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Stimulating Talk, Redux
Today's economic difficulties are novel, arising in part from new financial instruments and practices, such as the securitization of mortgage debt. In a rapidly evolving economy, which America's always is and the world's economy now is, difficulties usually are novel. Hence, economic policy is a science of single instances. Still, the past offers lessons.
In 2001, when $600 rebates were rained on American households, most people sensibly applied most of the money to savings or debt reduction. Today, with mortgage, car and credit-card debt equal to 18.7 percent of the value of household assets—a record high—rebates might again only slightly stimulate consumer spending, which is 70 percent of economic activity.
The coming stimulus will almost certainly include tax rebates because they are simple and immediately noticed. And if they do not spur demand, never mind. Nobel laureate Milton Friedman, a NEWSWEEK columnist from 1966 to 1983, finally concluded that any tax cut of any size, at any time, for any purpose, should be supported because individuals spend money more productively than governments do and waiting to cut taxes until government spending is cut is like waiting for Godot.
As Congress prepares to put its 1,070 hands on the economy's tiller, remember this: Congressional pay is not munificent, but members' compensation includes the pleasure of wielding incentives or mandates to change how people behave. So Congress relishes crises as reasons, or excuses, for expanding government's regulatory reach. People in government at all levels crave that pleasure. Consider California, that leading indicator of leading indicators. That state's Energy Commission proposes government control of temperatures in the state's homes and businesses. It advocates programmable communicating thermostats (PCTs) for use in a crisis, such as a spike in energy prices, or a shortage of energy. In a reasonably run society, the latter would cause the former, which would prompt solutions for the latter. But in Big Brother's California, the government would broadcast signals to "nonremovable" receivers in the PCTs, signals that would raise homeowners' air-conditioning settings or lower their heating systems' setting.
Washington can stimulate (i.e., enact longstanding agendas in the name of recovery from a perhaps nonexistent recession), but economic conditions on Nov. 4 may already be largely baked in the cake. Last week NEWSWEEK wondered whether 2008 would be " '92 Redux." We should be so lucky. Although Bill Clinton was elected in 1992 because voters were convinced the economy was awful, the growth rate in that year was 3.3, better than the 3.1 average since 1945.
© 2008
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Member Comments
Posted By: preybrother @ 09/06/2008 11:00:52 AM
Comment: Great George Will! You are right on the money. But, do you know what? Our government, through "Free Trade" agreements has not only gutted our manufacturing base but has neglected small business
outright. Just a few days ago, I read where a tax cut is supposed to "help".. uh...all businesses compete
on the worldwide market. Politicians in Washington are promoting Gobalists International Business. Not only to they get a tax break but can easily move manufacturing, telephone banks to China, India, Phillipines, Vietnam etc. Ok, how does that tax break help small business compete? Let me give you an example. My small company holds patents on a few products. In order to become more efficient and control costs, we started manufacturing our product about five years ago. Due to cost increased in raw materials and compoent parts, we have begun to out source manufacturing for our small compoent parts to China. Why?
Because they cost too much in America. Why? Because of labor cost, OSHA (a good thing if practiced in a reasonable manner), state and local interference etc. The fact is American labor cannot compete with countries like China and India. American companies must have a "level" playing field and we are not getting it with "Free Trade Agreements" like NAFTA-SHAFTA. Free Trade Agreements are for companies like good ole Walmart with outlets around the world including China where their manufacturing is located. Oh and in order to be successful in China, these muti-national companies must have good working contacts with Bejing aka Communist Party. It has been said that without Free Trade Agreements, US would lost many jobs. Well, those jobs could be replenished by Small Business. Yes, creation of more jobs and a larger
tax base. But, God Forbid, why would our politicians help small business when they are getting most of their
campaign funds from big multi-national corporations?
Posted By: Mwalimu @ 01/24/2008 4:47:35 PM
Comment: Since private individuals can spend money more wisely than the government, we should abolish taxes so everyone can go on a shopping spree and boost the economy. But wait a minute! You can???t go shopping if highways that are supposed to bring the goods to the shopping mall are shut down because of collapsed bridges.. You won???t want to go shopping if parking lot full of panhandlers and criminals. We can put the criminals in jail - but prisons cost money. It would be much cheaper to fund programs that prevent crime. In fact, It???s widely known fact (at least if you teach in a public school in Los Angeles) that most violent criminals were abused as children. Providing therapy and healing for abused children costs money, but it???s a lot cheaper than maximum security prison The same applies to the homeless
Rehabilitating a homeless person costs money but it???s a lot cheaper than the current jail-police-sweep-emergency-ward cycle Los Angeles currently uses. Providing students in inner city neighborhoods costs money, but it???s a lot cheaper to send a boy from the ???hood to college for 4 years than sending him to the pen.. It is much cheaper if our government spend $ 150 billion a year in research and development for sources of renewable energy than it is to fight the war in Iraq I???m paraphrasing an article I read in the Los Angeles Times about 98 years ago which described the economic and taxation policies of none other than Adam Smith. The godfather of capitalism not only favored taxes. He felt that the rich should be PROUD to pay more taxes to support the society than helped them prosper. Will can label me a tax-and-spend liberal if he chooses. But in truth, the taxes we pay now often mean lower taxes in the future. Tax and spend liberals are the only true conservatives.
Posted By: wilsan @ 01/21/2008 1:00:05 PM
Comment: It appears to me that Newsweek is finally getting it's recession. Congratulations.