People are buzzing about Obama's "bold" $450 bln jobs stimulus plan.
Obama says, "it will be paid for."
By whom?
Seniors.
That's because Obama also offered up big cuts to Medicare.
So who's paying for this bold new jobs plan? Rich people?
Nah...
Seniors!
Seniors are the new job creators.
Way to go, Obama! Way to go.
I don't get your negative appraisal. His proposals seem (almost half) of what Warren Mosler was suggesting. It is 50% of the full payroll tax holiday. It is investing in infrastructure. It is giving money to states. So what if he gets the funding wrong. As long as they do it, who needs to know that the government had the money for it all along. There is no constraint to spending until too much money is chasing too few goods. Isn't that the message of MMT? Was anyone really expecting Obama's proposal to be 100% of Warren Mosler's proposal? I'm just learning MMT. Please set me straight.
ReplyDeleteAnonymous - Yes, the spending/tax cuts are good (though not really enough).
ReplyDeleteThe problem is that Obama wants to "pay for it" - something which does not really make sense under MMT. The government should decide how much to spend and how much to tax based on real constraints - inflation and unemployment - not based on imaginary nominal financial constraints.
This was a political speech designed to boost Obama's ever declining re-election chances, not to create jobs.
The only practical effect is the political effect - more pressure towards so-called "entitlement reform." Obama thinks that reducing the deficit in the future will help economic growth because he is... confused. And also because his political advisors are confused enough to think that deficit reduction is really what independent voters want.
Of course the future elderly are paying for this Mike, in addition to others, while the stimulative effect has to partially make up for the fiscal drag Obama agreed to allow via the debt ceiling deal.
ReplyDeleteI like much of what I heard in the speech last night and I think it's the best speech I've heard Obama give so far as President, but he has a long way to go. This better just be a first step.
Anon,
ReplyDeleteWhy did Obama stop at 50%? Why not eliminate the entire payroll tax permanently? What the Hell is he worried about?
Anti
ReplyDeleteCutting the employer's side of the payroll tax will do very little for AD (aggregate Demand.) No additional spending money will be made available to wage earners. So this tax cut is unlikely to motivate employers to hire more employees.
Obama is afraid that the TeaBaggers will scream "HYPERINFLATION" Currently his mindset worries only about the TeaBaggers.
If he really wanted to do what is needed, he would heed Joe Firestone's words.
Is this really a jobs bill or a veiled attack on entitlements? How can taking from one group to give to another increase spending?
ReplyDeleteMike,
ReplyDeleteIf all of this is just "paid for" then this is just a big DUD.
And it's just on to more 'muddle through" (1% growth)...
Looking at the deficit flow, it seems (domestic and external) savings desires are setting it at about the $110-120 Billion per month range over the last year or two... so govt is going to have to cut taxes/ increase expenditures at this point so that (else equal) it would exceed this rate if we want to increase output/employment... btw the recent "debt ceiling" debacle had the exact OPPOSITE effect (forced the deficit down temporarily for 10 weeks)...
I'll try to find more info on what these new Obama fiscal proposals really mean...
Resp,
"Why did Obama stop at 50%? Why not eliminate the entire payroll tax permanently? What the Hell is he worried about?"
ReplyDeleteHe's worried about Tea Party nuts and political plays by some GOP members.
Also remember this: if this fails to accomplish expectations, it will be used politically to attack "keynesian economics".
Hopefully, the difference with Europe austerian policies will be enough to draw conclusions, and that will set us straight in Europe too after pain and recession, without Trichet, Merkel and other stupid polocy makers around.
I don't know when the "paid for" part kicks in. If it's in out years (2013, 2014), then we get a short term economic boost assuming this is passed.
ReplyDeletemore of the same.
ReplyDeleteI think we'll know more about the paid for part once the unconstitutional super committee comes out with their unquestionable irrefutable decisions that impact the entire nation. boy and I thought Bush was bad...hell hath no fury like a traitor...in fact isn't that theologically exactly how hell was "created"...by a traitor(s)? hmmmm
Clonal,
ReplyDeleteNo, you underestimate the impact of an across the board 2% fall in labor costs. You may be focusing on the effect on a single isolated firm, instead of the indirect effects of the action on other firms.
Is it intellectually honest to describe a cut to a handout as a tax to the people receiving the handout?
ReplyDelete@ sforst
ReplyDelete"Hand out" and "entitlement" are loaded terms.
Society isnot just an aggregate of individuals having no relation to each other. Society is constituted of a complex web of relationships that result in a system comprised of subsystems whose elements are individuals.
One of the great advances of modern humanity is the idea of civil society, in which individuals have reciprocal rights and responsibilities to each other within the overarching idea of a civil society based on reciprocity and coordination. This results in a social "compact" (not "contract"), one aspect of which is based on custom and another on institutions.
This is the basis of methodological holism is in the life and social sciences. Methodological holism mediates between methodological individualism and methodological collectivism.
In methodological holism, causality is traced to individual behavior based on causal mechanism that include social relationships rather than individual choice alone. Only anarchists as absolute methodological individualists think otherwise, and Somalia is a good example of where that leads, just as the USSR was a good example of where methodological collectivism taken to the extreme leads.
Methodological holism occupies the middle ground and democracy is the political system best able to express it. Distribution of real resources in a society is the result of democratic choices expressed through elected representatives. Allocations that increase a share are properly considered "spending" on that share, and allocations that reduce a share are properly called "taxation" imposed on that share. That is to say, spending increases claims on real resources and taxation reduces claims on real resources.