Tuesday, November 25, 2008

View from 'On High'

Can one estimate the multiplier effects of a Stimulus Package before the Package has been spent? The Answer is No. This is not a Critique of the Analysis, simply a Statement that the multiplier effects will alter every time, based upon method of dispersal, rate of adoption by Private Sector business, speed of Hiring, and the rate of Expenditure. Large-scale projects will have a longer Period of Dispersal, double or triple the Share of funds taken as Business Profits, and is affected seriously by the Cost of resources used in the Stimulus decisions. All of the Above portends a suppression of Wages, and therefore; it is counter-productive to generation of Consumer Demand–the prime rationale for Stimulus in the first place. There is a natural corruption of Stimulus by Profits-taking by Business as well; the Businesses involved immediately spotting the opportunity, with both Labor and Government Supervision brand New, and untested in conflict with tightly organized Business structure. The later entities will aggregate a normal half of the Windfall for themselves. Consensus multipliers generally hide more than they reveal.

I disagree with this Post by Alex Tabarrok, but it highlights the hazard of provision of Tax Credits to economic performance. Universal Tax Credits always brings multiple Players to whatever production sector is defined, Most without the requisite qualifications to actually produce successfully in the sector, and all inhibited from utilizing Market conditions to determine Production schedules. Ethanol production consumes Animal Feed at outrageous rates, Wind farms generate too much electricity for Power Grids which must introduce a safety factor of off-Wind capacity which must be paid in a high-Cost, high-Interest environment, and all Business seeks high Profits on total Capital investment. I would favor a guaranteed Profit level rather than Tax Credits, based upon actual Units of Power delivered and Sold.

I might as well introduce all the articles with which I disagree to some degree. John Taylor assumes that the Bush Tax Cuts were actually beneficial without Proof, and his thesis states that We should continue like behavior rather than expensive Stimulus measures. I would first like to say that the necessity for Stimulus developed under the system which he advocates. I truly believe that the Bush Tax Cuts supplied an excess amount of Investment Cash to the Markets, and subsequent efforts to absorb the Cash reserves brought the bad Lending practices to the fore. Funds which should have been drained from the Production process as Taxes later generated a Demand for Profits which could not be matched by the Production practices in force. The Reader is advised to read the article, and determine for himself what the Bush Tax program did for Us. lgl

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