President Bush

[houstonmacbro]

Postponing the pain by giving people (under certain incomes, mind you) $800 each? WTF?? This isn't Playskool money we are talking about here. We can't just print up more and pass it around without facing the repucussions in the future. We have been sold a bad bill of goods by Greenspan and Bush, as well as their predecessors who helped to permanently link the American economy almost solely to consumer spending. Now we have spent way beyond our means, are pulling back, and the government goes into crisis mode. So they 'give' us money in the hopes that we will spend the economy back to health.

If I am eligible for the money, I will take it of course. But I'm still sick to my stomach at the mess we are in, and that our supposed 'leaders' would rather leave the mess to someone else than have the b&^%s to fix it themselves.

I know this plan is probably just prolonging the inevitable collapse of certain sections (if not the entire) of the economy.

... but I know if I get a check from Ole Georgie and the folks in Congress, I am buying an iPod Touch.

[sidegate]

can it be donated to S-CHIP?

[TheNiche]

A bigger issue, one that will NOT be addressed during an election year, is whether the economy as it is comprised today, can be sustained. The robust expansion of the last several years was largely comprised of consumer spending financed by home equity loans and increased credit card limits. National savings has been at or below zero for the last several years. Once home values stopped escalating, the home equity market dried up. Additionally, credit lending tightened up. If there is no savings to spend and credit dries up, there is no money to keep consumer spending at its high level. There is no place for the economy to go but down. Is this a bad thing? For the individual consumer, it can be argued that it is not. Too much debt is bad. For those consumers who cannot stop borrowing on their own, a bank's refusal to lend to them is probably good for them in the long run. But, for the overall economy, it is bad.

Probably the best thing for the country is to go through the painful process of a shrinking economy to levels that can be sustained by current wages and moderate borrowing. No politician, especially a Republican, wants to preside over a shrinking economy. However, a natural resizing of the economy to sustainable levels is better than a fre fall correction. Currently, Bush is trying to stall the recession until he is out of office. I doubt he can do it, and the sooner we get the deadwood out of the system the better off we will be longterm. An extension of unemployment benefits and food stamps will help the truly destitute, and the money will be spent quickly. Giving away Christmas gifts for political favor will not help.

I get the distinct sense that we're just shifting gears. Although our economy is actually very well-equipped to see a net export deficit in every single successive year in the long term (made possible by foreigners' faith in the resiliency of our political and economic institutions), the last six or seven years have witnessed a particular glut of imports. And when we import something, we use money as our promise to pay off foreigners with goods and services. The mechanics that affect the value of the dollar relative to other currencies ensure that imbalances of trade are ultimately corrected.

The last couple of quarters of GDP growth reflect a dramatic increase of exports, and the data has been borne out in various other economic measures and anecdotes that I've come across recently. My thoughts are that this is the start of a trend that'll offset a recessionary period. Employment in construction-related sectors will continue to decline, that much I'm sure of. Additionally, industry that correlates heavily with housing will suffer, especially consumer durables like furniture or certain manufacturing sectors, like wood products. But the U.S. has competitive advantages in high tech, financial and business services, and in leisure and hospitality, and those and other sectors may buck the trend as foreign demand for our goods starts to increase.

One of the stats that I came across is that foreign investment in our real estate is going up rapidly, having quadrupled from where it was in 2002. They perceive it as inexpensive, and believe that our ability to import goods may have become recently stunted, meaning that their investment in dollar-denominated assets could pay off not just because it is a fundamentally good idea to buy at the bottom of a cycle but because it is a good currency play.

[BryanS]

Spend money so that we can keep the economy from crashing. Sounds nuts to me. Spending too much is what got us into trouble in the first place. From maxing out credit cards, home equity lines, buying homes we could not afford, obtaining loans we would normally not qualify for (subprime), exotic mortgages - you name it. The average American now carries almost $10,000 in credit card debt. The message our government should be sending us is: SAVE. Save like there is no tomorrow. Pay down bills, reduce debt, put more into your 401K/Roth, build up an emergency fund - your job is at risk, etc, etc. We need to get ready for a rough road ahead - and get it over with - and without any government intervention (no tax rebates, no subprime bailouts, no artifical lowering of interest rates to prop up the economy, etc).

We're not going to be able to keep the wheels on this thing much longer. The Fed cut rates in Sept 07... but listen why that didn't work:

http://www.youtube.com/watch?v=U3N7PU9ohMI

...not to mention an open letter to President Bush, from one Republican to another:

http://www.denninger.net/letters/president-financial.pdf

Ever hear that AAA bonds are "safe investments?" They only get that rating because they are insured. But what happens when the bond insurer's rating is less than AAA or is at risk of begin downgraded? Uh oh. Then all those AAA bonds are now something less than AAA. The subprime mess, the stock market's downward spiral, multi-billion dollar write-offs/meltdowns by the major financial institutions, etc. is one thing. But what could possibly happen in the bond market is going to make Enron dealings, and recent economic events, look like child's play.

in Nov....

http://www.bloomberg.com/apps/news?pid=206...&refer=home

...now in Jan...

http://www.latimes.com/business/la-fi-amba...dlines-business

Equities, bonds, and real estate - are all on shaky ground and headed down, down, down. There are no safe havens - and you can't eat gold. The economic stimulus package is believed to be valued at $150 billion. The bond market loss alone could be $200B. We're screwed.

Edited January 19, 2008 by BryanS

[houstonmacbro]

I agree we're getting screwed, but I just don't have the economic knowledge to KNOW we're getting screwed. But I will say, something just doesn't feel right about all this. First the FEDs inject billions into the markets last year and now these tax refunds ... it's all in an attempt to keep us spending (which I've already said my $800 would do) ... but, that seems ... temporary.

[TheNiche]

We're screwed.

We're like a drunkard with no self-control at the end of a weekend. Hung over, wallet empty. Wiped out on Monday, still aching on Tuesday, back into the groove by Wednesday, exceptionally productive on Thursday, and cashing a paycheck and getting excited by the prospect of another weekend by Friday.

Financial markets are in poor shape but the reality on the ground isn't yet desperate. Even the construction industry is cutting back on employment at a rate that veterans of the tech bust of 2001 would be envious of.

[crunchtastic]

We're like a drunkard with no self-control at the end of a weekend. Hung over, wallet empty. Wiped out on Monday, still aching on Tuesday, back into the groove by Wednesday, exceptionally productive on Thursday, and cashing a paycheck and getting excited by the prospect of another weekend by Friday.

Financial markets are in poor shape but the reality on the ground isn't yet desperate. Even the construction industry is cutting back on employment at a rate that veterans of the tech bust of 2001 would be envious of.

The economy either needs to create middle class jobs, or remove middle class consumer spending from the equation altogether--which is the most likely outcome, as the class divide grows along with the (true) inflation and unemployment rates.

[musicman]

... but I know if I get a check from Ole Georgie and the folks in Congress, I am buying an iPod Touch.

yeah buy one and get the upgraded service which will cost you more long term. yeah get into more debt.

[ricco67]

While I thought the 2001 refund's 300 bucks expensive "Chump change" because most people would just piss it away without a thought, the $800-1600 can for some people be helpful.

While to some of us $800 is no big deal, to those in the lower income brackets that have the gumption to make a shift to make their lives better like getting affording a down payment to a better apartment, purchasing a washer, fix their hooptie cars.

But then again, some will just buy a grill.

My $800? going to a couple of college books for my kiddo. (insert wince)

[houstonmacbro]

yeah buy one and get the upgraded service which will cost you more long term. yeah get into more debt.

iPod Touch, not the iPhone. No 'service' need for the iPods.

While I thought the 2001 refund's 300 bucks expensive "Chump change" because most people would just piss it away without a thought, the $800-1600 can for some people be helpful.

While to some of us $800 is no big deal, to those in the lower income brackets that have the gumption to make a shift to make their lives better like getting affording a down payment to a better apartment, purchasing a washer, fix their hooptie cars.

But then again, some will just buy a grill.

My $800? going to a couple of college books for my kiddo. (insert wince)

I think the plan is for it to someone inject some life and spending into the broader economy.

Not sure if 'grills' qualify as the 'broader marketplace'.

[RedScare]

The economy either needs to create middle class jobs, or remove middle class consumer spending from the equation altogether--which is the most likely outcome, as the class divide grows along with the (true) inflation and unemployment rates.

I don't see it happening. The onslaught of propaganda from Reagan's "trickle down" economics has turned the economy into a top heavy market. It used to be that companies recognized that a comfortable middle class had more total spending power than a small elite class. Now, even if they realize it, they do not care. Real wages, adjusted for inflation, have been stagnant or dropping for several years. The only thing that kept the numbers high was overzealous borrowing by consumers. Now that the credit crunch has dried up much of that spending, the consumer dependant economy will suffer.

I would say that this is not necessarily a bad thing. Allowing the economy to shrink into a sustainable size, though painful, would help in the long run. However, Bush's view of fiscal policy is to feed the rich, instead of enabling the working classes to spend more. Seven years of overspending has shown that we should expect the same in his eigth. Not only will his giveaway not help much, if at all, but our current $400 Billion interest on the National Debt will grow even larger.

[houstonmacbro]

I don't see it happening. The onslaught of propaganda from Reagan's "trickle down" economics has turned the economy into a top heavy market. It used to be that companies recognized that a comfortable middle class had more total spending power than a small elite class. Now, even if they realize it, they do not care. Real wages, adjusted for inflation, have been stagnant or dropping for several years. The only thing that kept the numbers high was overzealous borrowing by consumers. Now that the credit crunch has dried up much of that spending, the consumer dependant economy will suffer.

I would say that this is not necessarily a bad thing. Allowing the economy to shrink into a sustainable size, though painful, would help in the long run. However, Bush's view of fiscal policy is to feed the rich, instead of enabling the working classes to spend more. Seven years of overspending has shown that we should expect the same in his eigth. Not only will his giveaway not help much, if at all, but our current $400 Billion interest on the National Debt will grow even larger.

It would be a good thing for Americans, but not for Wall Street.

[sarahiki]

It would be a good thing for Americans, but not for Wall Street.

I saw a comment in the Chron (yes, despite its stinky new website, I keep reading...) on this topic noting that W probably knows that many people will not spend this money on "stuff," they will use it to make a credit card or mortgage payment, and in fact we could see this whole idea as a bank bailout disguised as a taxpayer rebate. Interesting idea. I know I'll be using it to pay off bills and reboot my savings account, which has been drained by rising prices on EVERYTHING.

[RedScare]

If only the bank bailout would cost $150 Billion. It would be a BARGAIN at that price.

[TheNiche]

I don't see it happening. The onslaught of propaganda from Reagan's "trickle down" economics has turned the economy into a top heavy market. It used to be that companies recognized that a comfortable middle class had more total spending power than a small elite class. Now, even if they realize it, they do not care. Real wages, adjusted for inflation, have been stagnant or dropping for several years. The only thing that kept the numbers high was overzealous borrowing by consumers. Now that the credit crunch has dried up much of that spending, the consumer dependant economy will suffer.

I would say that this is not necessarily a bad thing. Allowing the economy to shrink into a sustainable size, though painful, would help in the long run. However, Bush's view of fiscal policy is to feed the rich, instead of enabling the working classes to spend more. Seven years of overspending has shown that we should expect the same in his eigth. Not only will his giveaway not help much, if at all, but our current $400 Billion interest on the National Debt will grow even larger.

The declining inflation-adjusted wages--in this case--are a better measure of the extent to which consumers have been gluttonous than anything else. We have lived beyond our means, sacrificing today's buying power for yesterday's. What comes around goes around, and I agree that a corrective period is necessary and in everybody's best interests...otherwise, in five years, we'd just be having this same conversation, except replacing the r-word with the d-word.

However, the cause of this business cylce has little to do with "trickle down economics" or government deficits. It has to do with impropriety among financial institutions and the Fed's consistently terrible monetary policy. Whether government policy tends to favor the wealthy (in some ways true but in most ways false), the various components of the "middle class" (which if you put them all in the same room would point fingers at all the "filthy rich" and "dirt poor" amongst them and obnoxiously claim not to belong in the same category because they aren't at all alike although various politicians would like to think of them that way during election years), or the poor, has very little immediate effect. Excessive favoritism toward the poor will kill all investment and trigger a hyper-consumption meltdown within a year or so, while excessive favoritism to the wealthy will have the opposite effect since their marginal propensity to save is so much higher. The appropriate approach is to tax households equally based upon their production. The wealthy will get wealthier still, but that doesn't mean that they'll just sit on their money. It goes towards investment and consumption, acts which generate tighter labor markets and ultimately boost wages. It won't do away with the business cycle, but it does set us up for better long-term growth and even more foreign direct investment...and FDI has the nice little side effect that we tend not to wage war with our investors just as those who invest in us also tend not to provoke us.

[TJones]

$1600 for married folks like myself. I won't see it until about March though. My share will definately be going BACK into the economy as I plan to complete my wood floors with it. This is how you are supposed to spend it. Not on Booze and Cancerstix, or a few Ozs. of marijuana.

Edited January 21, 2008 by TJones

[houstonmacbro]

Yeah, but the government cannot mandate (yet) how people should spend the money. If they ONLY want it to go into the economy then maybe they need to just buy up tons of stuff and distribute it at a giant give-away.

[TJones]

Yeah, but the government cannot mandate (yet) how people should spend the money. If they ONLY want it to go into the economy then maybe they need to just buy up tons of stuff and distribute it at a giant give-away.

OOOOOOOOOOOOOOOO, like government cheese. They can distribute government Wiis. Sweet idea, I want my Wii, or maybe they will give a choice, PS3, Ipod nano, or Wii bundle.

[houstonmacbro]

OOOOOOOOOOOOOOOO, like government cheese. They can distribute government Wiis. Sweet idea, I want my Wii, or maybe they will give a choice, PS3, Ipod nano, or Wii bundle.

Now that would be cool. I want the iPod Touch upgrade, bundled with the Wii.

Where can I stand in line?

[jb4647]

This "rebate" is nothing of the kind. It's an early refund check. I remember back in 2001, I got the $300 "rebate" during the summer then wind up paying $300 more at tax time the following year.

It's a gimmick to show "how much they care" about the little guy.

[travelguy_73]

OK, so answer me this: Why have an income limit on the credit? Assuming an $85k income cutoff (what I read is part of the proposal), is the person who makes $86k not in as much need as the person who makes $84k? I realize that there probably needs to be some income limit out there, but this amount seems low (maybe not in Houston, but in high-cost-of-living cities), and it doesn't seem to be tied to tax rates.

[BryanS]

OK, so answer me this: Why have an income limit on the credit? Assuming an $85k income cutoff (what I read is part of the proposal), is the person who makes $86k not in as much need as the person who makes $84k? I realize that there probably needs to be some income limit out there, but this amount seems low (maybe not in Houston, but in high-cost-of-living cities), and it doesn't seem to be tied to tax rates.

I think the "cutoffs" are just rough estimates right now... whatever happens needs to be approved through Congress next month. All we really know is that the total package will be around $150B. To be "fair," I would guess (or you would think) they would phase-out the rebate (e.g. $200 for every $1000 over 80K to ensure that those who make 85K or more don't get any) in the same way they punish people who make over 100K (or is 115K this year?) per year, in terms of limiting Roth IRA contributions.

Then there is the question... are they going to tie this to your gross annual or adjusted gross income, after deducting 401K, social security, medicare, taxes, etc.? In one scenario, you may get the rebate. In the other, you're screwed (none for you.)

[memebag]

If $800 will be good for the economy, wouldn't $8,000 be ten times better? What about $8,000,000? Why not make everyone a millionaire? Surely that would be the greatest economy in the history of everything, a whole nation of millionaires.

[houstonmacbro]

If $800 will be good for the economy, wouldn't $8,000 be ten times better? What about $8,000,000? Why not make everyone a millionaire? Surely that would be the greatest economy in the history of everything, a whole nation of millionaires.

No, then you'd have a nation full of wanna be BILLIONAIRES ... we'd never be satisfied with our paltry millions.

[houstonmacbro]

This "rebate" is nothing of the kind. It's an early refund check. I remember back in 2001, I got the $300 "rebate" during the summer then wind up paying $300 more at tax time the following year.

It's a gimmick to show "how much they care" about the little guy.

Yeah, and now we're getting $200 less than they talked about originally ... sux!

[crunchtastic]

Yeah, and now we're getting $200 less than they talked about originally ... sux!

And aren't they putting an AGI limit on it? Scaling it, anyway. You could be getting much less if single.

[houstonmacbro]

And aren't they putting an AGI limit on it? Scaling it, anyway. You could be getting much less if single.

I haven't seen the final proposal, but probably so ... 'single' people (or at least 'not married' as defined by 'law') get the short end of the stick all the time.

[houstonmacbro]

Looks like it's gonna be $600 for singles and $1,200 for couples (extra $300 for each child).

Thanks Uncles George and Harry and Aunt Nancy!

http://www.cnn.com/2008/POLITICS/02/13/bus...ulus/index.html

[BryanS]

Looks like it's gonna be $600 for singles and $1,200 for couples (extra $300 for each child).

Thanks Uncles George and Harry and Aunt Nancy!

http://www.cnn.com/2008/POLITICS/02/13/bus...ulus/index.html

The package will pay $600 to most individual taxpayers and $1,200 to married taxpayers filing joint returns, so long as they are below income caps of $75,000 for individuals and $150,000 for couples.

[memebag]

No, then you'd have a nation full of wanna be BILLIONAIRES ... we'd never be satisfied with our paltry millions.

But $800 (or $600), that will satisfy us.

Edited February 13, 2008 by memebag