What is Wrong with Congress?

It is widely known that the problem with the economy now is that there is reduced changeover of money. People are saving what little they have because of economic insecurity, and this results in less money flowing through the economy. A reduced flux of money through the system, to borrow a physics term, means fewer purchases and therefore fewer jobs for retailers and manufacturers. The stimulus bill is supposed to spur people to start spending again. The most obvious way to do that is to actually hire people. Repairing a road or a railroad line or building a smart electrical grid requires hiring construction workers and engineers. The same holds true for rebuilding schools and making government buildings more energy efficient. And these are things that are meritorious in their own right. Even re-sodding the National Mall means you’ve got to go buy sod from some farm somewhere and hire people to do the work to lay it. Those people then can afford to buy clothes, gas, food, and maybe even see a movie or get a new TV, helping keep the people in those industries employed. In fact, the one way the government can spend money that won’t stimulate the economy is giving tax breaks to people who are relatively well-off. We are the ones who can afford to put that extra money in a bank account (or maybe under a mattress these days).

So what the frak is the problem with these so-called centrists? Why is there so much tax cutting by self-proclaimed fiscal conservatives that will produce the smallest injection of money into the economy, and so much cutting of direct spending measures that will actually result in people working? Are they idiots? Or are they mean? I’m actually asking.

5 thoughts on “What is Wrong with Congress?

  1. I think they’re mean. A large group of people who support them are rich. But, the bill will pass, so maybe they are delaying so they can say that they were responsible for trimming it down.

  2. Okay for basic, basic economics read “no spin economics” This book will explain to you how the new deal never worked and led to the depression within the depression in 1937. Even John Maynard Keynes rejected his own ideas put forth in “General Theory” late in his life.

    Suppose someone buys a car with tax money we have a ready workforce, factory to produce this car right now. Given they are running at low capacity (Down about 40% from last year high).

    One the other hand a company that does energy saving projects here in Orlando has something like $600 million in potential projects and capacity for maybe $60 million/Yr. So they cannot hire fast enough nor gear up fast enough to spend this stimulus money. The time to do this will literally many many years not months. Worthwhile for sure but not stimulative in the short term.

    By the way I reject the idea that republicans are mean or the rich. I would be glad to debate this with anyone. Who is meaner well intending Jimmy Carter, or mean old Ronald Reagan by the good they did in the end.

  3. Or you can read Paul Krugman who explains why the reason it took world war 2 to really end the depression is because the New Deal stimulus was not big enough. Economic problems are unquestionably complex. I’m not opposed to tax cuts as part of the mix, but to argue that that is all that should be done in the current climate is counter to recent experience as well as most economist’s prescriptions, liberal or conservative.

    There are certainly a lot of rich Democrats and poor Republicans, but there is a very strong correlation between income and likelihood to vote Republican. The data are dramatic: http://www.fivethirtyeight.com/2009/03/rich-and-poor-voters-in-2008.html

  4. I think we are having the classic monentary vs. keynesian debate here. I guess anyone interested could look at both. Paul Krugman is from the Keynesian school of thought whereas Milton Friedman would represent the monetarist viewpoint.

    Reagan lowered taxes as part of the laffer curve theory and greatly increased military spending. This increased the dept but also created jobs. He and Paul Volker tried to decrease rampant inflation, which was one problem in the mid late 70′s along with high unemployment.

    I personally prescribe to the monetarist viewpoint, for the reasons stated above and the fact that government spending stimulus is by definition temporary. Those people have to be reemployed later in another occupation.

    I will also argue that in general free market economies have out performed more socialist ones. The concept of economic profit is closely associated with standard of living and government does not have economic profit by definition. Just saying that liberalism is a close cousin to socialism and ultimately communism. Its a matter of degree and a slippery slope.

    Economists do agree on a lot and that is well outlined in no spin economics. For example economists agree that the new deal was a raw deal. We should know our history in order to not repeat its mistakes.

  5. In the interests of finding common ground, I would certainly agree that it’s a matter of degree and that there is a continuum between socialism and capitalism. One of the issues I found odd during the last election campaign was the astonished claims that redistributing wealth amounted to socialism. If so, then we have been a socialist country for as long as there has been an income tax that is a percentage of income which by definition means that those who have more, pay more, while all receive equal benefits in some areas (protection from the military, access to schools, use of roads, etc). I also agree that stimulus as job creation is temporary. I think the current measures being taken to get out of the recession represent a very small move along the economic continuum between capitalism and socialism compared to our current position on that scale relative to either endpoint. Thanks very much for your comments. I’m no economist, but I do find it fascinating.

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