Tuesday, January 29, 2008

How To Stimulate An Economy

Forget the studies... common sense should tell everyone this is true. However -- since the concept is antithetical to Republican "conventional wisdom" -- we'll just keep on putting out ineffective stimulus packages that make the old wise ones feel good.

In findings echoed by other economists and studies, he said the study shows the fastest way to infuse money into the economy is through expanding the food-stamp program. For every dollar spent on that program $1.73 is generated throughout the economy, he said.

"If someone who is literally living paycheck to paycheck gets an extra dollar, it's very likely that they will spend that dollar immediately on whatever they need - groceries, to pay the telephone bill, to pay the electric bill," he said.


The report pointed to expanding unemployment benefits as the program that gets the next biggest bang for the buck. That's because, although the unemployed are already getting checks, they need to spend the money. For every dollar spent here, the economy would see a return of $1.64, Zandi said.


Finally, Moody's report says business incentives such as tax breaks for buying new equipment - so-called accelerated depreciation - would give the least bang for the buck and potentially provide the slowest infusion of money. A dollar spent there would generate only 33 cents in the economy because, Zandi said, it takes longer for businesses to implement any benefit received.
By all means, let's follow Republican "conventional wisdom" until we're circling the drain... but gosh dang it, at least we'll be circling by our bootstraps!


Anonymous ghandi said...

Food stamps isn't logical either. Gift cards to Best Buy would be a better option. Of course why should we ever expect Government to ever really understand Economics 101.

11:06 AM, January 30, 2008  
Blogger Logic101 said...

I wouldn't mind a gift card to Best Buy, although I admit I'm not much of a freak when it comes to owning the latest gadgetry. :-)

I lived paycheck to paycheck for many years and I can tell you that I spent every penny I earned on pretty basic necessities. And it wasn't just money in, money out... there was always a growing backlog of crap I needed but didn't have extra money for. An extra $600 would have been immediately spent.

Low income folks -- including those who pay income taxes and those who don't -- are exactly the kind of people who are going to pump money immediately into the economy. For our Reagan worshipers, think of it as the "trickle up" theory. It's a win-win.

Expanding unemployment benefits seems like the absolute right thing to do if ever there was a right thing to do. Everyone pays great lip service to people who have been fucked over by "the new economy" but nobody actually does anything about it. I have personally delivered the "I'm sorry but we're going to have to terminate your employment" speech to about half a dozen hard working, educated, professionals, most all of whose jobs ultimately went offshore, and most all of whom were unable to find work again for a year or more.

Incorporating unemployment benefits into a stimulus package would be a super win-win.

1:27 PM, January 30, 2008  

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