Why We Need a Second Stimulus
By LAURA TYSON
Published: August 28, 2010
Laura Tyson, the Chairperson in Clinton's Council of Economic advisors, is a flexible, straight forward and very likable top-notch economist. She presents a clear and strong reasons that a strong second stimulus program will result in a lower deficit and because a stronger economy will bring in more tax dollars.
Stock Market bubbles as well as crashes result from our inherently human behavior of going with the crowd based on our emotional makeup. Unfortunately the crowd is more wrong than right about just about everything as many of us has experienced including myself. Logic and reality fails us when panic sets in and kept us out of the stock market when it went up sharply. Don't watch the stock market daily!
It is not an economic recession for corporations which is a good thing where the economic measurement called Gross Domestic Product or GDP is close to even before the recession started. Technically we are out of the recession because corporations are making plenty of money with record profits.
However, the loss of jobs, especially among Blue collar workers, is especially horrible if we count everyone not only out of work, but those working part-time, or are no longer looking for work and are not counted in the 9.5% unemployment. The corporations are relying on overworked domestic and overseas workers to keep their products supply going. The Reagan administration started importing jobs across borders and overseas with abandon . Unemployment among college graduates is 4.5%, the potential major source of excess consumer spending.
Bush's incompetent, greedy, and corrupt administration sent 50,000 corporations overseas during his terms, by giving many manufacturing plants with his tax breaks allowing them to keep money tax-free overseas and gave them one year to bring back the money to the USA for one year without any tax! If Obama makes the tax cuts permanent, it will increase the deficits by 1.3 Trillion Dollars!
Regulatory Agencies including the Securities Exchange Commission who are supposed to protect our investments and banks was like having Foxes to Defend the Hen House which led to the final collapse our lifetime savings, our jobs, and led to huge deficits. Remember, Bush and Paulson designed the bailout bill and submitted it to congress. It was passed during the Bush Administration with many congresspersons and Senators from both parties opposing the bailout including one of my Senators, Wyden (D-OR).
Bush's Republican congress passed the two financial bank bills in 1999 and 2,000 which led to our collapse, by keeping Bill Clinton busy with the overblown and unproven accusations of murder, financial fraud, and a whole list of Troopergate where lies went far. Clinton also made the mistake of believing Greenspan, Rubin, and Larry Summers who deviated from his longtime belief about how economies work instead of his wife Hillary Clinton. Not many know that she actually ran the governorship in Arkansas for four years and ran the campaign for Bill Clinton so he "won" 5 elections. Hillary should have been the President instead of Obama! She has more balls! She should have a strong Vice Presidential role and Make Joseph Biden Secretary of Defense!
Jim Kawakami, August 30, 2010, http://jimboguy.blogspot.com
Excerpts: … The situation would be even worse without the $787 billion fiscal stimulus package passed in 2009. The conventional wisdom about the stimulus package is wrong: it has not failed. It is working as intended. Its spending increases and tax cuts have boosted demand and added about three million more jobs than the economy otherwise would have. Without it, the unemployment rate would be about 11.5 percent. Because about 36 percent of the money remains to be spent, more jobs will be created — about 500,000 by the end of the year. …
Federal aid to the states is especially important because they finance education. Although the jobs crisis is primarily a crisis of demand, it also reflects a mismatch between the education of the work force and the education required for jobs in today’s economy. Consider how the unemployment rate varies by education level: it’s more than 14 percent for those without a high school degree, under 10 percent for those with one, only about 5 percent for those with a college degree and even lower for those with advanced degrees. …
An increase in government investment in roads, airports and other kinds of public infrastructure would be cost-effective, too, as measured by the number of jobs created per dollar of spending. And it would help reduce the road congestion, airport delays and freight bottlenecks that reduce productivity and make the United States a less attractive place to do business. The American Society of Engineers has identified more than $2.2 trillion in public infrastructure needs nationwide, and a 2008 study by the Congressional Budget Office found that, on strict cost-benefit grounds, it would make sense to increase annual spending on transportation projects alone by 74 percent. …
But can the government afford this additional spending? The answer is yes. Despite the large federal deficit, global savers, including savings-hungry American households, are snapping up United States government securities at very low interest rates. And they will continue to do so as long as there is ample slack in the economy and inflation remains subdued. Over the next few years, there is little risk that federal deficits will crowd out private investment or precipitate a crisis of confidence in the American government, a spike in American interest rates or a sudden drop in the dollar.
On the other hand, as long as private demand remains weak, the risk is uncomfortably high that trying to reduce the deficit — by cutting spending or increasing taxes — will tip the economy back into recession or condemn it to years of faltering growth and debilitating unemployment. In fact, either outcome would depress tax revenue and could mean larger deficits. … End Excerpts
Why We Need a Second Stimulus NY Times Op-Ed Laura Tyson, UCB School of Business, Aug 28, 2010, http://www.nytimes.com/2010/08/29/opinion/29tyson.html?_r=1&sq=Tyson&st=cse&scp=3&pagewanted=all
OUR national debate about fiscal policy has become skewed, with far too much focus on the deficit and far too little on unemployment. There is too much worry about the size of government, and too little appreciation for how stimulus spending has helped stabilize the economy and how more of the right kind of government spending could boost job creation and economic growth. By focusing on the wrong things, we are in serious danger of failing to do the right things to help the economy recover from its worst labor market crisis since the Great Depression.
The primary cause of the labor market crisis is a collapse in private demand — the same problem that bedeviled the economy in the 1930s. In the wake of the financial shocks at the end of 2008, spending by American households and businesses plummeted, and companies responded by curbing production and shedding workers. By late 2009, in response to unprecedented fiscal and monetary stimulus, household and business spending began to recover. But by the second quarter of this year, economic growth had slowed to 1.6 percent, according to a government estimate issued Friday. Clearly, the pace of recovery is far slower than what is needed to restore the millions of jobs that have been lost.
Households and businesses are on a saving spree to rebuild their balance sheets. Their spending relative to income has fallen more than at any time since the end of World War II. So there is now a substantial gap between the supply of goods and services the economy is capable of producing and the demand for them. This gap is starkly reflected by the 23 million Americans who are looking for full-time jobs and the millions more who have left the labor force because they could not find one. … http://www.nytimes.com/2010/08/29/opinion/29tyson.html?_r=1&sq=Tyson&st=cse&scp=3&pagewanted=all