to save it or pay down debt with it.

http://www-personal.umich.edu/~shapiro/TaxRebates.pdf

http://papers.nber.org/papers/w16246

40%? My income tax last year was 11% of salary. If I go back a few years, before I bought my house and before my company had a 401k that I could divert a lot of money to, the highest I paid was 18%.

How does one get to 40%?

Be born in England.

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