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Tuesday, September 7, 2010

More Stimulus

President Obama is now introducing another plan to pile in $50 billion more in stimulus (oops we are not supposed to call it stimulus) money for infrastructure and $200 billion in Tax cuts.  The tax side of it is to get the consumers and businesses to spend.  I don't think that will give us much of a nudge (very temporary like cash for clunkers), the infrastructure investment side doesn't sound like a bad idea as it is something real and has a possibility of creating some jobs.  It would be better to allow weak areas to fail and retrain the unemployed into more productive job areas (creating more permanent jobs as opposed to temporary 2-3 year jobs) through new a new energy grid.   If we are going to spend the money, lets make it something the economy will actually benefit from long term.  If the last two years are any indication of where our tax dollars in the form of stimulus are going, this will be like flushing $50 billion down the debt toilet.  A good point in the video is that large corporations are flush with cash and are holding onto it, so you have to ask yourself why?  Large corporations see trouble ahead and they are doing the prudent thing by reigning in spending and holding on to capital to survive a dramatic downturn.  So why would these companies spend money, beyond what will give them the tax cut. I think extending the Bush tax cuts and investing in our country's productive capacity seems like a better use of money, if your bent on spending the money.  I think Joe LaVorgna is kidding himself if he thinks GDP for Q3 is going to be at 2% and over 3% the next quarter.  Apparently he has not looked at new orders, export new orders, inventory, backlog and prices for materials in the ISM reports (PMI & NMI).

President Obama says that the $50 billion dollars over time would not cost the tax payers, yet we passed $175 billion dollar infrastructure bill before and where did it get us.  When you borrow billions of dollars, especially over time (interest will go up) it will cost us, it already has been costing us.

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