Arnold Kling has his own reasons for opposition to the Stimulus package. I am against it for the sincere belief that has as a goal the repayment of middle and upper management for the losses taken in the financial crisis. The socialism existent in the bill is present in the desired repayment of Risk-taker losses. This abandonment of Labor to endure the full blast of losses from Risk-taking remains exactly what will defeat any stimulus in the bill. Business opportunities are graded not on market performance, but a Concept of being too big to fail. Management can adopt any practice or policy based upon the fact that Government will cover if things go wrong; if you don’t believe what I say, I will sell you some of the Credit Swaps which the Fed is trying to get rid.
Sammy at Angry Bear has a cognizant account of why such Stimulus will not actually be stimulating. Right now, a great group of investors Worldwide find a lack of investment potential, and continue to subscribe US Treasuries. This condition will not sustain itself, if the stimulus actually works. No Study I have yet found has considered the operational loss of Profits from a realistic GDP outcome, for every One Percent increase in Interest cost for Treasuries. I will not even describe the pathetic model I constructed, but a 3% gain in Treasuries’ annual cost will easily defeat any Stimulus expectations. We may selling Ourselves to the Devil for iron pyrite.
(I will also explain my resistence to provision of any model because of a real doubt that any viable construct can be made).
Tariffs were not the cause of the Great Depression, so says Stephanie Flanders. I agree, as do an amazing lot of other economists. This is not my argument, though, and I take the converse in the current situation: that the fear of Protectionism may destroy the ability to stimulate in any meaningful method. We are captured by a vast intermix of economic treaty agreements which tie the hands of all policymakers. We need to expand domestic production, but cannot set limits or taxes upon foreign Goods. There is already great argument stating that stimulus funds should flow to the cheapest Competitor, who is universally the lowest-Wage Competitor; the Stimulus flows quickly overseas without amplitude controls. Economists must concentrate solely on domestic missions in stimulus planning, and hope most of the funds do not flow to foreign suppliers. Abrogation of current economic treaties and associations would generate probably be three times the stimulus as any package Congress could devise, and raise American living Costs less that the current assumption of vast debt. We may be looking at this Problem in the wrong way. lgl