Economic Stimulus

Payroll Tax Cut As Stimulus

One cornerstone of Obama's jobs plan is a $120 billion payroll tax cut. This tax cut has been enacted already for 2011 and according to Obama, the claim is this tax cut put an average $1000 into worker's pockets.

This is a tax cut that reduced those Social Security contributions, what you see as FICA, the social security component, on your W-2, by 2% for 2011. That's right, they defunded social security by 2% for 2011.

Social security is calculated on gross income, normally 6.2%. This is why attacking social security is almost a crime. You've actually been putting money into your benefit your entire working life. It's capped to a wage base and for 2011 it's $106,800.

Additionally, median income is a tad misleading, for it's household income, on aggregate, instead of individual income. Additionally, it's not median wages, which since social security is a regressive tax, affecting wage earners disporportionately, using median income to estimate the tax benefit isn't quite right. After all, most of us are have nots, the median wage for 2009 was $26,261, much lower than the household median income of $49,777 for 2009.

Stimulus vs. Austerity

The most heated debate in Washington these days involves deficits and unemployment. There are lots of heated rhetoric, finger-pointing, and hyperbole.
What there isn't is a surplus of actual facts.

For instance, this headline reads "U.S. should cut deficit to spur recovery, IMF says". It implies that cutting the deficit would automatically increase economic growth.
That sounds good to me. The problem is that the IMF never actually says that. In fact, the article spends most of its time warning about a drop in economic growth.

The headline was misleading, as is just about everything said in this debate.

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A Proposal for True Keynesian Economic Stimulus

Enough of the bastardization of Keynesian economics. True Keynesian economics is NOT about bailing out Wall Street and providing a tax cut to wealthiest Top 1-2% of population. Keynesian economics is NOT about providing government spending for a war machine. Keynesian economics is NOT about creating deficits WITHOUT a material return on investment in the form of FULL EMPLOYMENT.

What is Keynesian economics? In a nutshell, Keynesian economics is a political economic philosophy that believes that government fiscal and monetary policy can help close any output (GDP) gap in the economy - meaning recession/depression. The focus of Keynesian economics is on FULL EMPLOYMENT and SHARED PROSPERITY.

The GDP of Stimulus

Now that the Great Recession has been declared dead and gone by everyone who failed to see the possibility of it happening in the first place, it is important to examine the reasons for its demise.

The White House has been busy declaring that its Stimulus policies have created or saved 640,000 jobs. We should note that the White House originally claimed credit for 1 million jobs, and only revised them down after realizing that they are spending $234,000 for each job saved. More revisions are sure to come.
It's also important to note that the job number is based on mathematical calculations and is impossible to prove.

One thing that can't be denied is that the stimulus did have an effect on the economy. It's this impact that needs to be examined further.

House of Cards

During the Clinton years much was said about "bridging the digital divide." On Charlie Rose recently Leo Apotheker, CEO of German software giant SAP referred to enterprise-wide computer networks as a "nervous system." In listening I drifted back to the time just before the event of 9-11. What if government computers (at C.I.A., F.B.I., etc.) had all been able to "talk" and share/analyze/intelligate aggretized data? What if there had been an interchangeability and exchangeability? Aren't these largely the kind of "hi-tech" public works projects we need in today's economy?

Who will benefit from nationalization of finance?

I put this up yesterday on DailyKos. It did not get much traction, but I think it is important to get people thinking about the issues raised. In short, the success of both the two-pronged bank bailout (TARP and the Fed’s largesse), and the stimulus bill, are going to depend on whether or not the U.S. economy is transformed. I don’t think there is much disagreement in the direction we need to shove the U.S. economy; BruceMcF has done a brilliant job of discussing some of the more important aspects of transportation.

What is in The Economic Stimulus Bill of 2009?

Stimulus, stimulus, everywhere the buzz word stimulus, devil in detailsbut where is the devil, you know that creature who screws up the details?

Navigating the politics, the lack of analysis, the specifics and more importantly, the time line of effectiveness is not for the faint of heart. To that end we must start with the latest publicly available legislative text.

The Bill Text

The working title for the bill is, The American Recovery and Reinvestment Plan . The bill is also in a state of flux. The House states the bill will be formally introduced on 01/26/09.

Obama's Economic Stimulus Plan - Opinions & Analysis

Obama hasn't been sworn into office yet and he's basically laid an egg on his economic stimulus plan. That said, opinions are like censored and let's look at some analysis.

Firstly we have Christina Romer & Jared Bernstein analysis.

Frankly, I find this this report odious simply going off of the principle that a 1% increase in GDP equates to 1 million jobs. Well, that's all great if the U.S. were an isolated economy, but it's not and today's GDP does not equate directly to U.S. domestic job growth, as a 1:1 correlation. Rebate checks end up buying goods from other nations. Tax cuts not dealing with global labor arbitrage and offshore outsourcing won't create jobs.