Other nations have sovereign wealth funds which invest in companies and build up business and investing acumen.
Instead, America is trying to destroy any expertise or knowledge that the government has, and keep anyone with experience out of government (look at the ridiculous confirmation battles over the past 5 years).
The problem is that our current politics won't let the US government act on societal principles, or on business principles. The US Government is so hobbled that it can't act to succeed.
Oh yes, if your car is stalled on train tracks while a train is coming, it's much better to do nothing than something.
[Edit: lest someone thinks i'm being needlessly flippant; The US has to do something about the federal debt. That is not in question. Democrats and Republicans all agree on this. There are external actors who will act and events that will take place if the US does not deal with it's debt (for instance, a downgrade by 2+ rating agencies). So there is no question about whether we must act or not. We must act. It is merely whether we will try to cut our way to prosperity (ha), or whether we will try to actually balance our books while trying to preserve as much of our society as possible.]
Right, because we're lousy at deliberately creating solutions to complex problems - there's always unintended consequences, which often cause problems worse than the ones being solved.
The real way to solve complex societal problems is through many small-scale experiments, not a single top-down proposal imposed by a central authority. Tim Hartford's TED talk on this is well worth watching:
What sort of processes do produce good solutions to complex problems?
And if you can outline such a process, what prevents a government, or a polity (i'm more than happy for citizens to do stuff rather than the government) from performing the processes that do produce good solutions?
I think that the general argument goes that something like "the economy" is something so immensely complex that any effort to manage it top-down down is likely to fail, regardless of how brilliant, talented, or well-meaning such efforts would be.
As analogy (imperfect though it may be), it's like trying to fix a bug in a program that consists of trillions of lines of code, except that you don't have access to the source code or a debugger. Instead, you have just a few high-level variables you can adjust (which may or may not be useful).
In summary, the issue is that there are some problems that have a scale and complexity for which a top-down approach is really beyond human comprehension.
Yep, I get the top down argument, but what i want to know is what does work, and why can't our government enable that?
Government is a massive bureaucracy, no doubt, but then so are large companies. And large companies can partner with smaller organizations, or buy them and use their knowledge and expertise to make money.
Government has the power of force, which includes the power to circumvent the price system by taxing or borrowing against future taxes, irrespective of the information the price system conveys about the efficiency of the actions undertaken with that money.
Since the government's actions may not be subject to the pressures of the price system, a government solution is less likely to reflect economic reality as described by the price system. In more than a few ways, this means the government's actions are not likely to succeed, because the primary motivations for experimentation won't be economic, but political.
Individuals and groups without the power of force must create solutions that can stand up to the pressures of the price system. In this model, shifting experimentation to the scope of individuals and groups by liberalizing (if necessary) or fine-tuning economic policy is what works.
Of course, this explanation requires an well-functioning price system, and making the system function well is a subject in itself. There's also the question of how often actors in the price system actually act rationally, given the information they receive from the price system.
When someone says "x could never happen", i always want to ask "what would have to change for x to happen".
If congress has to act on this, yeah i think it's DoA, regardless of how good of an idea it is. But why couldn't the Federal Reserve do this?
Why can't the Obama administration who's still sitting on a pile of stimulus money team up with the Fed to do this? Grants + loans?
The Fed absorbed a huge amount of weird shit (assets like houses and such) in the aftermath of Lehman Brothers collapse. I would be interested in what they would have to change to set something like this up.
Right, but that's why I'd say it is a modern take on it. It actually makes the program more like an opportunistic specialized VC/investment bank combo.
From your link, emphasis added: Created by order of President Franklin Delano Roosevelt, the WPA was funded by Congress with passage of the Emergency Relief Appropriation Act of 1935 on April 8, 1935.
funding seems like a sort of crucial detail to me.
Legally I would guess the Fed could probably do something like this, at least indirectly. The restrictions on what they do are intentionally pretty limited.
The problem is the political fallout. Far-right will scream about socialism, far-left (and I'm one of them) will at least be concerned about the potential for abuse by corporations, and pretty much everyone will be asking why we should trust the Fed to do this right when they've done a lot in recent memory to erode any trust they had.
This is potentially a great job to give a central bank, but maybe not for the current US central bank.
Perhaps I'm just overly cynical, but I'm under the impression that the stimulus funds have been primarily used to stimulate the politically well-connected rather than truly stimulate the economy as a whole.
Let's fix it and demand accountability. I want a government that functions, and even if you are of a different political persuasion, I would hazard to guess that you probably do too.
Let's make politicians act in ways that are accountable.
Why not? If the Chilean government can do it, I imagine government(s) in the US can make it happen. Maybe it could start in smaller cities and towns. The missing part it the meme and forward thinking.
http://www.startupchile.org/
Cuban says big companies are not cash poor. I wonder how many of these have foreign funds that just won't import it because of the tax hit they'll take.
If you want to create jobs, how about companies under 10 years pay zero taxes. Zero costs to incorporate, and all licenses are free. No costs to access secondary equity markets, and access to an entrepreneurship courses. I don't think they want that many jobs tho, might shake things up.
Cuban is just trying his hand at central planning and it's not well engineered.
Considered the market needs to flush itself of some of these mid to upper sized companies. Some just exist because their stock maintains, while costing society valuable talents and resources. Just something to consider.
>> If you want to create jobs, how about companies under 10 years pay zero taxes. Zero costs to incorporate, and all licenses are free. No costs to access secondary equity markets, and access to an entrepreneurship courses. I don't think they want that many jobs tho, might shake things up.
God it pisses me off how easily corporations can infect people with their propaganda. Some tax dodging assholes are lobbying corrupt politicians to let them slide on paying their taxes and now all of a sudden a bunch of people like you are talking about what a big problem it is that all these poor multinational conglomerates can't get a hold of their tax dodging money. It's sickening. Can I ask you where you were made aware of the money repatriation issue?
The problem with this is that older corporations will just create shell companies, funnel all their wealth through them, and then transfer it back through things like IP licensing and other immaterial fictional goods.
Tax holidays are not the solution the the US debt, or better use of the US's fiscal resources (and yes the ability to borrow money cheaply is a resource).
>The problem with this is that older corporations will just create shell companies, funnel all their wealth through them, and then transfer it back through things like IP licensing and other immaterial fictional goods.
They would have to. How could an older company compete on such an uneven pitch?
If you're afraid of the system being gamed then no answer will suffice other than the tax code being re-written. Let's not pretend there's a practical answer to the cluster-fuck that is our economic incentive. I would like to challenge the basic premise that revenue should be taxed. If you want to incentivize spending, the answer isn't to make money dirt cheap by means of QE infinity. We've tried that trick and all we have to show for is a series of bubbles. The challenge isn't spending money, it's knowing where to spend it that counts. Propping up mid-sized corporations isn't that place IMO.
Jobs are a means not an end. I've never worked at a job to work at a job. I work at a job to provide for my family and for my other goals in life.
This sort of top down thinking is just toxic. It seems so great and tidy until you actually try to implement it and then you realize that your level of ignorance was greater than you could have possibly imagined. You can't solve a debt problem with more debt and you can't solve a jobs problem by just creating meaningless jobs. The only jobs that are sustainable are the jobs that produce something that other people actually want.
The whole idea of the price system is that we're given signals about the best ways to serve other people in society. The price system in financial and real estate markets is completely insane and basically non-functioning. We're all suffering with these zombie banks we've created for ourselves.
The real question shouldn't be how to create jobs but rather how to create a society where needs can be met by entrepreneurs and businesses. We've all seen that when people are having their needs met then jobs end up being created by the businesses that form in the process of meeting those needs.
As far as I understand it, Keynes's broad point was that even the straw man of creating jobs just to create jobs is better than the alternative of rampant unemployment (where people rely on charity and public works, and still don't contribute to GDP).
That said Keynes's primary point was that governments should invest and spend money wisely to do stuff the private sector can't or won't do.
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You and I can agree that we'd love to live in a world where people pursue employment due to interest and/or a drive to make the world/economy better. That's not the world we live in, and I don't know how we get there from here.
Lastly, markets are manipulable and are manipulated, and governments aren't the only actors doing so.
This assumes that the downsides of labor (monotony, debilitating or fatal injury (particularly in the case of much-touted "shovel-ready" projects)) don't count. If the end product of the artificial jobs minus those downsides provides less individual and social utility than simply paying the worker a stipend, we should go with the stipend and forget the work.
There are probably some psychological benefits to doing something, even if it's only building trails in the forest or things like Timberline Lodge or various endeavors like that. Probably best to study it though, rather than simply conjecture.
I think that most people would prefer a job doing something they feel is useful. Heck, I'd take some moderate risks to feel like I was earning my keep.
I think this is why most public assistance programs in America have been tied to 'service' of one kind or another. It's why social security is at least partly tied to your taxes while you were working. We've got our pride; and yeah, I agree it's irrational, but that's just the way many of us are.
Actually, I got one of those hiring bonuses last year; I mean, I didn't know that I'd get it, and it was only a few hundred dollars, so it didn't factor in to the hiring decision, but I did make someone an actual employee, and my accountant told me I got a credit for it. (The guy was a contractor before, but he did get a substantial raise, and a steady salary rather than a varying paycheck based on hours worked.)
the invisible hand was created by the conjunction of the forces of self-interest, competition, and supply and demand, which he noted as being capable of allocating resources in society. This is the founding justification for the Austrian laissez-faire economic philosophy, but is also frequently seen in neoclassical and Keynesian economics. The central disagreement between economic ideologies is, in a sense, a disagreement about how powerful the "invisible hand" is.
That's an emergent property of the system as a whole, not the desire of the typical participant, and it is not based on any motivation for working beyond desire to collect a paycheck.
Thank you jswinghammer. This statement right here summarizes the whole problem with the OP:
"The only jobs that are sustainable are the jobs that produce something that other people actually want."
This is exactly it. You can not stimulate an economy simply by pushing up production on the supply side.
Mark Cuban's idea seems appealing on the surface, but he makes a serious assumption. He implicitly assumes a positive net benefit after you give these companies money and they create jobs with this money.
Look, if you transfer money from the government to the companies to the people then that is just a transfer payment. Moving money around like that does not create wealth within a country, and that is what we need right now. We need to spend money on things that generate positive net present value, and we need to curtail spending money on things that do not meet this criteria.
In order for Mark Cuban's idea to work, all of these companies must be employing the additional labor towards activities that are economically profitable. Here's a quick thought exercise. What is the likelihood of a company being engaged in economically profitable activities given that it is taking advantage of this program? (It is reasonable to assume that a company with a healthy balance sheet and a healthy income would not want to deal with government bureaucracy willingly.)
Also, as a side note, the following quote from the blog post is a bit inaccurate:
"(Stunningly, bailouts excluded)."
That the bank bailouts were repaid so handily owes very little to the bailouts themselves. Thanks to extraordinary measures taken by the Federal Reserve, the banks were able to borrow money at an interest rate of virtually nothing and then use this money to purchase U.S. bonds - effectively lending it back to the U.S. government. In addition to this, the Federal Reserve also took the unusual step of dramatically expanding its balance sheet (removing toxic liabilities from the banks themselves). That was the real bailout, and it was much larger than the pithy amounts that you saw reported by the administration.
To get a sense of the scale and size of the real bailout, please take a look at this graph:
Edit: Also, I forgot to mention one more thing. The current negative rates on U.S. debt would almost certainly change if we began to issue substantially more of it. As Europe is rapidly learning, the debt market is far from a static environment.
Particularly if this is not a static situation we should take advantage of it until until an equilibrium is met (no we should not over leverage, that's a terrible idea).
The point is that we have an opportunity to do responsible investing. I am sympathetic to the argument that the US government is incapable of doing responsible investing. So who is, and how can we get them to act on the US government's behalf so that we all benefit?
I think the point is central planning in general doesn't work. It doesn't work when socialists try it, or when fascists try it, or communists either. You just end up starving lots of people and blaming it on external factors.
It is crazy, because you haven't thought through the consequences of zero-growth. Basically any medical research for example is off the table, because if the population expands or life expectency increases, the economy has grown. Technical research is off the table, in fact the same production methods in use today must be set in stone, since an increase in efficiency is economic growth. Etc, etc.
In some parts of Europe, de-growth movement is quite popular and proposes to shift the focus of government policies from economic growth to population well-being (how this is reached lends itself to debates).
It doesn't mean to stop medical research or technical research, it means stopping to envision growth as being only economic growth. Growth can be seen as progress of human indicators, not the accumulation of things and economic growth for the sake of economic growth (which more and more benefits only rich people).
It originates in the simple fact that the economy can not grow infinitely in a finite world.
Mmm, but wealth isn't cash money - it's "stuff people want". It's entirely a human concept. If there is more "stuff people want" being produced then the economy is growing, it is just growing in a different direction. That the desired commodity is changing doesn't alter this. If people want longer lives, or more leisure time, or whatever, instead of more consumables, that all has economic consequences. The de-growth movement, a lot of it is shifting from many, cheap, mass-produced items to fewer, expensive, hand-made items.
Wealth is "tangible stuff people want". There is a balancing point where working less for the same amount of stuff becomes more important than getting more stuff. EX: Suppose you are working 80 hour weeks and making 200k in 5 years would you rather work 40 hour weeks and make 200k or 80 hour weeks and make 400k?
That is not to say working less is always a major goal, if someone was doing 20 hour work weeks for 30k they would probably rather have 20 hour work weeks that pay 60k than 10 hour work weeks that pay 20k. The great thing about free markets is they let people balance many of those less tangible goals. However, government policy can easily focus on progress that is out of whack with what people actually want so an understanding that the Chinese population might tolerate more pollution for more growth were an American population cares more about clean air than maximizing growth is nessesary to keep people happy.
I think it is more about removing "bad" growth. People moving to suburbs and so consuming more oil is such a bad growth. People buying high quality expensive bio food is (or at least shouldn't) be bad growth. Making processes more efficient is good, but in your case growth is a byproduct, not an end to a mean.
The US searched growth in the 2000 at every price, even at the price of over-lending. That is where growth dominates everything at the price of well being, society consistency and eventually economy - see the 2008 crash.
And some people are so ingenious, they'll get richer no matter what you do. To make the typical voter's income at least stay even, the average has to go up then.
The real bailout? PPIP? Oh yes, here's how it worked:
1) Bank owns asset of dubious value, classifies it as "Level 3 Assets" which allows it to value it using an undisclosed method that has no correlation with the reality of a burst housing/credit bubble. This also allows the bank to hide its true financial state by escaping writedowns.
2) Market for these assets is dead, especially since government bailed out Fannie and Freddie, driving investors to a new "low-risk" market (government backed mortgage securities) and away from non-government backed securities.
3) Fed offers PPIP to buy up this trash. As a side effect, this effectively lowers the risk of these dubiously valued securities
4) Security of dubious value increases in value, is sold to Fed for profit (sometimes even twice its original level 3 valuation, which already had nothing to do with reality). Fed purchased security using mix of private investor and US Taxpayer funds (such as the Treasury)
5) Fed refuses to reveal the method of valuation for securities, preventing people from knowing how much profit the banks made, and how much the Fed lost out (including US Taxpayer money)
Conclusion: Fed now owns toxic security, bank escapes consequences of poor decisions and/or fraud, Taxpayer money is wasted buying assets for a heck of a lot more than they are actually worth in the real market, barring a resurgence of the housing bubble.
Yes, PPIP did begin. What I didn't realize is that a lot of this profit came from derivatives, not sales of the assets themselves. The actual program size was $40 billion, which is still a good amount of money but less than the original $1 trillion planned. So money was made without as many assets changing hands as the Treasury anticipated... I guess that's an even worse outcome?
For an individual yes. But when a politician talks about "jobs", what they really mean is "government revenue from income tax", and those governments that are highly dependent on income tax revenues view that as priority.
This is exactly right. Not many people understand the Austrian School of Economics, whatever you want to call it, "supply side", "tax cuts", not even the politicians that campaign for it. Not all tax cuts are created equal and the goal is not to get people to spend money but invest. The only tax cuts that work are across the board cuts that change long-term behavior. All these credits and "targeted" cuts don't do anything and might even hurt. The goal of tax cuts are to spur investment by lowering the required return on investment allowing capital to flow into more productive projects (manufacturing, startups, etc).
> It's as boring as having a resident Marxist posting the party-line Marxist take on any given economic problem, and has the same sanctimonious tone that claims to have the economy figured out, but without empirical data to back it up.
Before making any such broad assumptions please do read some of the Austrians and, why not, even Marx? First of all, like any true Marxist would be first to tell you, there is no "true Marxist".
The reason being that people are still in doubt, was Marx preaching for a sudden proletarian revolution (so, no support for the bourgeois economy and social doctrines, and under this light Keynes is as far from Marxism as Adam Smith himself), or for a gradual improvement of the workers' living conditions, followed by a voluntary surrender of power by the bourgeois middle-class to the lumpen-proletariat? Nobody knows.
And don't get me started on what socialist believes might have convinced Lenin that the capitalist-looking NEP (http://en.wikipedia.org/wiki/New_Economic_Policy) was an acceptable thing in order to support the proletarian revolution.
Taxes have been repeatedly cut and we still have 9% unemployment for years, what is your solution? More tax cuts? What if those cuts don't work? Tell unemployed people to stop being lazy? Do you think it's possible that even completely free markets could settle for years into an undesirable equilibrium?
Not because I think that his thoughts are necessarily the solution but because the lack of constructive criticism.
First of all I didn't read the post to say "this is to solution to end all solutions" but rather here is an idea could it work.
Second how is this a top down approach in any classical sense? His claims is that the companies who think they can create jobs with more money, exist out there and he want the find a mechanism to find them instead of simply distributing at large across the system and see what happens.
Third the US is probably the best country in the world to be an entrepreneur and business. There is very little in the way for anyone to find a need and then go out and build a business around it and there is a huge market for that. If your claim is that it can only be solved by making that part easier then the entire premise of capitalism seems flawed (I don't believe it is and I am not saying you are claiming that either)
The problem fundamentally is that you can only adjust your metrics so far before they become meaningless.
The first step to get the US out of their debt is to raise taxes. That won't make the startup environment better but it will start showing that the US as a country are ready to pay their bills instead of speculating their way out of it.
And before you start calling me a socialist and other nasty things let me just pre-empt this by the following.
I live in Denmark, a country with a progressive tax system +55% tax for the highest incomes and a sales tax of 25%. A car here cost 3 times the amount of a car in the US all because of taxes.
I am a member of the only liberal (in the european sense) political party and is fighting to get lower taxes.
So I am not saying raise taxes lightly. I am simply saying that the US have reached a point where the low tax is working against them not for them.
All systems have thresholds especially economic ones. To keep wanting more of the same ends up creating a self sustaining effect after you reach a certain point. The US have reached that now.
Historically the US federal government has never collected more than 20% of GDP in taxes. Doesn't really matter what the tax rates are. The US needs to get out of debt and I think ending wars is the way to do that.
This is an important point. Raising taxes is not a static game either. There are a lot of ways people with money avoid taxes now.
I think Cuban was right that we do have a spending problem. We spend too much on things that are not important. We should cut debt, but the debate around this issue has been framed as a false and confusing dichotomy by the two major political parties.
Ending the war will cut onto spending but what are you going to do with all the soldiers out of a job. Don't forget that the military de facto works as social welfare. So you will have to figure out what to do with them.
Someone have to pick up the bill and I have a hard time seeing who that could be besides the american taxpayers.
And just because it hasn't been done before is obvious no natural law
Give anyone some money and they'll save it, not spend it. They'll save it because next week milk and eggs will be more expensive, while houses and electronics will be less expensive. on craigslist. nobody is buying new stuff when the guy down the street is selling his PS3 to make rent.
Essentials are increasing in price. Luxuries are decreasing.
What company is going to create jobs in this environment? And what if you did create jobs making more of X: now X is cheaper. Deflation.
We need inflation. And that means pissing off the Chinese.
We need to accurately price assets. And that means letting some banks fail.
The differences between a recession and what we have now, a depression, include that interest rate changes are impotent and price deflation.
Benanke did his disseration on the Great Depression and essentially stated that to fight price deflation they should have used monetary inflation. That's what we're doing. They don't even publish the M3 anymore but estimates are that the currency printing presses are going at full speed. The problem that Ben didn't anticipate is while rates are low and people want to borrow, banks -- flush with cash to lend -- don't want to. The monetary inflation can't keep up with deflation, which (you're right) is lethal.
I'm not the one modding you down, and I should clarify: by "inflation" I mean "increase in prices", as opposed "greater monetary availability".
The fed is, with QEx attempting to provide greater liquidity, thinking that this will cause price rises, and in turn spur spending and transactions. Of course its having no effect whatsoever. String pushing at its best.
Also: the only people who want to borrow right now are those who are borrowing just to stay fed. Rightly, the banks dont want to lend to them.
by "inflation" I mean "increase in prices",
= price inflation
as opposed "greater monetary availability"
= monetary inflation
You can't control price inflation/deflation, you can only control monetary inflation.
It doesn't matter why the banks don't want to lend, the point is, Bernanke's plan can't work until they do. (But let's be honest: it won't work in any case.)
You can't control price inflation/deflation, you can only control monetary inflation.
I disagree. Gas prices go up when the dollar drops (not the only reason, but a guaranteed one). Make the yuan and the yen vastly more expensive, or just block imports at the port, and prices will go up. Maybe even to the point where it will be cost effective to pay americans to make them.
You don't hang out with many American middle class people do you?
Most have 2 weeks of savings or less.
If you give somebody money who is already a saver and who already appreciates the virtues of saving -- like myself or probably you -- yes, I'd save it. But that's because I spend a fixed amount, have no debt, and save excess income.
If you give a small windfall (I dunno, $100 to $5,000) to most american families, that money will be spent. Probably a good chunk towards paying down household debt, and the rest to fixing things that have long been neglected. That could be the family car, a leaky roof, etc.
The OP and the discussions here keep referring to people or companies getting money, and then spending it, or perhaps saving it, as if that were the end of that money. That's not how the economy works.
Savings should be the most obvious. You're not going to save your money by hiding it under your mattress. You're going to at least put it into a bank, of not invest in equity or debt instruments. In all of these cases, the money is going right back into the economy to be used productively. If you put it into a bank, they'll loan it back out to someone in a mortgage or such. Equity investment directly fund businesses. And so on. So when you're saving, you're really redirecting the money to someone who believes he has a use for it -- and who believes strongly enough that they're willing to pay for the right to try it. And this is actually what the OP wanted in the first place, but the current system has better controls for ensuring that the money is used productively.
If I spend the money -- say, on a leaky roof, as you suggest -- then that money is going to the roofing contractor, and thence to his employees and the producers of the shingles and other materials. Again, it's being used productively.
Less obvious is if I spend the money on a TV, for example. Some of that money goes to the retailer. But much of it is going to, say, a Chinese company that makes it. This gets into more economic theory like "comparative advantage", which I'm not going to explain here, but simply state that in the bottom line it still makes us better off. People will protest that this contributes to the so-called "trade deficit". In the case of this discussion (at the very least), that trade deficit is a good thing. If we (collectively, somehow, for the sake of simplicity) owe a Chinese company some money, that is precisely the same thing as them pumping stimulus money into our economy! Perhaps you buy a Japanese car; that "trade deficit" is actually executed by, say, Toyota using the "owed" money to build a factory in America, and that again is exactly what we want.
The banks just stuff them into a safe haven. Hence the phrase "Pushing on a string".
Your roofing contractor might pay his employees, or he might try to do more with less people and pay off some debt. Or they might pay of some debt.
As soon as that money enters the bank, its gone, as far as the economy is concerned. It used to be that money was passed along in a long chain of transactions. Now there is a non-zero probability that at any point in the chain, the money goes into a bank to pay off debt, and at that point, its gone for good.
How do we change the bank's behavior? We have to create an economy where loaning out money is the only way to preserve value, instead of the opposite.
Paying off debt is not spending. In an older time, the bank would then be able to lend out that money to someone else, but at this time, they aren't. They are just sticking it in the Fed where its safe.
Could you therefore conclude that the government really isn't all that able to create more jobs, but rather the private sector is? While I don't agree with the tea party, I do agree less government is the way to creating jobs. You can't just create jobs out of thin air because you want to; jobs have to satisfy a specific need/requirement.
I disagree that the Republicans and Tea Party can be tied together in the same / - but also that their sole method for fixing the economy is lowering taxes.
Regardless, the answer isn't jobs, but transitioning people from being skilled in trades that no longer matter, and becoming skilled in modern trades, such as programming, design, etc.
Why not just adopt something like the Fair Tax where business would pay significantly less taxes. Wouldn't that be just as good, if not better than doling out money to companies who "promise" to hire?
This would put a large amount of money in the hands of a small group of people. Money that isn't theirs, yet they get to decide where it goes. If the payout justifies it, corporations will hire lobbyists or set up backroom deals. There will be a huge influx in demand for essentially free money, meaning the paperwork to go through will be enormous. Shell Corporations that meet the requirements will sign up in addition to their actual corporation. And by setting minimum requirements (Especially 10yrs, 100workers), you end up targeting corporations who already have money in the bank. It's the uprising corporations that spend their revenue on expansion, that take out loans to rent a bigger office.
This already happens: if you're a corporation promising to create jobs, you can negotiate with government for tax breaks. I believe Twitter negotiated with San Francisco city government to get their payroll tax breaks by threatening to leave the city. Datacenter construction tends to get property tax breaks from local government. If you're talking about locating a car factory in a country, much bigger incentives are to be had.
I normally love Mark Cubans blog, but this is a terrible idea. If a company cant afford to keep employees it shouldn't hire them. This would be almost as bad as the bailouts were.
This would send inflation skyrocketing.
What happens to all of those small companies that don't have the connections or legal know-how to get the government money? They go out of business because they would not be able to afford the new inflated cost of hiring.
What happens to the people who can barely scrape a living out of their current wage when the inflation this would cause sends food prices sky rocketing?
More to the point, the whole point of borrowing to invest, is that if done successfully, your business grows in a sustainable manner, and you can continue to pay that person money for the business you have built.
This is how business loans are supposed to work. You start with nothing, you get a pile of money, you build something that will earn that money back, and hopefully have built a stable company in the mean time that will continue generating wealth even after the terms of the loan come due.
This shouldn't seem foreign on a startup and entrepreneurship site.
>Would it send inflation skyrocketing the way that the stimulus sent inflation skyrocketing? :P
From what I've read, inflation isn't a problem in the current economic climate because even with the increased money supply, no one is actually spending any money (or more accurately, most consumers don't have the money to spend) so there is no reason for prices rise since demand is low.
I have no idea how Cuban's idea would affect inflation.
Of course this is HN, so for all the knowledgeable people out there, please correct me if I'm wrong.
Inflation control is (like most economic problems) a balancing act. In my opinion way too much attention was paid to potential inflation problems in 2009/2010 instead of the real problem: unemployment.
There is actually rampant inflation. Global prices for food, energy, gold, and many other commodities are at or near all time highs. The reason this might not show up in some metrics is because we are also experiencing deflationary collapse in previously inflated sectors like housing.
Nope. Gold prices are going up because people believe gold prices will keep going up, and keep speculating as such. It has no bearing or relationship to inflation, since most of what we buy is not made of gold.
Energy prices are 50% off their all time highs. When they were high, it was a demand story, not an inflation story. Likewise, with food.
In any event, even if all of those statements were true, that's not what inflation means. Inflation is not "things get more expensive", it's "money gets cheaper". There's a big difference.
Inflation is low. Very low. Too low, in fact. If inflation were a couple percent higher, and nominal GDP were also a couple percent higher, the economy would look a lot better than it does right now.
"Wasn't cheap money from the Fed supposed to do this a couple of years ago?"
It has done it. Food prices are at all time highs and causing global social instability. Gold is at an all time high. Energy and commodity prices are very high.
You are mistaking an inflationary depression for equilibrium.
Initial causes of the late 2006 price spikes included droughts in grain-producing nations and rising oil prices.[4] Oil price increases also caused general escalations in the costs of fertilizers, food transportation, and industrial agriculture. Root causes may be the increasing use of biofuels in developed countries (see also food vs fuel),[5] and an increasing demand for a more varied diet across the expanding middle-class populations of Asia
Oil is down in price since 2008, not up.
Increases in the Gold price isn't a measure of inflation, it's a measure of the lack of confidence in other investments.
How about 10,000 X-Prizes, each with a 10M or so prize. That seems much more sensible. Everyone who wanted to compete for a given prize could register with a transparent prediction market, which would give investors an easy way to get to know the different people competing in each category.
I like this idea, I think pushing the boundaries of tech can create more opportunities in the long run past just the prizes aspect. I think the key to the prizes is also that they should be in areas that could realistically be economically viable going forward.
I really like this idea. It's sort of like a decentralized and transparent DARPA, only it can extend beyond defense. The contests could be a mix between incremental efficiency improvements as well as "pie in the sky" ideas. If coupled with a strong mentoring program per contestant, you could also target STEM education.
It might be a highly efficient way of developing new technology, but prizes don't immediately generate large amounts of new employment.
Think about it: most X-Prize-type competitions rely on the intelligence of a few highly skilled people, and even then only a few of them will actually win. The other teams generally make a loss, and so have to rely on "investors" to pay the bills.
To fix employment you need to employ 10,000 ex-auto workers, who at best have some machinist skills if you are lucky. Then you need to do it ten more times. Then ten more. Then you need to do the same for the construction industry, for hospitality and for agricultural workers[1][2]. What's more, you need to do this fast - in months, not years. I cannot imagine anyway to structure a X-Prize to do that.
[2] To be fair, the hospitality industry will probably pick itself up once employment improves in other sectors so you might only need to generate a few 100K jobs instead of a million.
If they only get some machinist skills at best, then they are effectively unemployable. So rather than getting a job, they should start taking classes at the local community college. Then, once they have become nurses, care-takers, welders, electricians, etc, etc they won't have such a big problem finding jobs.
Nurses, care-takers: Unemployment rate = 5.9%, with 1.2 million (already trained) people unemployed
Welders, electricians: That would be either the construction sector (Unemployment rate 13.6%) or the manufacturing sector (Unemployment rate 9.2%).
Re-training will help some people, but isn't immediate and will never help the majority.
There seems to be a weird view that manufacturing in the US will be dead in the future because it is struggling now. It's probably worth noting that rich, first world countries like Germany have huge manufacturing sectors, employing large number of people, and yet have to compete directly with countries with low wages. It isn't clear at all why some people believe the US is fated to lose its manufacturing sector but Germany isn't.
What he is proposing was already tried by the Michigan Economic Development Corporation.
Politicians from both parties loved photo ops where some entrepreneur was creating jobs, especially in a distressed area in exchange for state money. Even if all the promised jobs never got created.
Then it got to the point where a con man showed up who never intended to create any jobs.
Let the bankers steal from the middle class. Let federal reserve steal more money from its citizen. Let the government accumulate more debt. Let the jobs go overseas. Let inflation run rampant. Let people go deeper and deeper into housing/student debt. Let small businesses die.
In fact, encourage it.
Why? because the current system/society, as it stand, is dying body that cannot be healed. It is too old. Too lazy. Too morally corrupt. Too broke.
Because common citizens will wake up one morning. They will be out of a job. They will be losing their house. They will be in massive debt. And they will not be able to afford even the most basic food/gas.
Then they will be truly angry. Not angry as in chatting about it online. Angry as in massive protests in the capitals. Angry as in shutting down major websites. Angry as in rioting. Angry as in burning down houses. Angry as in everywhere.
Why? because the current system/society, as it stand, is dying body that cannot be healed. It is too old. Too lazy. Too morally corrupt. Too broke.
Who cares about 300 million citizens suffering through a total economic collapse, as long as The System improves? It should be encouraged, they should sacrifice themselves willingly to the idea of a better System.
There would be changes, sure, but they'd be done through the "criminal outrage of the mob, led by leaders who [would be] either unscrupulous, deluded, or both." What changes are you hoping for? Are you hoping for a Star Trek-esque future of no money and people working, if they want, for the betterment of themselves and humanity? I don't think the technology is there, but I'm told we could feed and house the whole human population several times over if we made that a goal. What definitely is not there is the culture and society. I have no confidence that an outraged mob of US citizens would effect anything much better than the current system, but perhaps I'm just too pessimistic and haven't seen enough opposing evidence.
Of course, I am very tempted to see 'what happens' if we just let everything continue on the path of destruction. Follow your suggestions, vote for a Trump/Palin/Bachmann trio of president/v.p./secretary of state (not necessarily respectively), etc.
I sense a bit of Ayn Rand in this post, but since it has been a while since I read Atlas Shrugged, I have to disagree with this approach.
If I read this post within a week of finishing Atlas Shrugged, I would agree wholeheartedly! Maybe even throw in a couple of ideas on how to fight the System.
Objectively speaking (if that is even possible), many good things did come from revolutions.
This idea will never work, but on top of that his "rules for entry" are totally silly. Just take a glancing look at this data and you can see that his criteria should be inverted http://www.census.gov/econ/smallbus.html
There are ~6M firms in the USA but only ~90K with revenues of 100M+ so his pool is very small to start with. Firms with 100+ employees count for 1.8 percent of employment and capture 65% of total payroll and something like 2/3 of total revenues. I think ANY company that is pulling in 100M in revenue has probably got things figured out already. The vast majority of employers in this country are small firms so why not try to help small guys turn into bigger guys.
So I think if anything, there should be more investment in firms with less than 100 employees, less than 100m in revenue and less than 10 years old.
I'm just completely at a loss as to what this says.
Companies are flush with cash. The government can't figure out how to spend money productively. So, we're going to have the government borrow more money to give it to companies that don't need it, using its incredible inability to allocate capital to decide which of these companies to allocate capital to?
If the government can't productively allocate capital and companies have enough, why, in the terms of this post, exactly is it such a bad idea to have the government stop borrowing all the available capital and let the companies start allocating it instead?
(I italicize some words to emphasize that it is the internal issues with the logic of the post I am questioning. I may strongly disagree with it, but I am well aware of the liturgy for Keynesianism.)
1) The government is literally awash in cheap credit. Good businesses, when credit is cheap, borrow and invest. If you think this is a bad idea, please explain if it is because you do not believe the government should act as a business does (and for what reasons), or because you think that you should not borrow when your interest rates are low.
2) If you dislike Cuban's target for investment (fixing unemployment, the purported goal of the Tea Party and GOP), then please, by all means, pick a different avenue by which the government could make a return on investment.
>pick a different avenue by which the government could make a return on investment.
A WPA-type program to improve transportation, energy and communications infrastructure. Lot's of jobs across many sectors, from professional to artistic to skilled & unskilled labor, most of which can be in the private sector (contractors/contracting firms).
There is also the problem of diminishing returns. Paving the roads and later upgrading them to highways improved the transportation capabilities a lot. I am at a loss as to what you would upgrade to now (unless you want to make it greener, but environmentalism doesn't improve the economy).
> I am at a loss as to what you would upgrade to now
There are upgrades to be had: HSR (where it makes sense), more modern air traffic control, intelligent transport systems, multimodal facilities, high-speed internet, power generation (green or otherwise), smart grid, flood contro, seismic refits, etc.
But we don't even need to discuss upgrading the infrastructure, most of what we have now is subpar because of decades of deferred or non-existent maintenance. We will need to spend billions just to get our existing systems up to par,
We're getting far afield, but the problem with American education isn't a lack of funding. Look at the slope of a graph of education funding over time, and you'll see that it would be difficult to pump cash in any more quickly than we already have -- and to no avail.
> May as well do it now while people are out of work and interest rates are low.
Um, the facts that we need to do it and now would be a good time to do it do not imply that we'd actually do it.
We're doing a lot of infrastructure spending now. How about fixing it before embarking on an expansion? That way, we won't have wasted a lot of money that could be used when we're actually going to fix infrastructure.
Yes, interest rates are low now, but lenders want their principle back as well, so wasting money now can affect our ability to borrow and spend when we're serious.
The government should not act as a business does, because per Cuban's words, "The problem for the Democrats is that the government hasn’t shown that they can earn a positive or even a break even return on their spending." If a business can not break even, then the proper thing for them to do is to liquidate while they are still worth something and disburse the proceeds of the liquidation to their shareholders.
Yes, I think perhaps maybe the government should not be doing what a business would do in this situation.
Again, I remind you I'm not actually trying to engage in a debate over proper economics in general (and trying very hard to carefully refrain from injecting too much of my opinion, it took me a few edits on the first message), I'm trying to work out what exactly this post is trying to say. It isn't clear to me at all how Cuban gets from the the government of today, which is incapable of allocating capital, to the government of tomorrow, which when presented with a menu of even more decisions than it has to make today, is then capable of allocating capital intelligently in an even tougher decision-making environment. Why would the government not simply fail in the ways it is failing already in the allocation of capital? What's the connecting step?
Alright, so we'll grant the government is terrible at capital allocation (because yes, that's the premiss of Cuban's post).
So, what would you do when faced with an investor who's a complete fucking idiot, but can borrow money cheaply?
What is a fail-proof investment plan for this trustifarian?
Why can't we find a plan, or demand that our government do something with this opportunity? There is a hack to be had in here. Who can we trust with this opportunity that the government can farm it out to? What would the terms have to be in order to ensure that the government can make a return?
btw, upvotes for you, thanks for the conversation :)
"So, what would you do when faced with an investor who's a complete fucking idiot, but can borrow money cheaply?"
... tell him not to borrow money?
Is that really such a strange idea?
In fact... how can you seriously entertain any other answer? (In this case, limited to the investor case, not the investor as a standin for the government. This may or may not apply to the government, but what is this metaphor supposed to be proving, anyhow...?)
One of the human irrationalities is a belief that for any set of constraints there must be a solution, but that's not true. An "idiot" investor has no winning solution (virtually by definition in this case), and therefore the answer is not to play. There is no force in the universe that says there must still be a way to invest and prosper anyhow.
Bonds/Notes/Bills issued by the Treasury have fixed rates - so yes, the interest rates will stay that low until the money is paid off.
The point that others have brought up is that if the US Government borrows an incredibly large amount of money and pushes up the Debt/GDP ratio, future, additional borrowing will become more expensive. But if today's borrowing is used efficiently, it should drive up GDP and reduce some of the need for future borrowing.
> Bonds/Notes/Bills issued by the Treasury have fixed rates - so yes, the interest rates will stay that low until the money is paid off.
TIPS aren't fixed rate, but I don't know what fraction of new US debt is TIPS.
More to the point, you're assuming that we won't have to roll-over that debt, which only happens if we're not running a deficit. Since we are for the forseeable future....
> I believe the "real" interest rate on TIPS is fixed - while the nominal rate fluctuates with CPI.
According to that reasoning, interest rates almost never change because they're typically a given premium to inflation.
We don't accept that reasoning because you repay what the note says, not the relationship between that number and some other number.
> Your second point is, of course, right on. But if we have to borrow $x, better to borrow it now at ~0% than later at (likely) >0% interest.
Umm, no. Borrowing now at 0% and rolling that over later to a new loan at 10% is not better than simply borrowing later at 10%.
Yes, borrowing now is better if you do something useful now with the money, something that you'd delay by borrowing later.
However, there's little evidence of that occurring. We're running up lots of debt on dumb spending. If you want to do some smart spending, take the money from dumb spending.
That is mostly a political decision. Remember that it is the Fed that controls the interest rates, especially for short-term lending.
For long-term lending, as long as the Fed doesn't change its stance, the rates will only go up if the economy recovers. If the economy recovers, government won't have to borrow that much anymore.
And if you were still unhappy about the interest payment of government, the government could just change the way its monetary policy is implemented and push down the yields of long-term bonds as well. After all, the government administrates the US$ monetary system. Operationally, they would just instruct the Fed to target long-term yields as well, and then the Fed would change them in the same way that it changes short-term yields (by doing open market operations).
> The government is literally awash in cheap credit.
--> infrastructure projects!
If it is a given that money can be borrowed for basically zero interest rate, why not invest it at long term low yield infrastructure projects such as: roads/bridges, high speed trains, electrical distribution networks, or my personal favourite: scientific research.
Preschools for children from low-income households also have a good return on the investment, according to that Planet Money episode... see them for their sources.
You're treating 'enough' as a fixed quantity and that's a mistake.
Just because a business is generating profit (has 'enough'?) doesn't mean that investing more into that business wouldn't make it more profitable and generate a big positive return.
In fact, investing into already successful businesses to help them grow faster (seems to be what Mark is advocating) seems like a great investment strategy if you can get hold of the cash to invest cheaply.
"The Republican/ Tea-Party approach to job creation is to cut taxes. The theory being that more money in the pocket of individuals will cause people to spend more money in the economy thereby creating more jobs. Nope. Not happening. Why ? Because individuals have too much debt. Any money they get goes to pay credit cards, student loans and for the smart and fortunate into savings.
Individuals now have debt = to about 119pct of income vs historical levels of .17pct in the 40s, 55pct in the 50s , 65pct in the 60s and a high of 133pct in 2007)."
This is clearly wrong. Never mind cutting taxes, that's much too indirect. New plan - the government borrows as much as it can at negative real interest rates until it bids those rates back down to 0. Then it just mails checks to every American. Some will spend the money (probably with great efficiency! They know what they need!), but most will use it to pay down debts. This is a feature, not a bug. The debts that Americans owe have positive, and in some cases substantial, real interest rates. Bam! You have just accomplished to biggest interest rate arbitrage play in history.
The conversation we really should be having involves answering these three questions:
1. What work could be done that would create a better world for us?
2. Why isn't this work being done? Is it regulatory paralysis? Insufficient coordination amongst stakeholders? Are the rewards difficult to capture by the people doing the work? Are there not enough people with the requisite skills?
3. Can we stimulate or coordinate the private sector to organize labor and capital to get this work done? If not, why not?
If you've thought about these questions for a while, it is absolutely shocking to listen to the economic debate going on around us today. We have two camps who are both way off -- some people (e.g. the author of the blog post) assume that throwing money at anyone who asks for it will work, but it doesn't (they just waste it). Others think that letting people keep the money they have previously earned and staying outta the way will work, but it doesn't (they just hold on to it or waste it).
I'm 100% with you. I'd quibble with the phrasing of "create a better world for us", since I think that lends itself to very mushy, subjective notions of "good" rather than "economic good", but you're absolutely right.
The problem is not, "how do we create more GDP" (forever and ever and ever) it's "is there demand which is not being met by supply." At the core, that's what a recession is. The answer is clearly yes in some industries (health care comes to mind) and is clearly no in other industries (real estate and retail comes to mind).
You can't just will an economy of 300m people to a certain state. If people spent more time thinking about optimal long term outcomes and then spent their time removing impediments to those outcomes, instead of pretending like there's some magic incantation that is simply being _blocked_, we'd be having a much more productive national conversation right now.
> The problem for the Democrats is that the government hasn’t shown that they can earn a positive or even a break even return on their spending.
How do you calculate the return on health care for old people, or school lunches for kids, or clean water in your faucet, or adding a lane to a congested highway?
Charles Gasparino has a similar idea. US companies have about $1 trillion parked overseas that will be taxed at 35% if transferred back to their US operations. His idea is to let them transfer the money tax free, on the condition that they use 25% of the funds to hire workers. and grow US operations. that may sound like corporate welfare, but the truth is that those companies are not going to bring that money back anyway.
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[ 3.0 ms ] story [ 260 ms ] threadInstead, America is trying to destroy any expertise or knowledge that the government has, and keep anyone with experience out of government (look at the ridiculous confirmation battles over the past 5 years).
The problem is that our current politics won't let the US government act on societal principles, or on business principles. The US Government is so hobbled that it can't act to succeed.
You could pretty much stop right there.
[Edit: lest someone thinks i'm being needlessly flippant; The US has to do something about the federal debt. That is not in question. Democrats and Republicans all agree on this. There are external actors who will act and events that will take place if the US does not deal with it's debt (for instance, a downgrade by 2+ rating agencies). So there is no question about whether we must act or not. We must act. It is merely whether we will try to cut our way to prosperity (ha), or whether we will try to actually balance our books while trying to preserve as much of our society as possible.]
The real way to solve complex societal problems is through many small-scale experiments, not a single top-down proposal imposed by a central authority. Tim Hartford's TED talk on this is well worth watching:
http://www.ted.com/talks/tim_harford.html
What sort of processes do produce good solutions to complex problems?
And if you can outline such a process, what prevents a government, or a polity (i'm more than happy for citizens to do stuff rather than the government) from performing the processes that do produce good solutions?
As analogy (imperfect though it may be), it's like trying to fix a bug in a program that consists of trillions of lines of code, except that you don't have access to the source code or a debugger. Instead, you have just a few high-level variables you can adjust (which may or may not be useful).
In summary, the issue is that there are some problems that have a scale and complexity for which a top-down approach is really beyond human comprehension.
Government is a massive bureaucracy, no doubt, but then so are large companies. And large companies can partner with smaller organizations, or buy them and use their knowledge and expertise to make money.
Look at what Disney did with Pixar.
Since the government's actions may not be subject to the pressures of the price system, a government solution is less likely to reflect economic reality as described by the price system. In more than a few ways, this means the government's actions are not likely to succeed, because the primary motivations for experimentation won't be economic, but political.
Individuals and groups without the power of force must create solutions that can stand up to the pressures of the price system. In this model, shifting experimentation to the scope of individuals and groups by liberalizing (if necessary) or fine-tuning economic policy is what works.
Of course, this explanation requires an well-functioning price system, and making the system function well is a subject in itself. There's also the question of how often actors in the price system actually act rationally, given the information they receive from the price system.
"The nervous system is a total waste of calories! It's total overhead! All it does is tell the muscles what to do!"
If congress has to act on this, yeah i think it's DoA, regardless of how good of an idea it is. But why couldn't the Federal Reserve do this?
Why can't the Obama administration who's still sitting on a pile of stimulus money team up with the Fed to do this? Grants + loans?
The Fed absorbed a huge amount of weird shit (assets like houses and such) in the aftermath of Lehman Brothers collapse. I would be interested in what they would have to change to set something like this up.
EDIT: http://en.wikipedia.org/wiki/Works_Progress_Administration
Looks like the executive branch should have enough power to do this on its own.
http://en.wikipedia.org/wiki/Works_Progress_Administration
The difference in what Cuban is suggesting is that he's just asking why the government can't loan directly to businesses to hire.
funding seems like a sort of crucial detail to me.
The problem is the political fallout. Far-right will scream about socialism, far-left (and I'm one of them) will at least be concerned about the potential for abuse by corporations, and pretty much everyone will be asking why we should trust the Fed to do this right when they've done a lot in recent memory to erode any trust they had.
This is potentially a great job to give a central bank, but maybe not for the current US central bank.
Let's fix it and demand accountability. I want a government that functions, and even if you are of a different political persuasion, I would hazard to guess that you probably do too.
Let's make politicians act in ways that are accountable.
If you want to create jobs, how about companies under 10 years pay zero taxes. Zero costs to incorporate, and all licenses are free. No costs to access secondary equity markets, and access to an entrepreneurship courses. I don't think they want that many jobs tho, might shake things up.
Cuban is just trying his hand at central planning and it's not well engineered.
Considered the market needs to flush itself of some of these mid to upper sized companies. Some just exist because their stock maintains, while costing society valuable talents and resources. Just something to consider.
Actually Mark Cuban suggested this as well -
http://blogmaverick.com/2008/07/28/how-to-jumpstart-the-econ...
For someone like Microsoft its cheaper to to issue debt in the United States (hey, AAA rating is hard to come by nowadays http://www.businessinsider.com/microsoft-low-bond-yields-thi... ) than transfer the cash from Ireland to the US.
Tax holidays are not the solution the the US debt, or better use of the US's fiscal resources (and yes the ability to borrow money cheaply is a resource).
They would have to. How could an older company compete on such an uneven pitch?
This sort of top down thinking is just toxic. It seems so great and tidy until you actually try to implement it and then you realize that your level of ignorance was greater than you could have possibly imagined. You can't solve a debt problem with more debt and you can't solve a jobs problem by just creating meaningless jobs. The only jobs that are sustainable are the jobs that produce something that other people actually want.
The whole idea of the price system is that we're given signals about the best ways to serve other people in society. The price system in financial and real estate markets is completely insane and basically non-functioning. We're all suffering with these zombie banks we've created for ourselves.
The real question shouldn't be how to create jobs but rather how to create a society where needs can be met by entrepreneurs and businesses. We've all seen that when people are having their needs met then jobs end up being created by the businesses that form in the process of meeting those needs.
That said Keynes's primary point was that governments should invest and spend money wisely to do stuff the private sector can't or won't do.
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You and I can agree that we'd love to live in a world where people pursue employment due to interest and/or a drive to make the world/economy better. That's not the world we live in, and I don't know how we get there from here.
Lastly, markets are manipulable and are manipulated, and governments aren't the only actors doing so.
I think this is why most public assistance programs in America have been tied to 'service' of one kind or another. It's why social security is at least partly tied to your taxes while you were working. We've got our pride; and yeah, I agree it's irrational, but that's just the way many of us are.
Actually, I got one of those hiring bonuses last year; I mean, I didn't know that I'd get it, and it was only a few hundred dollars, so it didn't factor in to the hiring decision, but I did make someone an actual employee, and my accountant told me I got a credit for it. (The guy was a contractor before, but he did get a substantial raise, and a steady salary rather than a varying paycheck based on hours worked.)
We do, and in fact it is necessarily so. See "Invisible Hand": (the following is a quote from http://en.wikipedia.org/wiki/Invisible_hand )
the invisible hand was created by the conjunction of the forces of self-interest, competition, and supply and demand, which he noted as being capable of allocating resources in society. This is the founding justification for the Austrian laissez-faire economic philosophy, but is also frequently seen in neoclassical and Keynesian economics. The central disagreement between economic ideologies is, in a sense, a disagreement about how powerful the "invisible hand" is.
"The only jobs that are sustainable are the jobs that produce something that other people actually want."
This is exactly it. You can not stimulate an economy simply by pushing up production on the supply side.
Mark Cuban's idea seems appealing on the surface, but he makes a serious assumption. He implicitly assumes a positive net benefit after you give these companies money and they create jobs with this money.
Look, if you transfer money from the government to the companies to the people then that is just a transfer payment. Moving money around like that does not create wealth within a country, and that is what we need right now. We need to spend money on things that generate positive net present value, and we need to curtail spending money on things that do not meet this criteria.
In order for Mark Cuban's idea to work, all of these companies must be employing the additional labor towards activities that are economically profitable. Here's a quick thought exercise. What is the likelihood of a company being engaged in economically profitable activities given that it is taking advantage of this program? (It is reasonable to assume that a company with a healthy balance sheet and a healthy income would not want to deal with government bureaucracy willingly.)
Also, as a side note, the following quote from the blog post is a bit inaccurate:
"(Stunningly, bailouts excluded)."
That the bank bailouts were repaid so handily owes very little to the bailouts themselves. Thanks to extraordinary measures taken by the Federal Reserve, the banks were able to borrow money at an interest rate of virtually nothing and then use this money to purchase U.S. bonds - effectively lending it back to the U.S. government. In addition to this, the Federal Reserve also took the unusual step of dramatically expanding its balance sheet (removing toxic liabilities from the banks themselves). That was the real bailout, and it was much larger than the pithy amounts that you saw reported by the administration.
To get a sense of the scale and size of the real bailout, please take a look at this graph:
http://economix.blogs.nytimes.com/2009/05/07/fed-balance-she...
Edit: Also, I forgot to mention one more thing. The current negative rates on U.S. debt would almost certainly change if we began to issue substantially more of it. As Europe is rapidly learning, the debt market is far from a static environment.
The point is that we have an opportunity to do responsible investing. I am sympathetic to the argument that the US government is incapable of doing responsible investing. So who is, and how can we get them to act on the US government's behalf so that we all benefit?
Is growth economics the only answer? What about creating a sustainable economy that isn't dependent on infinite growth of wealth?
In some parts of Europe, de-growth movement is quite popular and proposes to shift the focus of government policies from economic growth to population well-being (how this is reached lends itself to debates).
It doesn't mean to stop medical research or technical research, it means stopping to envision growth as being only economic growth. Growth can be seen as progress of human indicators, not the accumulation of things and economic growth for the sake of economic growth (which more and more benefits only rich people).
It originates in the simple fact that the economy can not grow infinitely in a finite world.
That is not to say working less is always a major goal, if someone was doing 20 hour work weeks for 30k they would probably rather have 20 hour work weeks that pay 60k than 10 hour work weeks that pay 20k. The great thing about free markets is they let people balance many of those less tangible goals. However, government policy can easily focus on progress that is out of whack with what people actually want so an understanding that the Chinese population might tolerate more pollution for more growth were an American population cares more about clean air than maximizing growth is nessesary to keep people happy.
The US searched growth in the 2000 at every price, even at the price of over-lending. That is where growth dominates everything at the price of well being, society consistency and eventually economy - see the 2008 crash.
And some people are so ingenious, they'll get richer no matter what you do. To make the typical voter's income at least stay even, the average has to go up then.
1) Bank owns asset of dubious value, classifies it as "Level 3 Assets" which allows it to value it using an undisclosed method that has no correlation with the reality of a burst housing/credit bubble. This also allows the bank to hide its true financial state by escaping writedowns.
2) Market for these assets is dead, especially since government bailed out Fannie and Freddie, driving investors to a new "low-risk" market (government backed mortgage securities) and away from non-government backed securities.
3) Fed offers PPIP to buy up this trash. As a side effect, this effectively lowers the risk of these dubiously valued securities
4) Security of dubious value increases in value, is sold to Fed for profit (sometimes even twice its original level 3 valuation, which already had nothing to do with reality). Fed purchased security using mix of private investor and US Taxpayer funds (such as the Treasury)
5) Fed refuses to reveal the method of valuation for securities, preventing people from knowing how much profit the banks made, and how much the Fed lost out (including US Taxpayer money)
Conclusion: Fed now owns toxic security, bank escapes consequences of poor decisions and/or fraud, Taxpayer money is wasted buying assets for a heck of a lot more than they are actually worth in the real market, barring a resurgence of the housing bubble.
I recommend reading the following article which talks about the failures of PPIP: http://www.nakedcapitalism.com/2011/01/richard-alford-why-ha...
Economics is more like politics, if politicians were any good at math.
Before making any such broad assumptions please do read some of the Austrians and, why not, even Marx? First of all, like any true Marxist would be first to tell you, there is no "true Marxist".
The reason being that people are still in doubt, was Marx preaching for a sudden proletarian revolution (so, no support for the bourgeois economy and social doctrines, and under this light Keynes is as far from Marxism as Adam Smith himself), or for a gradual improvement of the workers' living conditions, followed by a voluntary surrender of power by the bourgeois middle-class to the lumpen-proletariat? Nobody knows.
And don't get me started on what socialist believes might have convinced Lenin that the capitalist-looking NEP (http://en.wikipedia.org/wiki/New_Economic_Policy) was an acceptable thing in order to support the proletarian revolution.
Not because I think that his thoughts are necessarily the solution but because the lack of constructive criticism.
First of all I didn't read the post to say "this is to solution to end all solutions" but rather here is an idea could it work.
Second how is this a top down approach in any classical sense? His claims is that the companies who think they can create jobs with more money, exist out there and he want the find a mechanism to find them instead of simply distributing at large across the system and see what happens.
Third the US is probably the best country in the world to be an entrepreneur and business. There is very little in the way for anyone to find a need and then go out and build a business around it and there is a huge market for that. If your claim is that it can only be solved by making that part easier then the entire premise of capitalism seems flawed (I don't believe it is and I am not saying you are claiming that either)
The problem fundamentally is that you can only adjust your metrics so far before they become meaningless.
The first step to get the US out of their debt is to raise taxes. That won't make the startup environment better but it will start showing that the US as a country are ready to pay their bills instead of speculating their way out of it.
And before you start calling me a socialist and other nasty things let me just pre-empt this by the following.
I live in Denmark, a country with a progressive tax system +55% tax for the highest incomes and a sales tax of 25%. A car here cost 3 times the amount of a car in the US all because of taxes.
I am a member of the only liberal (in the european sense) political party and is fighting to get lower taxes.
So I am not saying raise taxes lightly. I am simply saying that the US have reached a point where the low tax is working against them not for them.
All systems have thresholds especially economic ones. To keep wanting more of the same ends up creating a self sustaining effect after you reach a certain point. The US have reached that now.
I think Cuban was right that we do have a spending problem. We spend too much on things that are not important. We should cut debt, but the debate around this issue has been framed as a false and confusing dichotomy by the two major political parties.
Someone have to pick up the bill and I have a hard time seeing who that could be besides the american taxpayers.
And just because it hasn't been done before is obvious no natural law
The money that you save by not having a military, can go to buying other goods that those ex-soldiers can provide.
Give anyone some money and they'll save it, not spend it. They'll save it because next week milk and eggs will be more expensive, while houses and electronics will be less expensive. on craigslist. nobody is buying new stuff when the guy down the street is selling his PS3 to make rent.
Essentials are increasing in price. Luxuries are decreasing.
What company is going to create jobs in this environment? And what if you did create jobs making more of X: now X is cheaper. Deflation.
We need inflation. And that means pissing off the Chinese.
We need to accurately price assets. And that means letting some banks fail.
Benanke did his disseration on the Great Depression and essentially stated that to fight price deflation they should have used monetary inflation. That's what we're doing. They don't even publish the M3 anymore but estimates are that the currency printing presses are going at full speed. The problem that Ben didn't anticipate is while rates are low and people want to borrow, banks -- flush with cash to lend -- don't want to. The monetary inflation can't keep up with deflation, which (you're right) is lethal.
The fed is, with QEx attempting to provide greater liquidity, thinking that this will cause price rises, and in turn spur spending and transactions. Of course its having no effect whatsoever. String pushing at its best.
Also: the only people who want to borrow right now are those who are borrowing just to stay fed. Rightly, the banks dont want to lend to them.
by "inflation" I mean "increase in prices", = price inflation
as opposed "greater monetary availability" = monetary inflation
You can't control price inflation/deflation, you can only control monetary inflation.
It doesn't matter why the banks don't want to lend, the point is, Bernanke's plan can't work until they do. (But let's be honest: it won't work in any case.)
I disagree. Gas prices go up when the dollar drops (not the only reason, but a guaranteed one). Make the yuan and the yen vastly more expensive, or just block imports at the port, and prices will go up. Maybe even to the point where it will be cost effective to pay americans to make them.
Most have 2 weeks of savings or less.
If you give somebody money who is already a saver and who already appreciates the virtues of saving -- like myself or probably you -- yes, I'd save it. But that's because I spend a fixed amount, have no debt, and save excess income.
If you give a small windfall (I dunno, $100 to $5,000) to most american families, that money will be spent. Probably a good chunk towards paying down household debt, and the rest to fixing things that have long been neglected. That could be the family car, a leaky roof, etc.
Savings should be the most obvious. You're not going to save your money by hiding it under your mattress. You're going to at least put it into a bank, of not invest in equity or debt instruments. In all of these cases, the money is going right back into the economy to be used productively. If you put it into a bank, they'll loan it back out to someone in a mortgage or such. Equity investment directly fund businesses. And so on. So when you're saving, you're really redirecting the money to someone who believes he has a use for it -- and who believes strongly enough that they're willing to pay for the right to try it. And this is actually what the OP wanted in the first place, but the current system has better controls for ensuring that the money is used productively.
If I spend the money -- say, on a leaky roof, as you suggest -- then that money is going to the roofing contractor, and thence to his employees and the producers of the shingles and other materials. Again, it's being used productively.
Less obvious is if I spend the money on a TV, for example. Some of that money goes to the retailer. But much of it is going to, say, a Chinese company that makes it. This gets into more economic theory like "comparative advantage", which I'm not going to explain here, but simply state that in the bottom line it still makes us better off. People will protest that this contributes to the so-called "trade deficit". In the case of this discussion (at the very least), that trade deficit is a good thing. If we (collectively, somehow, for the sake of simplicity) owe a Chinese company some money, that is precisely the same thing as them pumping stimulus money into our economy! Perhaps you buy a Japanese car; that "trade deficit" is actually executed by, say, Toyota using the "owed" money to build a factory in America, and that again is exactly what we want.
Except that they aren't.
http://research.stlouisfed.org/fred2/series/EXCRESNS
The banks just stuff them into a safe haven. Hence the phrase "Pushing on a string".
Your roofing contractor might pay his employees, or he might try to do more with less people and pay off some debt. Or they might pay of some debt.
As soon as that money enters the bank, its gone, as far as the economy is concerned. It used to be that money was passed along in a long chain of transactions. Now there is a non-zero probability that at any point in the chain, the money goes into a bank to pay off debt, and at that point, its gone for good.
How do we change the bank's behavior? We have to create an economy where loaning out money is the only way to preserve value, instead of the opposite.
Fixing things doesn't help with deflation either.
"The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design."
Regardless, the answer isn't jobs, but transitioning people from being skilled in trades that no longer matter, and becoming skilled in modern trades, such as programming, design, etc.
1) Companies don't really need cash, currently.
2) This is easily gamed. (Hire people for the minimum amount of time, fire again)
3) It excludes major sources of employment - the majority of gross job gains comes from companies with less than 50 employes.
4) Jobs worth creating require qualifications. People are not interchangeable cogs, you would need to create jobs that actually fit unemployed people.
Twitter: http://latimesblogs.latimes.com/technology/2011/04/twitter-g...
Datacenters: http://www.computerworld.com/s/article/9217259/Apple_Google_...
Ford Tax Breaks: http://www.huffingtonpost.com/2010/05/24/fords-to-invest-135...
I normally love Mark Cubans blog, but this is a terrible idea. If a company cant afford to keep employees it shouldn't hire them. This would be almost as bad as the bailouts were.
This would send inflation skyrocketing.
What happens to all of those small companies that don't have the connections or legal know-how to get the government money? They go out of business because they would not be able to afford the new inflated cost of hiring.
What happens to the people who can barely scrape a living out of their current wage when the inflation this would cause sends food prices sky rocketing?
Because if you look at the data, current inflation doesn't seem to be out of line with inflation prior to the 2009 economic collapse:
http://www.fintrend.com/inflation/inflation_rate/CurrentInfl...
More to the point, the whole point of borrowing to invest, is that if done successfully, your business grows in a sustainable manner, and you can continue to pay that person money for the business you have built.
This is how business loans are supposed to work. You start with nothing, you get a pile of money, you build something that will earn that money back, and hopefully have built a stable company in the mean time that will continue generating wealth even after the terms of the loan come due.
This shouldn't seem foreign on a startup and entrepreneurship site.
From what I've read, inflation isn't a problem in the current economic climate because even with the increased money supply, no one is actually spending any money (or more accurately, most consumers don't have the money to spend) so there is no reason for prices rise since demand is low.
I have no idea how Cuban's idea would affect inflation.
Of course this is HN, so for all the knowledgeable people out there, please correct me if I'm wrong.
Inflation control is (like most economic problems) a balancing act. In my opinion way too much attention was paid to potential inflation problems in 2009/2010 instead of the real problem: unemployment.
Food prices are going up universally. It's not a matter of shopping for groceries, it's knowing how much other nations are paying.
Energy prices are 50% off their all time highs. When they were high, it was a demand story, not an inflation story. Likewise, with food.
In any event, even if all of those statements were true, that's not what inflation means. Inflation is not "things get more expensive", it's "money gets cheaper". There's a big difference.
Inflation is low. Very low. Too low, in fact. If inflation were a couple percent higher, and nominal GDP were also a couple percent higher, the economy would look a lot better than it does right now.
Wasn't cheap money from the Fed supposed to do this a couple of years ago?
I think it's time for people to start to accept that money supply alone doesn't cause inflation.
It has done it. Food prices are at all time highs and causing global social instability. Gold is at an all time high. Energy and commodity prices are very high.
You are mistaking an inflationary depression for equilibrium.
There is a range of causes blamed:
Initial causes of the late 2006 price spikes included droughts in grain-producing nations and rising oil prices.[4] Oil price increases also caused general escalations in the costs of fertilizers, food transportation, and industrial agriculture. Root causes may be the increasing use of biofuels in developed countries (see also food vs fuel),[5] and an increasing demand for a more varied diet across the expanding middle-class populations of Asia
Oil is down in price since 2008, not up.
Increases in the Gold price isn't a measure of inflation, it's a measure of the lack of confidence in other investments.
It might be a highly efficient way of developing new technology, but prizes don't immediately generate large amounts of new employment.
Think about it: most X-Prize-type competitions rely on the intelligence of a few highly skilled people, and even then only a few of them will actually win. The other teams generally make a loss, and so have to rely on "investors" to pay the bills.
To fix employment you need to employ 10,000 ex-auto workers, who at best have some machinist skills if you are lucky. Then you need to do it ten more times. Then ten more. Then you need to do the same for the construction industry, for hospitality and for agricultural workers[1][2]. What's more, you need to do this fast - in months, not years. I cannot imagine anyway to structure a X-Prize to do that.
[1] See the unemployment rates by sector: http://www.bls.gov/news.release/empsit.t14.htm
[2] To be fair, the hospitality industry will probably pick itself up once employment improves in other sectors so you might only need to generate a few 100K jobs instead of a million.
Nurses, care-takers: Unemployment rate = 5.9%, with 1.2 million (already trained) people unemployed
Welders, electricians: That would be either the construction sector (Unemployment rate 13.6%) or the manufacturing sector (Unemployment rate 9.2%).
Re-training will help some people, but isn't immediate and will never help the majority.
There seems to be a weird view that manufacturing in the US will be dead in the future because it is struggling now. It's probably worth noting that rich, first world countries like Germany have huge manufacturing sectors, employing large number of people, and yet have to compete directly with countries with low wages. It isn't clear at all why some people believe the US is fated to lose its manufacturing sector but Germany isn't.
It is just that there will be a lot less jobs in the future.
Politicians from both parties loved photo ops where some entrepreneur was creating jobs, especially in a distressed area in exchange for state money. Even if all the promised jobs never got created.
Then it got to the point where a con man showed up who never intended to create any jobs.
http://record-eagle.com/opinion/x908934006/Editorial-MEDC-ou...
Do nothing.
Let the bankers steal from the middle class. Let federal reserve steal more money from its citizen. Let the government accumulate more debt. Let the jobs go overseas. Let inflation run rampant. Let people go deeper and deeper into housing/student debt. Let small businesses die.
In fact, encourage it.
Why? because the current system/society, as it stand, is dying body that cannot be healed. It is too old. Too lazy. Too morally corrupt. Too broke.
Because common citizens will wake up one morning. They will be out of a job. They will be losing their house. They will be in massive debt. And they will not be able to afford even the most basic food/gas.
Then they will be truly angry. Not angry as in chatting about it online. Angry as in massive protests in the capitals. Angry as in shutting down major websites. Angry as in rioting. Angry as in burning down houses. Angry as in everywhere.
Only then will there truly be changes.
Just as tempting and probably just as reckless, I think.
I suspect that the changes you would see under your scenario are closer to 1789 than 1787.
Who cares about 300 million citizens suffering through a total economic collapse, as long as The System improves? It should be encouraged, they should sacrifice themselves willingly to the idea of a better System.
Of course, I am very tempted to see 'what happens' if we just let everything continue on the path of destruction. Follow your suggestions, vote for a Trump/Palin/Bachmann trio of president/v.p./secretary of state (not necessarily respectively), etc.
If I read this post within a week of finishing Atlas Shrugged, I would agree wholeheartedly! Maybe even throw in a couple of ideas on how to fight the System.
Objectively speaking (if that is even possible), many good things did come from revolutions.
There are ~6M firms in the USA but only ~90K with revenues of 100M+ so his pool is very small to start with. Firms with 100+ employees count for 1.8 percent of employment and capture 65% of total payroll and something like 2/3 of total revenues. I think ANY company that is pulling in 100M in revenue has probably got things figured out already. The vast majority of employers in this country are small firms so why not try to help small guys turn into bigger guys.
So I think if anything, there should be more investment in firms with less than 100 employees, less than 100m in revenue and less than 10 years old.
Companies are flush with cash. The government can't figure out how to spend money productively. So, we're going to have the government borrow more money to give it to companies that don't need it, using its incredible inability to allocate capital to decide which of these companies to allocate capital to?
If the government can't productively allocate capital and companies have enough, why, in the terms of this post, exactly is it such a bad idea to have the government stop borrowing all the available capital and let the companies start allocating it instead?
(I italicize some words to emphasize that it is the internal issues with the logic of the post I am questioning. I may strongly disagree with it, but I am well aware of the liturgy for Keynesianism.)
2) If you dislike Cuban's target for investment (fixing unemployment, the purported goal of the Tea Party and GOP), then please, by all means, pick a different avenue by which the government could make a return on investment.
A WPA-type program to improve transportation, energy and communications infrastructure. Lot's of jobs across many sectors, from professional to artistic to skilled & unskilled labor, most of which can be in the private sector (contractors/contracting firms).
We tried that and can't do it today. Instead, we piss away large amounts of money and don't build infrastructure.
Policy recommendations should account for reality, not "if we do this right".
There are upgrades to be had: HSR (where it makes sense), more modern air traffic control, intelligent transport systems, multimodal facilities, high-speed internet, power generation (green or otherwise), smart grid, flood contro, seismic refits, etc.
But we don't even need to discuss upgrading the infrastructure, most of what we have now is subpar because of decades of deferred or non-existent maintenance. We will need to spend billions just to get our existing systems up to par,
When? ARRA was sold as that, but it became more about tax cuts and propping up state governments that a public works program.
> and can't do it today.
We're going to have to do it some point: http://www.infrastructurereportcard.org/
May as well do it now while people are out of work and interest rates are low.
> When? ARRA was sold as that, but it became more about tax cuts and propping up state governments that a public works program.
And your new program won't be that because ....?
We can also look at currrent infrastructure spending. It's basically all jobs program, starting with the Davis-Bacon requirement.
> We're going to have to do it some point: http://www.infrastructurereportcard.org/
> May as well do it now while people are out of work and interest rates are low.
Um, the facts that we need to do it and now would be a good time to do it do not imply that we'd actually do it.
We're doing a lot of infrastructure spending now. How about fixing it before embarking on an expansion? That way, we won't have wasted a lot of money that could be used when we're actually going to fix infrastructure.
Yes, interest rates are low now, but lenders want their principle back as well, so wasting money now can affect our ability to borrow and spend when we're serious.
Yes, I think perhaps maybe the government should not be doing what a business would do in this situation.
Again, I remind you I'm not actually trying to engage in a debate over proper economics in general (and trying very hard to carefully refrain from injecting too much of my opinion, it took me a few edits on the first message), I'm trying to work out what exactly this post is trying to say. It isn't clear to me at all how Cuban gets from the the government of today, which is incapable of allocating capital, to the government of tomorrow, which when presented with a menu of even more decisions than it has to make today, is then capable of allocating capital intelligently in an even tougher decision-making environment. Why would the government not simply fail in the ways it is failing already in the allocation of capital? What's the connecting step?
So, what would you do when faced with an investor who's a complete fucking idiot, but can borrow money cheaply?
What is a fail-proof investment plan for this trustifarian?
Why can't we find a plan, or demand that our government do something with this opportunity? There is a hack to be had in here. Who can we trust with this opportunity that the government can farm it out to? What would the terms have to be in order to ensure that the government can make a return?
btw, upvotes for you, thanks for the conversation :)
... tell him not to borrow money?
Is that really such a strange idea?
In fact... how can you seriously entertain any other answer? (In this case, limited to the investor case, not the investor as a standin for the government. This may or may not apply to the government, but what is this metaphor supposed to be proving, anyhow...?)
One of the human irrationalities is a belief that for any set of constraints there must be a solution, but that's not true. An "idiot" investor has no winning solution (virtually by definition in this case), and therefore the answer is not to play. There is no force in the universe that says there must still be a way to invest and prosper anyhow.
Instead, they are the scorekeeper and it seems by the current debate that there is many people that doesn't understand this.
TODAY. However, do you really think that interest rates will remain low until that money is paid off?
So, er, yes, sounds like that might be a reasonable assumption?
The point that others have brought up is that if the US Government borrows an incredibly large amount of money and pushes up the Debt/GDP ratio, future, additional borrowing will become more expensive. But if today's borrowing is used efficiently, it should drive up GDP and reduce some of the need for future borrowing.
TIPS aren't fixed rate, but I don't know what fraction of new US debt is TIPS.
More to the point, you're assuming that we won't have to roll-over that debt, which only happens if we're not running a deficit. Since we are for the forseeable future....
Your second point is, of course, right on. But if we have to borrow $x, better to borrow it now at ~0% than later at (likely) >0% interest.
According to that reasoning, interest rates almost never change because they're typically a given premium to inflation.
We don't accept that reasoning because you repay what the note says, not the relationship between that number and some other number.
> Your second point is, of course, right on. But if we have to borrow $x, better to borrow it now at ~0% than later at (likely) >0% interest.
Umm, no. Borrowing now at 0% and rolling that over later to a new loan at 10% is not better than simply borrowing later at 10%.
Yes, borrowing now is better if you do something useful now with the money, something that you'd delay by borrowing later.
However, there's little evidence of that occurring. We're running up lots of debt on dumb spending. If you want to do some smart spending, take the money from dumb spending.
For long-term lending, as long as the Fed doesn't change its stance, the rates will only go up if the economy recovers. If the economy recovers, government won't have to borrow that much anymore.
And if you were still unhappy about the interest payment of government, the government could just change the way its monetary policy is implemented and push down the yields of long-term bonds as well. After all, the government administrates the US$ monetary system. Operationally, they would just instruct the Fed to target long-term yields as well, and then the Fed would change them in the same way that it changes short-term yields (by doing open market operations).
--> infrastructure projects!
If it is a given that money can be borrowed for basically zero interest rate, why not invest it at long term low yield infrastructure projects such as: roads/bridges, high speed trains, electrical distribution networks, or my personal favourite: scientific research.
Just because a business is generating profit (has 'enough'?) doesn't mean that investing more into that business wouldn't make it more profitable and generate a big positive return.
In fact, investing into already successful businesses to help them grow faster (seems to be what Mark is advocating) seems like a great investment strategy if you can get hold of the cash to invest cheaply.
"The committees would then look at the submissions, starting with the ones that promised the most jobs at the least cost."
Yoiks. Investment by government committee. Way to allocate all the wrong money in the wrong place
Individuals now have debt = to about 119pct of income vs historical levels of .17pct in the 40s, 55pct in the 50s , 65pct in the 60s and a high of 133pct in 2007)."
This is clearly wrong. Never mind cutting taxes, that's much too indirect. New plan - the government borrows as much as it can at negative real interest rates until it bids those rates back down to 0. Then it just mails checks to every American. Some will spend the money (probably with great efficiency! They know what they need!), but most will use it to pay down debts. This is a feature, not a bug. The debts that Americans owe have positive, and in some cases substantial, real interest rates. Bam! You have just accomplished to biggest interest rate arbitrage play in history.
1. What work could be done that would create a better world for us?
2. Why isn't this work being done? Is it regulatory paralysis? Insufficient coordination amongst stakeholders? Are the rewards difficult to capture by the people doing the work? Are there not enough people with the requisite skills?
3. Can we stimulate or coordinate the private sector to organize labor and capital to get this work done? If not, why not?
If you've thought about these questions for a while, it is absolutely shocking to listen to the economic debate going on around us today. We have two camps who are both way off -- some people (e.g. the author of the blog post) assume that throwing money at anyone who asks for it will work, but it doesn't (they just waste it). Others think that letting people keep the money they have previously earned and staying outta the way will work, but it doesn't (they just hold on to it or waste it).
I don't know what the solution is.
The problem is not, "how do we create more GDP" (forever and ever and ever) it's "is there demand which is not being met by supply." At the core, that's what a recession is. The answer is clearly yes in some industries (health care comes to mind) and is clearly no in other industries (real estate and retail comes to mind).
You can't just will an economy of 300m people to a certain state. If people spent more time thinking about optimal long term outcomes and then spent their time removing impediments to those outcomes, instead of pretending like there's some magic incantation that is simply being _blocked_, we'd be having a much more productive national conversation right now.
How do you calculate the return on health care for old people, or school lunches for kids, or clean water in your faucet, or adding a lane to a congested highway?