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Old 01-19-2008, 02:47 PM   #1
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Bush's bailout

http://business.timesonline.co.uk/to...cle2361425.ece


I thought Republicans were supposed to be economic conservatives?
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Old 01-19-2008, 03:09 PM   #2
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I guess they need to buy votes.
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Old 01-19-2008, 03:10 PM   #3
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The Republicans of the past would hate the Republican party of today.
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Old 01-19-2008, 03:14 PM   #4
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I just hope that decent Americans will donate this $1200- $1800 gift to Haliburton.

God knows this money would and should be going to them.

FREEDOM IS NOT FREE!
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Old 01-19-2008, 03:16 PM   #5
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1200 clams?! I thought it was only 800.

Maybe, just maybe they've boughten themselfs a vote.
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Old 01-19-2008, 03:17 PM   #6
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These bailouts are ridiculous.
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Old 01-19-2008, 03:18 PM   #7
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They don't produce the hoped-for results either. Most people pay off bills, rather than buy a new dishwasher.
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Old 01-19-2008, 03:26 PM   #8
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Quote:
Originally posted by martha
1200 clams?! I thought it was only 800.

Maybe, just maybe they've boughten themselfs a vote.
Administration officials were refusing to comment on details, including a report that the rebate would be set at $800 for individuals and $1,600 for couples.

$1600 for you and your torch man.
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Old 01-19-2008, 03:34 PM   #9
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We're both in then.
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Old 01-19-2008, 11:00 PM   #10
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Quote:
Originally posted by martha
They don't produce the hoped-for results either. Most people pay off bills, rather than buy a new dishwasher.
There's rumors it may be distributed on debit cards, not checks. So, it can't be saved. It must be spent.
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Old 01-19-2008, 11:45 PM   #11
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Originally posted by MrBrau1
There's rumors it may be distributed on debit cards, not checks. So, it can't be saved. It must be spent.
And here I thought that Iraq was when the U.S. "jumped the shark."
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Old 01-19-2008, 11:48 PM   #12
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To go along with that analogy you just need to introduce an obnoxious kid into the cabinet, just like any failing TV show.
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Old 01-20-2008, 12:12 AM   #13
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WSJ Editorial
Feel-Good Economics
By BRUCE BARTLETT
January 19, 2008; Page A12

With remarkable speed, Congress, the White House, Republicans, Democrats and even the Federal Reserve have come to a consensus on the need for economic stimulus to moderate and perhaps forestall a recession. It seems certain that the final stimulus package will contain a tax rebate.

The underlying theory for the rebate idea traces back to the British economist John Maynard Keynes. He believed that spending was the driving force in the economy. It didn’t matter whether the spending was done by businesses on capital equipment, by governments on public works, or by consumers — spending is spending in the Keynesian model, and all of it is stimulative.

In Keynes’ defense, his theory was developed during a severe, world-wide deflation. Spending of all kinds was paralyzed by a lack of liquidity, and the Federal Reserve had difficulty injecting money into the economy because so many banks had closed. Under these circumstances, deficit spending by governments made sense as a means of getting money into circulation and overcoming deflation. The problem is that, once World War II seemed to validate Keynes’s theory, the idea of stimulating the economy by increasing government spending became the all-purpose cure for every economic slowdown, regardless of its underlying cause.

In the 1960s and 1970s, this usually took the form of public works spending. But in 1974, the White House was keen on the idea of cutting taxes to stimulate private spending. Since it was feared that a permanent tax cut might be inflationary, President Gerald Ford and the Democratic Congress agreed on a one-shot tax rebate. It was thought that cash-strapped consumers would take their government checks and immediately run out and spend them on food, clothing and other necessities. This would give the economy a Keynesian boost.

One dissenter was economist Milton Friedman. His research had led him to conclude that consumer spending was less a function of liquidity than something he called “permanent income.” Friedman observed that when workers lost their jobs, they didn’t immediately cut back on spending. They borrowed or drew down savings to maintain spending, in the expectation of finding a new job shortly. Conversely, consumers didn’t immediately spend windfalls. They kept spending on an even keel until they achieved a promotion at work, or other increase in their long-term income expectations.

Thus Friedman predicted that the $100 to $200 checks disbursed by the Treasury Department in the spring of 1975 would have a minimal impact on spending, because they did not alter peoples’ permanent income. Most likely, people would save the money or pay down debt, which is the same thing. Very little of the rebate would cause consumers to buy things they wouldn’t otherwise have bought in the near term.

Subsequent studies by MIT economists Franco Modigliani and Charles Steindel, and Alan Blinder of Princeton, showed that Friedman’s prediction was correct. The 1975 rebate had very little impact on spending and much less than a permanent tax cut — which would change peoples’ concept of their permanent income — of similar magnitude.

In 2001 — despite the thoroughness and general acceptance of these studies — Congress and the White House once again chose a one-shot tax rebate to deal with an economic slowdown in 2001.

To his credit, Treasury Secretary Paul O’Neill cautioned against the rebate. “I was here when we tried that in 1975, and it just didn’t work,” he said. “If we want to change consumption patterns, we need to make permanent changes in peoples’ tax burdens.” But President George W. Bush overruled his Treasury secretary and approved the rebate idea. Checks of $300 to $600 per taxpayer were sent out in the late summer. Contemporaneous polls by Gallup, Bloomberg and the University of Michigan all found that the vast bulk of consumers expected to save the money or use it to pay bills. Subsequent studies confirmed these forecasts.

In short, there is virtually no empirical evidence that tax rebates are an effective response to economic slowdowns. The increased personal saving doesn’t help the economy because the federal budget deficit, which can be thought of as negative saving, offsets all of it in the aggregate. The main benefit of a tax rebate would seem to be political — giving politicians a way of appearing to be doing something about the nation’s economic problems that is superficially plausible.

A new rebate probably won’t do much harm. But anyone who thinks it will prevent a recession — if one is actually in the pipeline, which is not at all certain — is dreaming. It’s an insult to Keynes even to call a tax rebate Keynesian economics. It should be called “feel good economics” because its only real effect is to make politicians feel good about themselves and buy re-election with the public purse.

Mr. Bartlett was deputy assistant secretary of the Treasury for economic policy during the administration of President George H.W. Bush.
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Old 01-20-2008, 01:02 AM   #14
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The money could also be used to shore up the capital base of banks (many of which are at risk of failure) as people deposit the money. So it is, at least partially, a government bailout of the banks similar to the sovereign wealth fund injections of capital.
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Old 01-20-2008, 02:04 AM   #15
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Quote:
Originally posted by BonoVoxSupastar
The Republicans of the past would hate the Republican party of today.
I agree.

Also, there are many Republicans today who hate the new breed of Republicans.
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