Jump to content

wall street journal: stimulus package boosted economic growth.


mizzufalcfan
 Share

Recommended Posts

U.S. Economy Gets Lift From Stimulus

By DEBORAH SOLOMON

WASHINGTON -- Government efforts to funnel hundreds of billions of dollars into the U.S. economy appear to be helping the U.S. climb out of the worst recession in decades.

[Clunker photo] European Pressphoto Agency

A load operator at Auto Parts Plus in Stafford, Va., crushes a car last week that was traded in during the 'cash for clunkers' program.

But there's little agreement about which programs are having the biggest impact. Some economists argue that efforts such as the Federal Reserve's aggressive buying of Treasury debt and mortgage-backed securities, as well as government efforts to shore up banks, are providing a bigger boost than the administration's $787 billion stimulus package.

The U.S. economy is beginning to show signs of improvement, with many economists asserting the worst is past and data pointing to stronger-than-expected growth. On Tuesday, data showed manufacturing grew in August for the first time in more than a year. "There's a method to the madness. We're getting out of this," said Brian Bethune, chief U.S. financial economist at IHS Global Insight.

Much of the stimulus spending is just beginning to trickle through the economy, with spending expected to peak sometime later this year or in early 2010. The government has funneled about $60 billion of the $288 billion in promised tax cuts to U.S. households, while about $84 billion of the $499 billion in spending has been paid. About $200 billion has been promised to certain projects, such as infrastructure and energy projects.

[Geithner photo] Bloomberg News

U.S. Treasury Secretary Timothy Geithner speaks last month at the construction site of a new elementary school in Berea, Ohio.

Economists say the money out the door -- combined with the expectation of additional funds flowing soon -- is fueling growth above where it would have been without any government action.

Many forecasters say stimulus spending is adding two to three percentage points to economic growth in the second and third quarters, when measured at an annual rate. The impact in the second quarter, calculated by analyzing how the extra funds flowing into the economy boost consumption, investment and spending, helped slow the rate of decline and will lay the groundwork for positive growth in the third quarter -- something that seemed almost implausible just a few months ago. Some economists say the 1% contraction in the second quarter would have been far worse, possibly as much as 3.2%, if not for the stimulus.

For the third quarter, economists at Goldman Sachs & Co. predict the U.S. economy will grow by 3.3%. "Without that extra stimulus, we would be somewhere around zero," said Jan Hatzius, chief U.S. economist for Goldman.

Dave Anderson, chief financial officer of Honeywell International Inc., said the stimulus package actually froze business activity at first as firms tried to figure out how they could benefit from the government spending. The $787 billion package "created actually a slowdown in order activity in terms of the flow that we would normally have anticipated," Mr. Anderson said at a conference sponsored by Morgan Stanley. "We anticipate that that's going to actually pick up in the second half of the year. I think it's not unreasonable to see several hundred million dollars of orders."

[Traders photo] Reuters

Traders at the New York Stock Exchange on Tuesday.

Opinion, however, remains split about which program has had the biggest impact. "I don't think the stimulus was necessarily as effective as people claimed it to be or claim it will be," said Joseph LaVorgna, chief U.S. economist with Deutsche Bank Securities Inc. He credits the government's "stress tests" of banks, which helped boost confidence on Wall Street and allow banks to raise capital and resume lending.

Economists say other programs are having an impact, including an $8,000 tax credit for first-time home-buyers that has spurred home sales. The cash-for-clunkers program, which provided financial incentives for consumers to trade in older vehicles, did the same for cars.

One big question: Will the boost evaporate once the programs end?

Stuart Hoffman, chief U.S. economist for PNC Financial Services Group, said the stimulus package "caused this bit of a concentrated burst [that] probably will exaggerate the pace of economic growth," since some areas, such as auto sales, could fall back to low levels.

Link to comment
Share on other sites

Bubble Economics, my boy. Nothing more than Bubble Economics.

bubbles.jpg

For instance, the school that is being built. What happens to those who are building the school once it is complete? How did spending X amount of dollars to build the school spur our economy in the long run? Those guys/gals will be looking for the next job after this job is completed. Everyone has been sucked in to this "we're creating jobs" crap while not really looking at what kind of jobs and long term impact they are talking about. Again, it is the government falsely propping up the economy.

BTW, many economists have said this recession would come out on it's own, as many do and have done. I believe that only 13% of the $787 billion has even been spent so I don't give much, if any, credit to the "stimulus" bill for the economy righting itself.

way more than 13% has been spent. back before cash for clunkers it was at 60mil which is way over 13%, but the credit goes to the Fed, but the fed is putting our interet rate very low, which could have repercussions. the stimulus is helping, but like Corps in the job market. it is getting the credit for the majority of the work, when a 3rd party is actually doing the job.

I say increase Corp income tax.

Link to comment
Share on other sites

I say increase Corp income tax.

That's a crazy idea. The corporate income tax is why so many businesses left the country entirely and are housed overseas. Bring in the Fair Tax, eliminating the corporate income tax altogether and you'll see those HQ's brought back to the US and all the jobs with it...

Link to comment
Share on other sites

Bubble Economics, my boy. Nothing more than Bubble Economics.

For instance, the school that is being built. What happens to those who are building the school once it is complete? How did spending X amount of dollars to build the school spur our economy in the long run? Those guys/gals will be looking for the next job after this job is completed. Everyone has been sucked in to this "we're creating jobs" crap while not really looking at what kind of jobs and long term impact they are talking about. Again, it is the government falsely propping up the economy.

BTW, many economists have said this recession would come out on it's own, as many do and have done. I believe that only 13% of the $787 billion has even been spent so I don't give much, if any, credit to the "stimulus" bill for the economy righting itself.

nobody said the economy wouldn't have come out of the recession on its own. the question is how long and how severe would it have been without the stimulus.

some pretty smart economists estimate that gdp growth would have been 2-3% lower, meaning we would still be in a recession as opposed to a potential recovery.

Link to comment
Share on other sites

I wouldn't make the same mistake Bush did, by claiming Mission Accomplished on the aircraft carrier. It's a little early to judge the effects. And despite any gains in the economy, what are they going to say when all of this deficiet spending inevitably leads too rampant inflation and out-of-control interest rates?

I personally don't care what the outcome ends up being, I don't think the ends justified the means regardless. I don't think the government has any authority to prop up private industry, and I don't like policy of spending a trillion dollars on government infrastrure in the midst of an economic meltdown.

Link to comment
Share on other sites

way more than 13% has been spent. back before cash for clunkers it was at 60mil which is way over 13%, but the credit goes to the Fed, but the fed is putting our interet rate very low, which could have repercussions. the stimulus is helping, but like Corps in the job market. it is getting the credit for the majority of the work, when a 3rd party is actually doing the job.

I say increase Corp income tax.

That's a crazy idea. The corporate income tax is why so many businesses left the country entirely and are housed overseas. Bring in the Fair Tax, eliminating the corporate income tax altogether and you'll see those HQ's brought back to the US and all the jobs with it...

I posted this a few months back on corporate taxes:

Companies have a tax rate of 39.3%, 2nd highest in the world behind only Japan.

In comparison, China, who is having economic prosperity, does not have a import / export deficit. Here is their corporate tax rate:

Enterprise income tax ("EIT") - standard tax rate is 33%, but the tax rate could be reduced to 24% for enterprises located at the coastal cities or 15% for those located at the special economic development zone (Note: Currently, separate EIT systems are applicable to foreigners, FIE and FE, as contrasted with those applicable to local Chinese and domestic companies)

So at the very base, their companies are taxed at 33%, but are offered incentives that can lower their tax rate as low as 15%.

It seems evident that there is a reason why they are prospering with low corporate tax rates, and we're struggling while we tried to place the burden on these American companies. The more they're taxed, the more they outsourced in order to save money.

Thoughts?

Link to comment
Share on other sites

We pay 260 billion a year in INTEREST on our debt. This is how important it is that we get out of this deficit. That's wasted money right there.

We pay 42 billion a year in UNEMPLOYMENT.

There is asinine expenditures everywhere, some obviously not as well known as the war, but they're there. The fact is, if people have jobs, we save in unemployment. If people are employed, we receive more in taxes, so that's two birds with one stone. More taxes with responsible spending and we can curb into this deficit and help eliminate the interest we're paying.

We're not going to fix anything until we find a way to provide jobs. We're not going to provide jobs unless companies have incentive to keep them in the Unites States, and not in India or China.

Link to comment
Share on other sites

I posted this a few months back on corporate taxes:

So at the very base, their companies are taxed at 33%, but are offered incentives that can lower their tax rate as low as 15%.

It seems evident that there is a reason why they are prospering with low corporate tax rates, and we're struggling while we tried to place the burden on these American companies. The more they're taxed, the more they outsourced in order to save money.

Thoughts?

You'd be hardpressed to throw a stone in Shanghai, Beijing, Guangzhou, Tianjin, etc. without hitting a Special Economic Development Zone. Heck, Shenzhen, a city of over 10 Million people, isn't even classified as a city/municipality, but just as a Special Economic Development Zone.

Link to comment
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

 Share

×
×
  • Create New...