Why Don't Govs Save Taxes?

[Ben Kenobi]

You realise that the central banks can only set the rate at which banks borrow from them, right? What banks charge to lend on top of that is up to them.

Exactly my point. Monetary policy cannot force banks to lend at a loss.

Actually I heard from NPR yesterday that companies with less than AAA ratings have trouble getting loans at below 10% right now.

I'm not surprised. It's a good thing. More risk = higher priced loans. It really doesn't matter what the government does, the market will make their own decisions.

Maybe they are, maybe they aren't. They're in a panic mode where they've raised everyone's rate by way more than the govt. has cut their rate.

Which is exactly what it should be. If people are more likely to default then interest rates will go up.

Depends on how many people lose their jobs. The problem is when that happens, they stop consuming at their current level, and a vicious cycle begins.

Demand isn't 100 percent elastic. What will happen is when all the folks with the bad loans get worked out, businesses will start climbing slowly.

[Arrian]

Look, I'm not thrilled with the prospect of massive deficit spending. But I'm excited about 15% unemployment either.

A fiscal stimulus is unlikely to have much of an effect before the recession ends on its own.

That isn't clear to me.

Is it worth dumping hundreds of billions of dollars of debt on future generations to in order to lower unemployment by a couple percentage points for a few months?

No. The question is whether or not this characterization is accurate. Some believe as you do. Others think otherwise. Right now, I'm in the other camp.

-Arrian

[Arrian]

Which is exactly what it should be.

Panic is not exact how things should be.

Lending does need to be tighter than it was during the inflation of the bubble. I think we ALL agree on that (show me someone who doesn't, and I'll be happy to throw rocks at them with you). But there seems to have been an overcorrection. The Fed's out of ammo on that, though.

-Arrian

[Naked Gents Rut]

dp

[Naked Gents Rut]

That isn't clear to me.

The article I posted on the CBO's latest report on the stimulus explains it pretty well.

Some believe as you do. Others think otherwise. Right now, I'm in the other camp.

Even the Obama administration doesn't predict anything more than what I said, a few percentage points reduction in the unemployment rate for a few months.

[Adam Smith]

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[Naked Gents Rut]

As we all know, we are in the middle of what will likely be the worst U.S. economic contraction since the 1930s. In this context and from the history of the Great Depression, I can understand various attempts to prop up the financial system. These efforts, akin to avoiding bank runs in prior periods, recognize that the social consequences of credit-market decisions extend well beyond the individuals and businesses making the decisions.

But, in terms of fiscal-stimulus proposals, it would be unfortunate if the best Team Obama can offer is an unvarnished version of Keynes's 1936 "General Theory of Employment, Interest and Money." The financial crisis and possible depression do not invalidate everything we have learned about macroeconomics since 1936.

Much more focus should be on incentives for people and businesses to invest, produce and work. On the tax side, we should avoid programs that throw money at people and emphasize instead reductions in marginal income-tax rates -- especially where these rates are already high and fall on capital income. Eliminating the federal corporate income tax would be brilliant. On the spending side, the main point is that we should not be considering massive public-works programs that do not pass muster from the perspective of cost-benefit analysis. Just as in the 1980s, when extreme supply-side views on tax cuts were unjustified, it is wrong now to think that added government spending is free.

http://online.wsj.com/article/SB123258618204604599.html

[RGBVideo]

The problem is, governments have never paid for 'smoothing the dips' BY trimming the peaks. Too unpopular.

Actually, they often do. What's popular among the voters depends on how intelligent the voters are.

[Dis]

My state actually does have a rainy day fund, but it's pretty small (more for natural disasters which we never have). My state also has a balanced budget provision in it's constitution.

I like this balanced budget constraint a whole lot. At least we aren't in the boat California is in (pretty much bankrupt). But people are whining and complaining that we'll cut education spending. Our largest university is facing 50% reduction in money!!. Our state is in serious trouble generating income. Tourism is way down, and we just aren't making any money anymore.

While it is true we are last in education, I'm not convinced this is because of funding. Not when Utah is last in the union in education spending, and they are way above us. Family values > education spending.

So stuff it liberals!

The schools went on a wild spending spree during our good times, now they will have to cut salaries (only thing left to cut). But having a balanced budget and not going into debt is worth it.

[snoopy369]

This is a good time to be spending that rainy day fund, don't you think?

Cutting salaries is a very poor idea. Teachers don't make half what they should now; further cutting salaries = further reducing the quality of teachers = further reducing the quality of education.

[Dis]

these are professors salaries. I find it weird that the students are protesting. their education isn't being reduced, just the salaries of overpaid professors which they probably hate anyways lol. Schools were cut this year. Mostly in terms of not buying new textbooks, don't think they cut teachers salaries (yet)