Dueling Twins

Stimulate

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The 'Dueling Twins'

The absolute fundamental aim is to make money out of satisfying customers.

 Sir John Egan

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The Many Faces of Keynesian Economics

Point:

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Stimulate Whose Economy?
 
James Hall, From the Left

Six weeks ago the Bush administration argued that its tax cut for the wealthy was a sufficient economic tonic for an economy in the first stages of a downturn.  Now even the Bush people recognize that the American economy has moved into recession, and the president this week urged Congress to act on a stimulus package before the end of November.  But this isn't the same Congress that kowtowed to President Bush's ideas of Trickle-Down Economy (i.e., throw the wealthy some tax breaks and they'll hire more gardeners, chauffeurs, and nannies).  Mr. Bush and his Republican allies will have pursue a more fair-minded approach to economic stimulus if they want to stimulate something more than a political fight on Capitol Hill.

In the Republican-controlled House of Representatives, they're working on something best called "Son of Tax-Break."  It would add $35 billion dollars more in business tax breaks than President Bush requested and accelerate the tax breaks passed last spring for the highest income tax bracket that the president did request.  The Senate, on the other hand, is considering a package of spending to terrorist-secure infrastructure for bridges, roads, and airports, the tax breaks for business and low-income Americans that the President asked for, and an increase in unemployment benefits and supplemental insurance for laid-off workers.  Putting aside for the moment the ideological arguments for tax breaks, which package makes the best economic stimulus for a dragging economy?

We've already given the wealthy a huge break in taxes.  The Bush tax cut passed last spring saw the majority of the tax refund go to the top 2% of taxpayers.  Now President Bush and his Republican allies would add in additional tax breaks for business and accelerate the tax breaks--but only for the top income bracket as a stimulus plan.  Mr. Bush also supports a small tax rebate for those low-income Americans who didn't get one in spring, but this amounts to only 16% of the total package, reserving 84% for the wealthy and businesses.

While tax breaks for business make sense in a recession, it hardly makes sense to add more tax money into the hands of the wealthiest Americans to jump-start the economy.  No doubt the idea is to give the wealthy money to invest in the stock market, but in the current climate of market uncertainty, people are keeping their money out of the market and sitting on the sidelines. What's needed is a way to stimulate consumer confidence, and that's best done by giving money to those who will spend it quickly--i.e, the lower and middle classes with bills to pay and economic needs to fulfill.

Unemployment is up and the unemployed are anchors to a stalled economy.  Unemployment decreases consumer confidence and lowers consumer spending. People out of work drastically cut back their buying and break into their savings or overextend their credit to cope with the problem.  The inability to pay back credit frequently lead to bankruptcy and default, further reducing consumer spending and adding to business losses.  That's where unemployment compensation helps, by permitting a level of consumer spending to continue and reducing the need for the unemployed to declare bankruptcy.

By supporting unemployment compensation and tax breaks for consumers who will quickly spend the money we can give the economy the kick it needs to restart.  The first sign of an economic upturn is increased spending by consumers That signals businesses to hire new employees, invest, and increase their manufacture of product and that raises the stock market, encouraging further investment, creating the wealth that fuels additional spending, etc.

The Senate plan, therefore, is set to kick-start the economy by increasing jobs through spending on infrastructure, by keeping the unemployed participating in the economy, and by giving the lion's share of the tax rebates this time to those segments of the economy who will go out and immediately spend it, ultimately improving things for businesses and the wealthy.  The House plan gives businesses and the wealthy money but not the inclination to spend it or boost consumer confidence.

It seems clear that if one is looking for an economic stimulus package, the Senate plan is best.  Everyone benefits from it, from the lowest on the economic ladder to the highest, and ultimately it is a fairer and more effective method to stimulate the economy than Son of Tax Cut could ever be.

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Rebuttal:

It's no surprise that my friend Sartre doesn't believe in Keynesian economics.  He prefers the model of government benign neglect that Herbert Hoover perfected--the one that made a Dust Bowl out of the American economy of the late 20s and 30s.  Fortunately Sartre's economic ideas--as up-to-date as a Model T Ford--are about as popular.  The argument in Washington these days is not between Keynesian economics and classical laissez-faire ("leave alone") economics, but between Republican and Democratic versions of Keynes' idea of government as the regulator and protector of the economy.

The last politician, Republican or Democrat, to practice laissez-faire economics was Dubya's Dad, and we know what happened to him.  The gold standard died long before that and lies stuffed and mounted between the Dodo and the Square Wheel.  Oddly enough, for a nation that no longer practices pure Capitalism (with a capital C), the US does quite well and even serves as the world's economic role model.  This must bother brother Sartre greatly, particularly with his notions of America as a nation of shopkeepers, but the American nation remains economically versatile and potent nonetheless.

Leaving aside Sartre's musings over the salad days of his own wealth-creation, we'll just remind him that in order to make money, he must have customers willing to spend money.  Since he's opposed to any stimulus package, perhaps he won't mind me saying that dealing with consumer confidence is crucial at this time, so the best of the two packages that he opposes will be the one that puts more money in the hands of those who will spend it, either for goods from stalwart small businessmen like Sartre, or from evil corporations.  Son of Tax Cut simply won't restore consumer confidence to the degree that President Bush needs it restored.

This might smack of the New Deal to the practitioner of Hooverian economics, but considering that the New Deal pulled America out of the deepest Depression in American history and put it on the road to its present economic greatness, that's not such a bad thing.

James Hall, From the Left

Counterpoint:

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Stimulate What?

Nothing illustrates the dilemma of political debate better than the framing of an issue by the 'Loiterer of the Left'. Failure to understand or to accept that government is the opponent of the free market and is in capable of creating the magic of wealth, is at the core of his thinking. Or should I say sophistry? Arguments between or among foolish options is not only a waste of energy, but when they take the form of policy, become deadly.

Looking to an assemblage of legislatures to fashion a fix for an addict hooked on the drug of fiat currency invention, is like hoping that the crack you smoke is really a free base high that will allow for a total escape from reality. That is the only promise you get from the status quo guardians of a manipulated economic structure. Why not go for the gold and just stimulate the entire economy with the government printing press that will distribute once and for all the long awaited redistribution of wealth, so that all of society will become equal?

Deciding which is the better form of legislation, says more about the mindset of the script writer, than the purchasing power of the currency that is continually being debased. For that is the only trend that ALWAYS goes up! Technical analysis clearly points to selling this one short. That candlestick pattern of a dark cloud is not reserved to its Japanese origin. It also applies to the American economic structure of inept government management. The oscillators of relative strength are not just chart techniques, but are genetic defects that are inculcated in the disturbed allusions of public policy designers.

The mainstream has assisted in the impregnation of an improper relationship and now is all too ready to abort the unwanted residue of their shaping the future. The notion of creating a tax deduction to mold behavior is immoral. Stimulation should be intended for more pleasurable endeavors. Or are you against the normal course of nature, as well?

That is exactly what the economic virtuoso of central planning proposes. Encouraging the migration of business into becoming blessed monopolies, is the character of this freak of nature. And you want those who still retain independent thought to accept your false paradyne? We may be obliged to live under the consequences of your errors, but we surely aren't foolish enough to accept your false choices. Both concepts of legislation, are wrong. The results of either produces more parasites and expands your community.

If those of us who have been the rootstock of wealth creation had confidence that our capital commitment was worthy of the risk, we would earn a solid return based upon sound economic principles. But your approach just allows that great benevolent silent partner, your bureaucracy; to destroy all incentives to participate. Jealousy towards the prosperous is just as bad as arrogance of the opulent. Government economic policy resents the independent businessman and treats him as the mortal enemy of the State.

You offer us the promise of relief from the Scylla goddess of natural processes who wooes the seafarer, but really gives us the Hydra. Your multi headed monster has no solution. Its definition: a multifarious source of destruction that cannot be eradicated by a single attempt, describes your legislative alternative. This is not a plot from a Japanese science fiction monster movie. It is real life! Your doji has no magic, and your school is no dojo tutor.

But what can be expected from a life long disciple of the 'New Deal' ? Needful emotional dependency is the trademark of all interventionists, in any of their forms. Your notion of a  healthy economy is getting your monthly check in the mail from your patron. But you better start wearing gloves so that all that tainted powder doesn't contaminate your skin!

The greatest economic stimulus of all times would come from dismantling the entire deception, that you erroneously call capitalism. Capitalism no long exists, because of policies that you advocate. Expanding unemployment compensation just feeds your membership ranks. What you fail to tell them is that the best they will ever do, under your system, is to be a beholden vassal to the siren song of a patron idol.

Son of Tax Cut came out of the same womb as your queen. Both are miscarriages of genuine life with dignity. The Senate is suppose to be the great deliberated body. In this case the only wanton service they serve is to nurse the dependent. Why aren't we surprised that suckling the nipple, is the only talent that so many have mastered?

James Hall aka SARTRE

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Final Word:

Lessor of inept options is all that the commissar of Left gives us! And I'm, the anachronism? Let's get this straight, once and for all. The last remnant of True Free Enterprise has not been practiced for well over a century. Independent wealth existed when private property was tied to a stable gold standard. Elites, and snob want-a-bees, seek political power to destroy the autonomous businessman. Their goal is to enslave the many with a system of economic manipulation by the few. That is the reason you are never allowed any real choices.

Wall Street gave you the delight of the depression so that they could give themselves the bounty of Big Government. Customers are the ultimate freedom determinators. It is their money. The Statists want to make them the terminators of their own future, while the government aspires to be the approvers of acceptable purchases.

At the core of the undisguised advocacy of dependency, you have beggars who can't prosper on their own guile and wits. Without the patronage of their 'Big Brother', they are relegated into a condition of insecurity. Economic reality is reducible in the willingness to buy and sell. Confidence is a state of mind and expectation that if you spend today, you will be able to earn more tomorrow. For folks like the 'bad seed', they interpret this axiom as being assured that the post office will be able to deliver their welfare check. Who said that there was no benefit to the government's growth industry, IPO; inspection powder operation?

The bubble economy is the invention of the soothsayer. The great economy that James wants is one that is approved by Tom Daschle, funded by Alan Greenspan, and secured by Larry Ellison. That is not the Oracle that I want, but is the only promise of the Hydra.

James Hall - 'The Right'


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I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years. Warren Buffett

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