President Obama sworn in

By LiquidIce, in 8. AGoT Off Topic

Posted at

LiquidIce said:

http://en.wikipedia.org/wiki/American_Recovery_and_Reinvestment_Act_of_2009#Assessments_by_economists

The economists are pretty divided, perhaps the package needs to work through the system before its value can be judged?

Of course you are correct on this point. A lot of different factors here. I'm not overly optimistic about this package - on the other hand, due simply to cyles, we will come out of this eventually. Even a few years down the road it won't be simple to judge weather or not the 'stimulus package' had a positive or negative effect.

LiquidIce said:

The inter bank lending rate appears to be settling down a bit which is the first indication that the first obstable to recovery (seized up credit markets) might be overcome. If that doesn't work out there may have to be extreme measures taken to get credit flowing- even down to the government using its new controlling interest in some of the institutions to force them to grant credit to businesses that need it for their regular operations. Certainly no recovery can happen (meaning the spending package will have been for nothing) if credit markets don't unkink.

True. However, this again is a place where philosophies differ. Personally, I come down on the side that the market has to be allowed to work - any government action is likely to just prolong/delay the hardship until such a time that the market can correct itself. I don't have a link - but I found the quotes of the CEO of US Bankcorp interesting. Did everyone see/hear those? He was commenting on the pay restrictions associated with bailout money. He said that the only reason US Bankcorp took bailout money is because they were encouraged to by the government so that they had funds to buy the failing banks (thus eliminating some problems for government). They were supposed to keep quiet about that (since this means the real plan/purpose of the TARP money had nothing to do with Asset relief, but was intended as a loan for healthy banks to buyout unhealthy ones). He said he felt compelled to come out since the government was changing the rules/they wouldn't have taken the bailout money/made acquisiitions if those restricitions had been in place at the time.

LiquidIce said:

Art, I think you'll find Congress is less profligate in future months. This was no ordinary month. Also, the recession you're in now partly goes back to Iraq. The drain of $100+billion a year into operations in Iraq weakened the US economy & pressed the Fed to cut interest rates lower to compensate, which in turn made the housing bubble bigger & built up the current mess. Yes Haliburton got rich but even allowing for that the real cost of the Iraq war is going to be far beyond $700 billion.

I hope you are right regarding Congress. I have to strongly disagree with you regarding the cause. While Iraq may not have helped, this really began with the Fannie/Freddie's policies encouraging home buying amongst those who couldn't afford it - banks were heavily pressured by congress to make loans to those they may otherwise not have. I think tying the housing bubble to Iraq is a real stretch (first time I've even heard of such a theory - but, hey, you can't read everything & another reason these boards/this community is great). Housing prices are still probably at higher levels than they should be. And this plan to help stop foreclosures will only forestall the correction that has to happen. The big problem is: as long a prices at the bottom rung of houses remain too high, the market will remain frozen. Even if higher income people want to sell/etc. Because The housing market is unique in that current owners' new purchases/upgrades are depenedent on selling their current house (theoretically to someone else who will upgrade) - the whole market is in some way tied to the first time buyer - the price level of that level of homes. And that level is still too high in general. Helping the current people who can't afford to pay mortageges stay in their homes only delays the inevitable price correction that needs to occur.

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Stag Lord said:

I'm getting a tax cut - and so is everyone else in the middle class who pays payroll taxes. yes - its about 13 dollars a week, which doesn't sound like much, but will actually apy my transporation costs to the office.

Plus unemployment benefits are being extended - which strikes me as a very important provision.

And again - what is being called "porK" in the GOP outlets seems to be direct aid to the states. Thsi money is supposed to be sued to help states and municpalities meet theri budgets and keep civil servcie workers like cops, firemen and teachers from getting laid off.

The infrastructure spending won't kick in until next year, really - but I have long advocated more spending in this area. This will eb a long temr benefit, and we won't see dividends rigth away, but that is fine . If we don't start doing this now - when will we ever?

I'm optimistic. It looks like they cut most of the egregious stuff and if government spends money, even conservative economists agreee we will see a bost in teh economy. Thsi question is for how long. My beleif is that thsi is the wya to go. Tax cuts for the middle class and public sector spending - heck, this is why I voted Democratic last year.

Yeah you/we pay less - but it's really going to do little for the economy. Companies still have to pay their portion - so it' not going to alter their decisions on hiring/eliminiting jobs. And $13/week probably has a lot less impact on your spending habits than a bunch of people having jobs or not having jobs (which short term - is much more likely to occur with corporate and/or individual rate cuts). That's without even getting into the fact that it completely changes the fundamental theory FDR setup that a worker funds their own retirement benefits, and that it speeds up the bankruptcy of the program/fund failure.

I have no problem with the extension of unemployment/health benefits or infrastructure spending. That's just not near enough %wise of the spending in here. There's way more pork.

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Stag Lord said:

Don't you think a message of hope would ring pretty hollow in this day of skyrocketing firings, grim economic forecasts, a crashing housing market and mass bankruptices?

On the other hand, things were worse in '33 and roosevlet, while admitting the grim reaility, did manage to inspire hope in the public, which translated pretty quickly inot a rebound in the stock market by the early summer of '33. But he' no Roosevelt., and given his alck of expereince, not likely to be one...despite the Obamamnaiacs.

To answer your question - no, I don't think it would ring hollow. He could even say, it'll be tough for a little while, but we're strong & will be OK. People love him. That's his strength & he could have & should have (IMO) used it in this instance.

The fact is that right or wrong, anything that goes badly this first year, maybe even next year, will likely be blamed on Bush. I think he knows that. In that way, he really has a free pass, and I don't understand why he didn't continue the positive/hope campaign message here, especially in an area where public psychology really does matter.

Posted at

LordofBrewtown said:

I hope you are right regarding Congress. I have to strongly disagree with you regarding the cause. While Iraq may not have helped, this really began with the Fannie/Freddie's policies encouraging home buying amongst those who couldn't afford it - banks were heavily pressured by congress to make loans to those they may otherwise not have. I think tying the housing bubble to Iraq is a real stretch (first time I've even heard of such a theory - but, hey, you can't read everything & another reason these boards/this community is great). Housing prices are still probably at higher levels than they should be. And this plan to help stop foreclosures will only forestall the correction that has to happen. The big problem is: as long a prices at the bottom rung of houses remain too high, the market will remain frozen. Even if higher income people want to sell/etc. Because The housing market is unique in that current owners' new purchases/upgrades are depenedent on selling their current house (theoretically to someone else who will upgrade) - the whole market is in some way tied to the first time buyer - the price level of that level of homes. And that level is still too high in general. Helping the current people who can't afford to pay mortageges stay in their homes only delays the inevitable price correction that needs to occur.

I think you're talking about the Community Reinvestment Act that was touted by Carter & Clinton... but actually very few CRA loans are facing sub-prime troubles right now. There's no empirical research to back up the CRA link- my impression is that the CRA link is a political attack line with minimal economic merit. I imagine research is being done on this though, so maybe I'll be proven wrong.

Also, I'm not saying Iraq was the sole cause of the financial crisis. I used the word "partly" because the financial drain & debt burden it represented is *a* contributing factor. Throw in some bad banking practice, poor regulation (not necessarily insufficient, but definately poor), & the lack of energy policy which meant that in 2007 the US was still terribly oil-dependent & vulnerable to fluctuations. Mass psychology has a role to play as well. You can even go behind all that & look at the factors of production & the way tax rates for capital & labour are higher than the tax rate on land. That *may* have led to excess money being drawn to land (creating bubbles) at the expense of investment in labour & capital- with consequent impact on the capacity of the economy to physically produce things.

It's too trite to link a meltdown on this scale to a single policy or party. They'll be poking the carcass for years trying to figure it out.