Obama Acts to Aid Small Businesses
nytimes.com
nytimes.com
Micromanaging billions of "knobs" on the economy is a losing proposition and it creates "regime uncertainty", where folks are afraid that the rules (on taxes, regulation, inflation, contracts, etc.) can change out from under them at any time.
Money is a commodity. When the government prints more it reduces the value of all other dollars in circulation. This inflation is a hidden tax that we will be paying off for years.
You are absolutely correct.
Dams, Bridges, Interstate Freeways, Air Traffic Control and Nuclear Power Plants all work so much better when they are built entirely by private enterprise. In cases where they were built using public obligations, they provide very little benefit and do not enable other industries.
Look: public infrastructure spending stimulates the economy on multiple levels; directly, through spending on contractors and suppliers (who in turn buy from their contractors and their suppliers) and indirectly by creating public benefits that create new opportunities and enable new industries; and through the fact that it engenders stability (a dam has a lifespan measured in centuries if it's maintained, a functional transportation link is not likely to vanish overnight, and so forth). The thing is that these benefits are diffuse enough (though they are measurable) that no single commercial entity can afford the risk that they might not be able to capture those benefits.
The blinkered view that all public spending is automatically evil prevents clear discussion of the possible alternatives. Not all public spending is equal, some projects deliver more overall benefit than others.
I guess my take is that those who are strident in their distaste for any public spending are patsies in the hands of the special interests who are trying to capture as much of the benefits of public spending as possible.
Public infrastructure provides economic benefits throughout the economy, enabling more economic activity; which more than makes up for the money withdrawn from circulation by taxation.
If you cannot wrap your head around this concept. You have no business lecturing others about basic economics.
Governments are not exempt from economic forces, in fact a very good argument could be made that they are created and sustained by economic necessity. To put that argument in the simplest terms; governments save us money.
My other point is that blind negative rage toward all public spending makes you an easily manipulated member of a mob. A mob that others are adept at using to shelter their favored projects.
As I said in my earlier post infrustructure is fine depending on the situation. I believe government works are a necessary evil where we expect private interests to create monopolies for expoitation. Dam's are such a case. A good highway system is probably such a case. But these things take time and I expect them to be taken advantage of. They have to be maintained even if they aren't useful. You say. "Public infrastructure provides economic benefits throughout the economy, enabling more economic activity; which more than makes up for the money withdrawn from circulation by taxation."
We just disagree on the last sentence. I believe it only makes up for it if the end result of the infrastructure encourages more economic activity.
Of course, this tbread started complaining about giving small business owners stimulous. Well, I agree with the original sentiment. They could also try relaxing some laws that get in small business owners ways.
as for the rest of your post...government saves us money? this is nonsensical. government takes money and provides services. You claim that these services are a net gain, I disagree.
as for the "libertarian mob"....you haven't been around any actual libertarians obviously. Mobs are the #1 things we hate. The whole point of libertarianism is to negate the power of mobs. read a book.
Japan's experience on public works spending as a recession stimulus is mixed:
"Economists tend to divide into two camps on the question of Japan’s infrastructure spending: those, many of them Americans like Mr. Geithner, who think it did not go far enough; and those, many of them Japanese, who think it was a colossal waste."
http://www.nytimes.com/2009/02/06/world/asia/06japan.html?_r...
The CBO says that growth would restart by the end of the year without the stimulus. If that's true, why do we need additional spending afterwards?
Note that Keynes said counter-cyclical spending while Obama's spending establishes a higher baseline. (The only significant savings is for Iraq after Bush said that we'd be out.)
AIG has multiple divisions. Many folks in many of these divisions (a) have contracts specifying that they get 90% of their annual compensation in a lump sum known as a bonus; (b) did a great job over the past year in areas of business entirely unrelated to CDOs and other issues.
...and now we've got a Republican senator saying that these people should commit suicide, and we've got a Democratic president and a Democratic senator saying that these workers will either have to give their salaries back or they'll be slapped with after-the-fact 100% tax rates.
In a political environment like this, I'd suggest that a lot of folks who can deliver massive amounts of value would be quite leery of signing up for a new job with variable, results-based compensation.
Thanks - that's really helping the economy!
Don't forget the recently passed legislation exempting these bonuses (contracts signed before Feb last year) from the executive pay limits. Said legislation was voted for unanimously by Dem senators, nearly unanimously by Dem house members, and signed by Obama.
I guess it's a relatively small amount.. so I'll still continue hating his policy mostly for the decision to tax my charitable donations.
To be fair, I'm probably one of very few that are/would be affected by the proposed charitable deduction changes. If you go out and earn more money to support a charity, then Obama's proposed changes can result in you adding the IRS to the list of charities you're supporting. I don't know about you, but they're near the bottom of my list of non-profits to support.
Business loans are fundamentally different, aren't they? Sure, a lot of these businesses will fail, but at least the whole point of a business is to create value, and there will be a lot of winners, too. Money has to move around, that's how the economy works. I'd much rather see it moving around trying to drive people to create value, than to consume concrete assets.
A couple of points though. First, there were a lot of "concrete assets" created in recent years. As simple evidence google "condo glut." Also, you're right - these business loans are fundamentally different. Unless I'm missing something, they're fundamentally riskier - there's no collateral (overvalued collateral is better than none), and the entity you loaned money to is FAR more likely to simply disappear.
As to whether they'll go to better uses - hey - I hope you're right. I hope it helps create more value / helps the economy, etc. However, plenty of people took money "out of equity" in loans and spent it on stuff that created value in a similar manner. For instance, there used to be quite a burgeoning business in selling solar panels to homeowners.. many would argue it's good for the environment, adds value to the home, etc. The interesting part here though is that the salesman weren't really just selling solar panels. Their job was to walk the homeowners through how to get the money in a mortgage "out of equity" on the always-rising value of their home and collect any tax credits available.
Businesses probably are fundamentally riskier, but there's probably a power distribution in there somewhere, where a few pay off like mad and offset everything else. I'm not advocating irresponsibly handing out business loans or anything like that, but if a bank has the choice between investing in a risky mortgage or a risky business, I guess I would hope they'd pick the business. Then again, I'm not really interested in buying a house anytime soon.