Can We Have Some Serious Ridicule for Charles Schumer?
New York Senator Charles Schumer proposed handing $15,000 of Joe the Plumber's money to every person who buys a home. It is possible that someone has come up with a more foolish idea, but researchers have not yet been able to identify one that makes less sense.
In addition to the fact that taxing non-home buyers to hand a really big check to home buyers (as opposed to poor children, unemployed workers, or people needing health care) is a questionable redistribution of income (spreading the wealth around), this proposal is incredibly easy to game.
I'm going to buy my brother's house and sell it to my mother. We'll pocket $30,000. This should be great fun. We'll pay out hundreds of billions of taxpayer dollars to transfer homes among friends and families. Now that's real stimulus.
Fortunately for Mr. Schumer, national reporters have so little understanding of economics (or anything else) they apparently think this plan makes sense,
That's amazing. Hummmm---I wonder how many jobs get created by transferring granny's house to my brother or me?
But, what if they took part of that idea and gave the money directly to consumers for other kinds of products? What would happen if I got some of my neighbor's tax money to buy a new high mileage or hybrid car that is built in the US of A? Would there be a problem with that, or is my brain a little fuzzy this morning? I would like it better than giving a blank check to a jolly banker.
Does that make sense? Or, how about this? How about health care vouchers for people that can't pay for health insurance? That way, they will be less likely to lose their job because they or their little kids get sick all of the time and they can not pay for a prescription.
I don't know much about economics, but it's fun to throw out ideas.
Bob Spencer
February 3, 2009 8:38 AM | Reply | Permalink
Same here, Mr. Spencer. In the same amateur spirit, I'll take a crack at it with two absurdly simple alternatives (assuming we can agree that SOME kind of monetary stimulus is a good thing to do in the present circumstances):
(1)If 1 trillion $$ is the number (for round figure's sake), why not just give every single citizen in the country $3333? If I haven't misplaced a decimal in my hurried calculation, that's 1 tril divided by 300 mil. Even if I have, it doesn't really change my point: Just divide it out equally.
(2)If that rubs 'free-market' gurus the wrong way, add a free-market component: Just scatter 1 tril in cash out of airplanes. Let those smart enough, dedicated enough, and lucky enough just make-off with what they can get.
I'm trying to make a serious point here: GET THE 'CURE' INTO THE PATIENT'S BLOODSTREAM NOW, one way or the other. Foot, or arm, or finger is beside the point, if the patient dies while we're arguing about it. It's also not clear to me that one distribution method is DEMONSTRABLY better than another - therefore, speed, simplicity, and basic commonsense fairness are at a premium, and back to my alternatives.
I'd appreciate some criticism and commentary on this from Mr. Baker or anyone else with something to say.
February 3, 2009 9:37 AM | Reply | Permalink
My first impression is that $3,300 is only about five times the amount everybody got last year, and what happened to that money? It disappeared. Nothing happened. Would 5x make that much difference? Sure, some people would spend more of it, but on what? TVs made in Japan?
The main difference between just handing out money and government spending on stimulus is that much of the stimulus will result is things of lasting value.
Suppose there are two towns on opposite sides of a river. Would the citizens of these towns get together and pool their $3,300 checks, so they could build a bridge across the river? After all, the bridge would benefit them for years to come... No, they wouldn't. Government has to build the bridge. Otherwise it will never happen.
-- ARG
February 3, 2009 11:21 AM | Reply | Permalink
Would the citizens of these towns get together . . . .
No, but there's nothing that prevents their elected representatives (mayors and councilpersons) from getting together and ---
The "citizens" now have the money to pay the taxes that will pay for building the bridge.
February 3, 2009 12:29 PM | Reply | Permalink
Well, the proposal in question is to give back the taxes the government would have, or once had, to the citizens. (Thus, no bridge.)
-- ARG
February 3, 2009 2:01 PM | Reply | Permalink
I'm not following ---
As I understand the proposal all payments to the individuals (personally, I like households) would come from borrowings and not from taxes.
What those individuals would choose to spend the receipts on would be up to them -- and infrastructure generating jobs in their local community might be one of their choices.
February 3, 2009 2:15 PM | Reply | Permalink
To quote John McEnroe, "You cannot be serious!"
Can you point to one case where people -- sorry, households -- took the $600 (or $1200) stimulus checks they received last Spring and chose, collectively, to spend them on "infrastucture generating jobs in their local community"??
-- ARG
February 3, 2009 5:01 PM | Reply | Permalink
I guess you'd have to get out there on the hustings and convince your fellow citizens that building that bridge was in the general interest.
It's called democracy.
"A dictatorship would be a heck of a lot easier, there's no question about it."—President George W. Bush
February 3, 2009 5:25 PM | Reply | Permalink
Or we could elect someone, like Obama, to stand on the hustings and convince...
And build bridges.
Still seems like Democracy to me.
-- ARG
February 4, 2009 11:31 AM | Reply | Permalink
The prosal of one_wilson may be "simple" but it's not simplistic.
Handing a trillion dollars to the people (and another trillion dollars next year) is sound policy. Its salutary effects would be massive:
1. There would be an immediate injection of $1 trillion dollars into the banking system;
2. Mortgages and credit card debts would be paid seasonably;
3. Workers who would now enjoy a rainy day fund would become more confident;
4. There would be money for states to tap if their citizens believe the services the states provide deserve to be continued; and obviously,
5. There would be "brass in pocket" to be spent by consumers.
The policy need not be the only policy adopted. Extending unemployment benefits and/or increasing them, helping the states pay for programs imposed upon them by the federal government such as Medicaid, etc.
The real benefit, however, is in taking the spending decisions away from jerks like Schumer and Geithner and giving those decisions to the people who will ultimately have to pay the cost.
February 3, 2009 2:35 PM | Reply | Permalink
Why stop at $1T? Make it $10T. Get rid of government all together, let's give everyone equal access to the printing presses.
Seriously: Churning is not good economic activity.
February 3, 2009 3:58 PM | Reply | Permalink
Seriously.
Replacing (helicoptering it if necessary) the money supply as it's being destroyed is good economic policy!
February 3, 2009 5:21 PM | Reply | Permalink
Let's not equate money with credit.
I know that our money is based in "faith and credit", but outside of the Fed and [other] counterfeiting operations, money is conserved while credit is not. So, when the supply of credit in the economy dries up, that's not quite the same as the money supply drying up.
Credit is the imaginary component which complements real money.
February 3, 2009 6:27 PM | Reply | Permalink
Let's not equate money with credit.
Why ever not?
I assure you that when the loan officer at Citibank taps his keyboard resulting in my having $100,001 in my checking account where formerly I had $1, Hermès will be happy to process my bank debit card.
Sounds like money to me.
February 3, 2009 8:34 PM | Reply | Permalink
Because it's too serious and too common a subject to joke about it that way, Ellen.
If you take out a loan for $100K, you not only get $100K in your checking account, you also get a copy of the IOU you signed for the lender. Your net wealth is still zero. And generally your balance sheet starts ticking negative as you accumulate owed interest. Your buying power starts decreasing immediately.
Money, except for monetary inflation aka counterfeiting, doesn't work that way. If you get paid $100K and deposit it in your checking account, there is no IOU. And your buying power, inflation aside, remains stable.
Credit cards and equity lines work a little differently, but the overall idea is the same. You get cash or some goods/services and you get a red mark on your account, an IOU.
Money is conserved, credit is not (in a stable system).
Mistaking money for credit is like mistaking price for value, if you like twisted analogies. But all this was surely obvious to you, unless you weren't joking. Sadly, much of America mistook easy credit for money, and now here we are beating around the Bush looking for lost Change We Need.
I hope that's enuf.
February 3, 2009 9:25 PM | Reply | Permalink
Very well said, eds. Thank you. (Downright poetic at the end there.)
-- ARG
February 4, 2009 11:39 AM | Reply | Permalink
No, thank you! :-)
(you're welcome)
Take a look at my outline below. I might post a revised version of it as a blog entry...
http://tpmcafe.talkingpointsmemo.com/2009/02/03/can_we_have_some_serious_ridicule_for_charles_schu/index.php#comment-3365007
February 4, 2009 3:34 PM | Reply | Permalink
I don't know where to start with you, eds.
You're confusing individual, consumer balance sheet concepts with the subject at hand, namely, the creation of "money" (typically by way of fractional banking and by government "printing") and its destruction (typically by the cancellation on the banks' balance sheets of assets due to them becoming worthless).
Presently, we're experiencing a credit contraction caused by the insolvency of some of the banks' debtors. The banks are seeing their capital being destroyed (by way of simple, straightforward accounting rules).
The reaction? Banks calling in or not renewing loans in order not to violate their loan-to-capital ratios.
The result? The destruction of "money" and from the nation's point of view, a reduction in the supply of money.
Since the amount of the economy's real goods and services hasn't changed, the prices for those goods and services must fall (deflation). My solution?
Print money to restore the price level. But give that newly printed money to the people in the first instance rather than to the banks -- although the banks will still get it, initially; the people will loan that money to the banks by depositing it into their bank accounts.
February 4, 2009 12:02 AM | Reply | Permalink
"I don't know where to start with you, eds."
Why not stay with the thread sequence instead of posting a reply to an old part of the thread, for starters? Here's the link:
http://tpmcafe.talkingpointsmemo.com/2009/02/03/can_we_have_some_serious_ridicule_for_charles_schu/index.php#comment-3363746
It talks about actual money because you mentioned $100K or so in an account as an example.
Money and "money" are obviously not the same thing. Which is my prior point. It's a credit thing, not money being destroyed.
Your equation of "money" = credit doesn't advance anything except conflation or confusion.
Did you miss this the first time?
February 4, 2009 1:56 AM | Reply | Permalink
Ellen and Eds:
While you are both at this, why don't you both consider value?
Money has value, products have value. Printing money does not create value, it only dilutes the value of existing money. This is called inflation.
Credit has value, Increasing credit does not increase value either, it also only dilutes the value of existing credit.
To correct a problem, the problem must first be identified.
There are three areas in the US economy where overproduction has caused problems:
1. Housing. With the baby boomers retiring and moving into retirement villages and homes, there is an excess of houses available for purchasing. The easy availability of mortgages has flooded the marketplace with excess homes. Therefore, the housing market is now in a slump.
2. Credit. Many people have reached the point in their credit where they are realizing that a substantial portion of their incomes is going straight to the banks in interest payments. That is money that they do not get to spend and, in effect, is reducing their spendable portion of their incomes.
3. Automotive. There is a glut of cars, trucks, and SUV's in the USA. Just look at any new or used car lot and see how fast these vehicles are being sold. They are not. Many American families have two or three vehicles already and do not want, or need, additional vehicles.
The current government answer to these problems?
1. Increase the amount of money available for mortgages.
2. Increase the amount of money available for credit.
3. Provide a bailout to the auto companies so they can continue to build cars, trucks, and SUV's than nobody either wants or can afford.
None of these "solutions" can possibly have any effect on the underlying problems they are designed to solve. These "solutions" can only make the underlying problems worse.
February 4, 2009 8:18 AM | Reply | Permalink
I think you're arguing from the fact that consumers' balance sheets are under stress -- as are the balance sheets of many banks, shadow banks, non-bank banks, and over leveraged firms -- but that's another kettle of fish.
Back to consumer balance sheets ---
Repair: reduce liabilities (pay them off more quickly or negotiate their reduction or go bankrupt) and/or increase assets (save more and invest more wisely)
What role should government play in assisting in carrying out any or all of these repair practices?
February 4, 2009 9:31 AM | Reply | Permalink
Why should the Government (taxpayers) be involved at all in bailing out individuals or corporations who made bad decisions and have gotten themselves into financial trouble? The "Government" was not involved in making the corporate or individual decisions which have caused this crisis. Set up a US National bank to compete with these failed private banks and let them go bankrupt due to the bad decisions they have made.
There is a level at which the value of things (as determined by what people in the marketplace are willing to pay for them) equals the amount of money and/or credit which is available for their purchase. That level has been artificially raised by the financial institutions to the point where more and more people realize that things (houses, for example) are overpriced and people are unwilling to assume a mortgage or continue in a mortgage at that inflated level. Providing more money for mortgages cannot solve this problem.
The biggest problem facing the USA and the Obama Administration is deficit spending. This is, by definition, a hugh Ponzi scheme - using the money from increased debt (borrowing) to pay off previous debt - and still spending more than the income, requiring more borrowing. Anyone with any ability to use a math projection can see that this quickly leads to disaster.
February 4, 2009 3:10 PM | Reply | Permalink
Ponzi - Yes Bush&Co should be hanged for treason for pushing the US needlessly further into this narrative. Some would argue that it was done intentionally, to drive government "over the cliff" and allow monied power interests to step in and return us more towards a feudal state economy with empty political democracy (what happened to South Africa in the 90s).
Neo-feudalism is now on the horizon after being latent for some decades (I first noticed it as a narrative factor about 20 years ago). The neocons were the pawns in this chess game, and did pretty well by my view.
February 4, 2009 3:43 PM | Reply | Permalink
Modify anti-usury laws to reduce rates on existing balances to about 5%.
Borrow cheap (Treasuries) as long as possible to spend wisely. Wise spending is a complex of short and medium to long term projects.
Work towards a "pay go" version of Fed and State spending, with significant progress milestones at 2 and 4 years.
Reduce expectations for pension and SSI payments, starting at the top.
February 4, 2009 3:30 PM | Reply | Permalink
blog on this topic for further reading or discussion:
http://tpmcafe.talkingpointsmemo.com/talk/blogs/eds/2009/02/prescription-for-recovery.php
February 4, 2009 4:40 PM | Reply | Permalink
I like this outline. Would be interested to see it fleshed out a little more.
-- ARG
February 4, 2009 4:45 PM | Reply | Permalink
And I can follow that handy link you posted to do so...
-- ARG
February 4, 2009 4:46 PM | Reply | Permalink
If you like, comment there when you have a chance!
February 4, 2009 7:10 PM | Reply | Permalink
Johann, the only major disagreement I have with your comments is that those things at the end are not what the government is trying to do. The Recovery Bill is what Obama is trying to do. Yes, last summer a bill passed in July to try to help mortgage holders. It seems to have been rather impotent from what I've heard.
I agree that the auto industry needs a major re-alignment.
On minor points, the Bush Ownership Society plus easy money drove a boom in new home building into a bubble on its own rights. Easy credit, both unsecured (credit cards) and secured (collateral such as home equity, partly building on the first strict housing bubble), at modest to low rates led to large consumer borrowing. Now those rates are up and killing consumers.
There are interventionist methods, and other methods, to try to deal with this (such as, legislate low rates on old unsecured balances). But that seems another topic.
Money and credit "have" the value that people give them. For this discussion, money is primarily of real value while credit it not. Monetizing money/credit is where it starts to get iffy, treating the medium of exchange as though it were itself a real asset. This is the essence of bubble formation and propagation.
Currency is just an IOU to represent bookkeeping entries, an accounting trick. Giving value to accounting tricks is very iffy. Betting on other people's credit deals is just gambling.
February 4, 2009 3:19 PM | Reply | Permalink
Along with the Republican party and today's Democratic leadership, Schumer is one of the main cretins responsible for today's economic tsuanmi. Schumer and Phil Gramm are the bag men for the money changers on Wall Street and in the Corporate Boardrooms.
What Schumer is doing here is pushing a populist idea, as bad as it is, so he can camouflage where his main interests lie.
I'm all behind any move to crucify Schumer. Here's his record according to the NYT;
http://www.nytimes.com/interactive/2008/12/12/business/20081214-schumer-table.html
Schumer will be an impediment to any attempt at trying to get the sharks on Wall Street to behave.
February 3, 2009 9:20 AM | Reply | Permalink
Consider him ridiculed.
Not that he's alone. One thing we've not lacked since this crisis hit is crackpot populism.
February 3, 2009 10:17 AM | Reply | Permalink
I ain't a Harvard trained economist, but I remember hearing something about a housing bubble starting all these recent problems. It would seem, therefore, that the problem can't be resolved until home values are lowered to their actual market value.
This should scare the bejeezus out of every one of us who owns a home. There is no way to avoid the distasteful medicine here of watching this important asset be devalued. We can't get "all better" until that happens.
Schumer's proposal would forestall the inevitable by propping up house values at, oh let's say, about $15k more than they are actually worth. He'd spend a great deal of money to do this, all the while just postponing the painful but necessary readjustment in the market.
Ain't he on some Senate Finance Committee or other? What the hell is he thinking?
February 3, 2009 10:43 AM | Reply | Permalink
. . . taxing non-home buyers to hand a really big check to home buyers . . . is a questionable redistribution of income . . . . Dean Baker
No taxes are involved!
In case no one's noticed we're in a period of asset (and thus, liability) deflation. Shumer's plan, whatever its merits or demerits, would be nothing but one more transfer of private balance sheet liability ("debt destruction") to the government's balance sheet ("money" creation).
Enough with all this poor-put-upon-taxpayers demagoguery!
February 3, 2009 11:05 AM | Reply | Permalink
Okay, you're right that this is a bad idea.
But people aren't not ridiculing Schumer because they don't understand economics. They're not ridiculing Schumer because, as bad an idea as this is, it strikes the right chords.
So far we've had a giant wealth transfer from Main Street to Wall Street in the form of TARP and the nationalization of AIG and subsequent bailout of Citigroup. All of this has led some to believe that the government will spend hundreds of billions to give hundreds of millions to rich people, but that it won't lift a finger to help normal people in trouble.
Now we have a stimulus package coming up and even those of us who support the package worry that a lot of money is going to wind up in the hands of big corporations that will distribute the money in the executive suite first and to the rest of us... never.
So giving $15,000 to homebuyers is bad economics. We get it. But with one-wilson's proposal above, to just hand $3,300 to every citizen might not be so bad. Little stimulus checks, those $600 "raises in our allowance," as I like to call them, do nothing. But with $3,300 I could definitely do some spending.
Schumer's proposal is wrong on the merits but the spirit of it is right -- don't try to help ordinary Amercians through the gateway of American corporations because that never works.
February 3, 2009 11:05 AM | Reply | Permalink
I agree with you about the sentiment behind this Schumer plan. But the idea of just giving everybody $3,300 is also not going to work.
Imagine that you've just lost your job. Will $3,300 help you? Sure, temporarily. But it won't get you a new job. And your neighbors aren't going to get together and pool their government checks to pay you a salary.
Stimulus spending is what we need. Yes, some of it should be focused on us, "the little guys", as much as possible. But direct cash payments (as well as tax cuts) have low multipliers.
-- ARG
February 3, 2009 11:26 AM | Reply | Permalink
No, TARP stock injections were not a huge transfer of wealth, they were investments.
The newer loan guarantees, those strike me as outright legalized theft by BAC and Citi. Paulson and Bernanke belong in jail.
February 3, 2009 5:15 PM | Reply | Permalink
Yes, by all means. What took you so long?
February 3, 2009 11:21 AM | Reply | Permalink
Destor,
I understand that Schumer might be trying to appear populist as he gets billions for realtors and the folks who will game his plan, but reporters at major news outlets do get paid for doing something.
It is their job to ridicule a public figure like Senator Schumer for coming up with such a ridiculous plan. They are the ones who should be able to recognize its absurdity and point it out to the public.
February 3, 2009 11:22 AM | Reply | Permalink
Hi,
I have several feature reporter friends, and I'll bet that they would be too afraid to say much negative stuff about anything to do with Pres. Obama. His popularity is out of sight and most reporters' careers depend upon how many people read or watch or listen to their stuff. Readers only read what they agree with.
Right now, reporters think that it would be sacrilege to write anything negative about the new Pres and they would lose readers and maybe their careers in such a fragile business.
So, thank you for raising the idea. It's strange how these things catch on and the idea grows.
Thanks,
Bob Spencer
February 3, 2009 11:56 AM | Reply | Permalink
Well, the Senator is not the Pres, but I guess that I was just throwing all of the stimulus ideas into one basket. But the point remains that if something catches on at first, reporters will stick with it. Is that better?
February 3, 2009 12:01 PM | Reply | Permalink
Fair enough, Dean. And if Schumer is thick skinned like you are, he'd be able to take it. Very much appreciate that you wade into the comments from time to time.
February 3, 2009 12:30 PM | Reply | Permalink
If "Joe the Plummer" is footing the bill, I'm ALL for it! Can we just stop using this idiot (who isn't even a plumber BTW) as justification for shit?
(And yeah - I'll join the group ridicule of Schumer, he's an ass)
February 3, 2009 11:44 AM | Reply | Permalink
Schumer is an ass, I'll agree with that.
Of course, anyone who would buy their granny's house or sell their house to their brother to pick up $15,000 is also an ass, and an idiot to boot.
$15,000 would maybe cover the closing costs on a home in my area - between title insurance, transfer tax and various fees for flood certifications and so on (but no points), the total closing costs would be over $10,000. Once you add in any mortgage points and closing costs on the other side of the transaction (if you are also selling a house), there is almost no chance that you come out ahead.
So, in theory, if you are trying to jump start the housing market, maybe it isn't the worst idea ever. If you are trying to help the builders and construction companies, restrict the $15,000 credit to people buying new homes (thus avoiding the intra-family housing swaps mentioned above) in arms length transactions (that is, the builder's relatives can't buy the houses and claim the credits).
February 3, 2009 12:05 PM | Reply | Permalink
Require anti-flipping provisions, too.
February 3, 2009 4:34 PM | Reply | Permalink
President Obama firmly STANDS BEHIND Senator Schumer's absurdity, former Senator Tom Daschle tax cheat and lobby ties, former IMF banker extraordinaire Timothy Geithner tax and nanny issues….anyone else….
…..would like to repeat myself by mentioning how all our worldly problems can be solved…..by solving the national deficit and freeing the country from being held hostage by the downside of capitalism: GET RID OF if not at least limit the powers of fractional interest and the political powers of international banking and our pseudo-governmental institution of the Federal Reserve Bank (the facts are in history: http://video.google.com/videoplay?docid=-515319560256183936 or visit their web site: www.themoneymasters.com regarding the recent Wall Street bailouts. Also, include the underreporting of how the U.S. government(both parties) encourages and is in collaboration of outsourcing not only U.S. manufacturing jobs but is now working its way into eliminating white collar and upper levels of employment: “On February 2, 2009, NumbersUSA with the Coalition for the Future American Worker launched the above "elevator ad" in an extended nationwide educational campaign on cable TV. The purpose of the ad is to inform the public of two government statistics that, when placed together, show an outrageous participation of our federal government in increasing the numbers of unemployed Americans”:
http://www.numbersusa.com/content/resources/video/commercials/elevator-commercial.html
February 3, 2009 12:07 PM | Reply | Permalink
While I am waiting for something, I thought of something else. Aside from gaming the payments, across the "flat lands" closing costs would not eat up the $15,000. But, if somebody legitimately bought a house, then often they would also buy furniture and appliances. The $15,000 would help to buy that stuff. Does anybody have any numbers about that impact?
Bob Spencer
February 3, 2009 12:50 PM | Reply | Permalink
That idea came from a guy that offered himself up as a game show prize on Trumps tv show. :[
In fact Schumer reminds me of Little Britain's fake hypnotist:
- "Look into my eyes, Look into my eyes" you did not see me or my fellow Democrats support credit card companies rights to arbitrarily and retroactively shove everyones interest rates sooo far up your ass as to forever stop and or/block you from EVER wishing to buy ANY FU**ING THING FROM A moth**-FU**ING BANK again". EVER!!
Our Grandmas aren't falling for it either,Chuck.
February 3, 2009 12:59 PM | Reply | Permalink
To follow-up, I just took a look at my local yellow pages. Lots of businesses revolve around housing and home sales. So, if the price of housing essentially went down by $15,000, then that would also eventually stimulate new construction along with bring the local furniture store back to life.
I wonder how fast that would put people to work? The economic numbers might be interesting. Anybody know what they would be?
Bob Spencer
February 3, 2009 1:01 PM | Reply | Permalink
Do we really need to "stimulate new construction"?
According to Krugman's "favorite housing-and-credit-bust site," there are "about 1.87 million excess housing units in the U.S. that need to be absorbed over the next few years." Calculated Risk
February 3, 2009 3:06 PM | Reply | Permalink
We need to import another 2 million immigrants, legal or not, and give them downpayment funds!!
Ahem.
February 3, 2009 5:07 PM | Reply | Permalink
Not a bad idea -- as long as they bring 2 million jobs along with them (we don't seem to have any to spare) in order to be able to pay their mortgages.
February 4, 2009 9:37 AM | Reply | Permalink
They could stimulate more than 2 million jobs! 15 hour work week would make sure of that!!
But wait until I can buy a house cheap, please.
February 5, 2009 3:30 AM | Reply | Permalink
Yes. You make an important point. Plus, I had another thought. What got us into this mess is that we do not have a real economy. Much of our previous growth was due to people getting second and third mortgages to buy stuff that they really could not afford.
Now, you tell me that we do not really need a lot of those houses. That is a gloomy thought when I remember that somebody told me that about 30% of our workforce (at least where I live) worked in construction. Now, they have no place to go. Does this mean that we are doomed? I guess we can build all kinds of government roads and mass transit and so forth, but does that really do enough? Is that really production that drives an economy?
Do we have a big surplus of labor that is sorta permanent? Eventually, we have to produce stuff that pays the taxes that pay for the new trains and windmills. Are we going from an artificial economy of a housing bubble (we didn't really have the money to pay for it) and now creating another artificial economy of windmills (There is nothing sustainable to pay for that either)?
Yikes!
Bob
February 3, 2009 6:04 PM | Reply | Permalink
"Do we have a big surplus of labor that is sorta permanent?"
Yes, and growing as automation and outsourcing grow. The leverage effects of automation (broadly, incl. all machine tools from tractors to CAM) are a key factor in our current condition.
The labor pool will shrink as baby boomers retire, but they might keep working longer than planned, now. When they do retire, they will be living off investment income (broadly speaking).
http://tpmcafe.talkingpointsmemo.com/talk/blogs/eds/2009/01/jobs-and-investments.php
February 3, 2009 6:21 PM | Reply | Permalink
Much more sensible would be to just allocate funds for tenants organizations and affordable housing groups to buy up houses for limited equity co-ops, affordable rental housing and the like. This enables the public sector to reap some small benefit from the excess housing, puts low-income people into housing they can afford (and provides stimulus, because if their rents go down, they have money to spend on other things), and provides housing for the increasing number of homeless families.
Why do these people always come up with BAD ideas, when good ones are so easy that I can do them?
February 3, 2009 1:34 PM | Reply | Permalink
In general, I think Democrats should eschew tax cuts and tax credits as Republican concepts that frame the debate conservatively. buys into conservative framing.
Instead of going to banks, TARP funds should go to debtors in the form of mortgage principal payment vouchers. That way, in the process of recapitalizing banks, at least homeowners would be somewhat compensated for their capital losses. That plan would help two classes of people with one transaction, instead of Schumer's plan to chase one bad idea with another.
February 3, 2009 2:46 PM | Reply | Permalink
How would these vouchers work, and why should we help anyone out with their bad investments (compensated for capital losses)?
Homeowners don't suffer a real capital loss if the market goes away, until they sell.
February 3, 2009 5:38 PM | Reply | Permalink
To quote John McEnroe, "You cannot be serious!"
Can you point to one case where people -- sorry, households -- took the $600 (or $1200) stimulus checks they received last Spring and chose, collectively, to spend them on "infrastucture generating jobs in their local community"??
-- ARG
February 3, 2009 4:59 PM | Reply | Permalink
Crap. That was supposed to be a reply to Ellen, upthread. Re-posted there. Please ignore here.
Apologies.
-- ARG!
February 3, 2009 5:02 PM | Reply | Permalink
A dumb idea for sure. As dumb as the Republican sheep in Congress bleating for more "stimulus" taaaaaaaaaax cuts that will just end up sitting idle in a savings account? I'm torn.
February 3, 2009 10:22 PM | Reply | Permalink