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Updates
Martin Feldstein argues that military spending should be part of the stimulus package
Jacob Hacker argues that health care reform should be part of the stimulus package
Keep in mind that no matter what your view of health care reform, the goal of our next round of health care policy changes should not be to spend as much money on labor costs as quickly as possible.
This is an object lesson -- in progress -- of how bad decisions end up getting made.
There will be no slice of stimulus pie for me this Christmas, though perhaps we will manage tamales de elote.
Posted by Tyler Cowen on December 24, 2008 at 07:08 AM in Economics | Permalink
Comments
I think the last appropriate avenue for stimulus money is towards 0-utility military projects.
A good list of stimulus priorities:
1.) Unexpected payroll tax reduction
...
37.) Money to infrastructure like roads and bridges (wait didn't we already overbuild that stuff? Or was this only true when oil was triple what it is now)
...
5613.) MORE MILITARY SPENDING.
Nobody actually enjoys fences. They enjoy the things that the fences protect. Our fence does not need to be higher and thicker.
Posted by: a person at Dec 24, 2008 7:54:45 AM
Health car needs supply stimulus, not demand stimulus.
Posted by: aaron at Dec 24, 2008 8:28:54 AM
Mish says that the TALF will now be handling securitized auto loans as well as dealership floorplan loans. He think the Federal government will end up owning a lot of auto dealerships...
http://globaleconomicanalysis.blogspot.com/2008/12/fed-destined-to-become-worlds-largest.html
Now there's a plan!
Posted by: MichaelG at Dec 24, 2008 8:33:19 AM
A Federal Bakery Service to supply the masses with apple pie is the answer.
Posted by: dearieme at Dec 24, 2008 9:18:16 AM
Here's another way to think of the situation.
The CPI had the largest drop since 1947 last month. But, the threat of deflation doesn't need to be a problem. It can be a huge opportunity.
Seigniorage is the answer.
Print money and retire gov't debt. When consumers and businesses hold more cash (instead of interest bearing securities) they will want spend that money and that will increase demand, and put idle resources back to work. While we're at it, re-start some of those government infrastructure projects that were put on hold. Pay for them by printing money. For good measure, give everyone a tax cut and pay for that by printing money, too.
Keep printing money, paying off our debt, investing in infrastructure, and cutting taxes until deflation ends and we have moderate (1-3%) inflation.
Yes, it's a free lunch. More gov't spending and lower taxes but less gov't debt.
That's what happens when resources are idle. Putting them to work creates value at no ones expense.
It's not that often we can literally print money without negative consequences. Let's enjoy it while we can.
Posted by: a student of economics at Dec 24, 2008 10:19:13 AM
dearieme, and here I thought it was 'let them eat cake' (not apple pie).
Though I guess we all must adjust to changing times.
Posted by: meter at Dec 24, 2008 10:39:12 AM
That's what happens when resources are idle. Putting them to work creates value at no ones expense.
...assuming those resources aren't idle for good (costly) reasons.
Posted by: Grant at Dec 24, 2008 11:15:08 AM
I think, meter, that dearieme was referring more to the Roman "bread and circuses" model of governance...
Posted by: Neal at Dec 24, 2008 12:31:21 PM
It's not that often we can literally print money without negative consequences. Let's enjoy it while we can.
Once upon a time, the US had Reaganomics. Now, I suppose, we'll have to settle for Gononomics.
Posted by: at Dec 24, 2008 1:22:33 PM
Feldstein may have a point.
Consider that we live in a luxury economy (as opposed to a necessity economy). So, most of the jobs that are being lost are jobs that produce luxuries. The jobs that will be created are also jobs that produce luxuries. Finally, much of modern military spending is, in essence, a luxury. So, the idea that unused resources (the unemployed) will be used for something other than luxuries is a failure to recognize that we live in a luxury economy. Spending on military projects is no better or worse than spending on "infrastructure". They're both luxuries - we don't "need" either.
Posted by: Randy at Dec 24, 2008 2:29:35 PM
Military spending as PART of the budget? No thanks. Military spending should be CUT in the stimulus package, no matter what your arguments are.
It's very bloated. Like 20 times every other country combined, last time I checked.
And as Ha-Joon Chang has demonstrated, investing in schools and other infrastructure is much more beneficial for society.
NS
http://sciencedefeated.wordpress.com/
Posted by: notedscholar at Dec 24, 2008 6:39:08 PM
can't someone set up a market to determine where the stimulus money goes?
Posted by: babar at Dec 24, 2008 8:28:35 PM
We need military spending stimulus now? 2 wars and troops in every other country simply not costing enough?
This all reminds me of a family that have all lost their jobs and who have decided to run up their credit cards and go bankrupt as a way to get money.
I wonder if Madoff is this inspiration for the national Ponzi scheme we have going? Who will be left holding the bag I wonder?
Posted by: Alan Brown at Dec 25, 2008 12:59:11 AM
a student of economics: I completely agree.
Your suggestion is the best way to put dollars into the economy very quickly and it reduces the national debt at the same time.
Unfortunately, it does not provide opportunities for the politicos to give any money to their friends. better luck next time!
Posted by: Alan Brown at Dec 25, 2008 1:05:42 AM
