Ron Paul: Stimulus Packages Will Turn Recession Into A Depression

[DanS]

Besides, if you can't even keep the Washington Post editorial board onside for a spending bill, then you are doing something seriously wrong...

http://www.washingtonpost.com/wp-dyn/content/article/2009/02/04/AR2009020403172.html?hpid=opinionsbox1

However, ideology is not the only reason that senators -- from both parties -- are balking at the president's plan. As it emerged from the House, it suffered from a confusion of objectives. Mr. Obama praised the package yesterday as "not merely a prescription for short-term spending" but a "strategy for long-term economic growth in areas like renewable energy and health care and education." This is precisely the problem. As credible experts, including some Democrats, have pointed out, much of this "long-term" spending either won't stimulate the economy now, is of questionable merit, or both. Even potentially meritorious items, such as $2.1 billion for Head Start, or billions more to computerize medical records, do not belong in legislation whose reason for being is to give U.S. economic growth a "jolt," as Mr. Obama himself has put it. All other policy priorities should pass through the normal budget process, which involves hearings, debate and -- crucially -- competition with other programs.

[Velociryx]

I think we should:

* Eliminate taxes entirely for anybody making over $150k per year
* Double taxes on everybody else
* Eliminate all those useless social programs that help the poor (I mean, after all, they're just a drain on the economy, so a net loss to society)
* Let the markets decide (This will cause banks to fail en masse, bring most of our remaining heavy industry to its knees, and hammer the retail sector nicely too, and combined with ending all those social programs will throw MILLIONS of people out of work)
* Let all those unemployed sods join the military
* Pick out a few new countries to form the "Axis of Evil, 2.0"
* Invade (hey, we've got all these troops...might as well use 'em!)
* Make sure to send them over without enough body armor and the like (don't have to pay 'em if they're dead)

Dude...it'd be utopia!



-=Vel=-

[The Mad Monk]

I was with you until the second line.

[The Mad Monk]

Cut corporate taxes to zero. Unhindered profit will attract investment from all over the globe.

[The Mad Monk]

How are we funding all this again? With the worldwide nature of this downturn, I really don't know who will be buying all these t-bills.

The Chinese.

My reaction: China's treasury holdings are rising exponentially:

1) China's true foreign portfolio is probably around $2.4 trillion.

2) China had around $830 billion of Treasuries at the end of October and around $595 billion of Agencies. That works out to around $1425 billion of Treasuries and Agencies.

3) This works out to around 10% of the United States 2008 GDP - and around 35% of China's likely 2008 GDP.

4) These estimate are for the end of October! By now, at there current rate of growth, China's holdings of Treasuries and Agencies are approaching 2 trillion! This means that China's holdings are now 20% of the United States 2009 GDP - and around 50% of China's likely 2009 GDP.

Conclusion: The growth of China's US holding is completely unsustainable and will break down in the near future.

http://www.marketskeptics.com/2009/01/chinas-treasury-holdings-rising.html

[The Mad Monk]

Gross Says U.S. Must Spend to Avoid Mini Depression (Update1)
Email | Print | A A A

By Kathleen Hays and Dakin Campbell

Feb. 5 (Bloomberg) -- Bill Gross, co-chief investment officer of Pacific Investment Management Co., said the U.S. may slump into a “mini depression” unless policy makers spend trillions of dollars to spur growth.

“This economy needs support from the government, a check from the government in the trillions,” Gross said today in a Bloomberg Television interview from Pimco’s headquarters in Newport Beach, California. “There is a potential catastrophe if the U.S. government continues to focus on billions of dollars.”

President Barack Obama has proposed a stimulus package intended to spur growth estimated at as much as $900 billion. The U.S. economy shrank by 3.8 percent in the fourth quarter, the most since 1982 as consumer spending recorded the worst slide in the postwar era, the Commerce Department said last week.

Pimco won a Federal Reserve contract in December as one of the four managers of a $500 billion program to purchase mortgage-backed securities. The company was also one of the managers selected to run the Commercial Paper Funding Facility in October.

The Fed will have to step in and buy Treasuries, Gross said, to keep long-term interest rates low as the U.S. increases its debt sales to finance a growing budget deficit and stimulus programs. Central bank officials said Jan. 28 they were “prepared” to buy longer-term Treasuries.

‘Significant Day’

Government borrowing will probably reach $2.5 trillion during the fiscal year ending Sept. 30, according to Goldman Sachs Group Inc.

Speculation has risen that China, which holds $681.9 billion of Treasuries as the single largest investor in U.S. debt, may stop or slow the purchases of U.S. debt as its own economic growth slows.

“To the extent that the Chinese and others do not have the necessary funds, someone has to buy them,” Gross said. “It is incumbent upon the Fed to step in. If they do, that will be a significant day in the bond market and the credit markets.”

Gross, 64, increased his holdings of U.S. government debt, a category that includes agency securities, in December for the first time in a year, according to the company’s Web site. He said today that he will not buy Treasuries.

Gross manages the $132 billion Total Return Fund, the world’s biggest bond fund. The fund gained 4.8 percent last year and has outperformed 99 percent of its peers over the past five years, according to data compiled by Bloomberg. The average government and corporate bond fund lost 8 percent in 2008, Bloomberg data show.

Pimco is a unit of Munich-based Allianz SE, Europe’s largest insurer.

To contact the reporter on this story: Kathleen Hays in New York at khays4@bloomberg.net; Dakin Campbell in New York at dcampbell27@bloomberg.net

http://www.bloomberg.com/apps/news?pid=20601087&sid=aisUgNlpOK.Y&refer=worldwide

Bolding mine.

How does a government buy its own debt?

Easy. It prints enough money to get it done.

[Naked Gents Rut]

If I had my 'druthers, we would extend unemployment insurance and maybe only a little more. But that's it. Hey, I'm not going to complain too much about a little infrastructure spending, but this bill is a Christmas tree.

I'm completely in agreement with you on this.

[Arrian]

I'm not a fan of stimulus plans. They delude people into thinking that there's such a thing as a free lunch and the impact is questionable anyway. If I had my 'druthers, we would extend unemployment insurance and maybe only a little more. But that's it.

Right, so what's there to talk about then? You don't really believe that fiscal stimulus works. I think this represents majority Republican thinking on the matter. The answer is then simple: oppose the stimulus, flat out, and be done, instead of pretending to really give a **** about this or that detail.

-Arrian

[Velociryx]

Arrian.

-=Vel=-

[Arrian]

Incidently, the other thing I agree with TMM on is corporate taxes... I don't see how they do anything, really. The corps probably spend a bunch of money avoiding taxes as much as they can, and what they can't avoid just gets passed on to the consumer.

But that's not the only change I'd make to the tax code (long term).

-Arrian

[DanS]

Right, so what's there to talk about then? You don't really believe that fiscal stimulus works. I think this represents majority Republican thinking on the matter. The answer is then simple: oppose the stimulus, flat out, and be done, instead of pretending to really give a **** about this or that detail.

I'm afraid I'm not going to be led around by the nose. Some of these provisions are worse than others.

[Victor Galis]

All those little old ladies, who would otherwise be funding businesses creating jobs.

Except not in this climate.

I'm not going to argue about the specific spending provisions, as I've already stated that I believe the immediate stimulus needs to be split from the long-term spending and the latter needs to be justified on its own merits. I happen to like most of the things that are being cut I'm afraid they'll be cut and never come back if they don't really get enough debate time, which they won't if the bill is kept in one piece and rammed through.

Easy. It prints enough money to get it done.

We might have to try the create inflation so we can cut real interest rates further approach .

[Imran Siddiqui]

Ok, found this summary:

http://www.marketwatch.com/news/story/stimulus-holds-tax-relief-help/story.aspx?guid=%7BCD0FF22B-F34A-4850-9265-1C07F5DC5A04%7D&dist=msr_4

That's the HoR bill.

-Arrian

To cut (as this is a stimulus bill and not a general spending bill... also realizing that any spending is somewhat stimulative, which doesn't mean we should just throw money around like drunken sailors)

Renewable-energy tax credit: $20 billion
Accelerated deployment of broadband: $5.6 billion
Community development: $5 billion
Rural development: $4 billion
Federal energy-efficiency projects: $22 billion
Energy-efficiency grants: $18.5 billion
Smart electric grid: $11 billion
Renewable-energy loan guarantees: $8 billion
Education programs: $29 billion
Pell grants: $18 billion
Scientific research: $3 billion

Put all of those in the next general budget, where they can be looked at over time and studied and past. Not in a bill that needs to be passed or else the economy will collapse and die. They aren't bad programs (I'd like to see more tax credits for renewable energy and accelerated deployment of broadband), but they shouldn't be in an emergency stimulus plan.

[Jon Miller]

Those all look good to me, although I am not sure what Rural and Community developement are.

We in the science community have been pretty starved the last 4 or so years.

JM

[Imran Siddiqui]

That's fine, they just don't belong in an emergency stimulus bill that has to be passed NOW, NOW, NOW!!