What happens when the Stimulus Bill fails to fix the economy?

[Political Heretic]

First, I think a strong progressive spending bill is very important for our country. I do not believe it will worsen our economic crisis, and I believe if we were not in such an immediate crisis it would do a great deal to make our country more economically balanced and sustainable for the long term.

However, I do not believe that the government currently has enough borrowing or spending power to "spend" its way out of this economic collapse, even with a "perfect" spending bill. What I would like to know is what happens to our policy makers six months from now when things are worse?

I get this strange feeling that this is sort of Washington's sort of last hope. You've had the conservative answer to the crisis in the form of TARP spending/handouts to business. Now you're getting the more liberal answer to the crisis in the form of more direct spending on social services and the middle and working class. When both fail - I get this feeling everyone will be standing around Washington speechless.

I was just on another thread griping about some "end of the world" post from Alternet. Because I think the tone of some gloom and doomers is a little annoying. I don't think anything is ever "over" when it comes to human beings and their commitments to their families and communities - we can rise from the ashes of almost any catastrophe and create a situation worth fighting for. But I also don't think that our policy makers still fully grasp the seriousness of what is happening to our system right now. They still act like its just a "rough patch."

I think a lot of people on both sides of the isle in Washington are in for a serious shock in a few months....

We're in too much debt to successfully enact the kinds of radical emergency programs that were tried during the great depression. And we're too big of a country at 300million plus people. We literally don't have any means to respond to a continued economic collapse -- so what happens next?

[Orrex]

1. There will be calls from the Right for Obama's impeachment, and they won't stop

[lostnotforgotten]

2. US Defaults On Debt - Currency Becomes Worthless - We Enter 2nd Great Depression

eom

[Idealism]

3. We won't ever default

We can just print more money. The world is forced to accept it, or else their economies will falter. China needs our consumerism to stave off revolution and civil unrest. Without the U.S., OPEC isn't shit. Without the U.S. sending billions overseas to other countries, they are screwed eventually too. Every major country in the world has a vested interest in the U.S. dollar staying the reserve currency and the U.S. economy maintains its global leadership position.

[Tuesday Afternoon]

5. Interesting...I just can't wrap my head around the concept that

printed money is bascially not worth the paper it is printed on. :dunce: :shrug: :wtf:

[Idealism]

12. Thanks to currency markets,

One dollar is worth whatever investors say it is. It is like that for every major nation (except China, but thats another story). The more one looks at unfettered capitalism and "free" trade, the more you envy Socialism. :(

[LakeSamish706]

6. I'm not sure I see it that way actually.... I see another country taking over where...

the US dollar has left off. Not sure which country might be in a position to do this, but it might happen.... Guess we will see.... The US is in deep shit since Bush came to office..... When Clinton left the US had a debt of 5.6 Trillion and now we have a debt of 10 Trillion plus.... This country is broke plus........

[Idealism]

10. A broke American is more wealthy than a broke (insert Country here)

At this point, and in the near future, there is no country that can replace the US consumerism. Think of it in these terms: Our 14.5 trillion GDP is 70% consumer spending driven. You will see both numbers shrink significantly, but the ratio of consumer spending- even in the wake of this possible Depression- drop to at the lowest around 50% consumer spurred GDP. We don't make anything here; we have to import things. If China demands more money to ship goods to the biggest consumer in the world, then Malaysia will gladly take China's place as the cheapest labor force. Once Malaysia wises up to it, you move to another country. Rinse and repeat. That is how globalization works. It brings the standard of living down across the top, and raises the bottom. It is a race to the bottom, for the US especially.

[sandnsea]

11. We were at double this level in 1944

Debt as a percentage of GDP. We've got a ways to go really.

[Idealism]

13. I don't recall it being that high, are you certain?

Public debt this year will surpass 80%...

[sandnsea]

15. It was 36.8% in 2007

Are you sure? And it was 120% of GDP during WWII. That's why the tax rate was so high in the 50s and why Kennedy could reduce it in 1960. Alot of the WWII debt had been paid. Republicans always fail to mention that little detail when they praise his reduction of the tax rates.

I don't consider Wiki an indisputable source, but it is quick.
http://en.wikipedia.org/wiki/United_States_public_debt

[Idealism]

18. Here is a great source, Ma'am

United States public debt was 60.8% of GDP (2007 est.)

https://www.cia.gov/library/publications/the-world-factbook/geos/us.html#Econ

Public Debt is easy to figure out: It is what the government owes (National Debt) divided by that country's GDP

I should go edit that Wiki entry, but I am not html saavy and editing takes me forever!

[sandnsea]

23. Here's a better source

That shows the percentage of the debt that is being covered by FICA money, primarily, which those people who don't pay taxes are paying - and which counts. That makes it 36.8%.

http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=199

[Jim Warren]

26. "I see another country taking over.........."

Really? Which country would that be?

[shanti]

31. or a new world order

:tinfoilhat: we could be using the amero sometime soon. you know how "they" like to the solution to our problems after they've created them...

[Oregone]

4. A new one will pass

Hopefully it wont suck as bad and will be much bigger. Thats how these things go

[NRaleighLiberal]

7. think REM - It's the end of the world, as we know it. I truly believe that.

What we were doing - the world was doing - was/is unsustainable. So the shit will indeed hit the fan.

In crisis greatness/ideas/solutions can emerge - but only a few will really see it....and change comes very hard for people.

[sandnsea]

8. It isn't supposed to "fix" the economy

It is going to be a long slog to get out of this. It's supposed to keep that slog from being at a Depression level for 5 years instead of a recession level. Unless we make some huge break-throughs in alternative energy or stem cells or something like that.

[terisan]

9. High Interest Rates, Inflation? War as Stimulus of Last Resort ?---People and mid-

level and small businesses keep trading and spending amongst themselves and ignore government/big bank/multinational corporation complex?

[BlooInBloo]

14. Kill yourself now. We're doomed.

[Tuesday Afternoon]

17. bwahahahahahaha --- after you

minding my manners, here :hide:

[Believing Is Art]

16. Depends which side gets to the media first and which side is louder

If the right does, we can expect more tax cuts and a freeze on non-defense spending. This won't work, the downturn will accelerate and we'll end up in a depression. If we're there before 2010, we will gain at least one more seat in the Senate. If not, we'll lose some and probably lose in 2012. I don't want to think about what would happen then.

If we get to the media first and yell the loudest, some repub senators from blue states will be forced to cave or risk getting voted out in 2010. Then we need to pass through infrastructure spending, financial market regulation, education, health care, alternative energy spending, and tax hikes on corporations and the wealthy in about that order. History shows we can't count on elected democrats to do the job, so it may be that we need to write into papers and call into radio shows. If you live in an area that needs stimulus spending, or, even better, if you live in an area that receives some of this stimulus spending and it's been a success, call a local news station and suggest they do a story on that. For example, the steel plant in my hometown has only been on a skeleton crew for the last few months. Infrastructure spending would put them back in business.

I don't think we can worry about the deficit right now. If people get back to work, that will start to correct itself. Even if Obama doesn't repeal the Bush tax cuts, they'll expire soon anyways.

This fight is going to be held in the media, and if our elected democrats are unwilling to fight it, we will have to do it for them.

[Still Sensible]

27. Yes, I think the key is that the President has the bully

pulpit now. And he needs to use it vigorously one this bill is passed (and the TARP II funds are allocated) to move steadily forward, control expectations, remind the masses how the republicans got us into this mess and tout every modest success along the way. He also needs to make targeted new proposals, some of which will be individual bills to go ahead with certain things that have been negotiated out of the current Recovery Act, to enhance the effectiveness of the plan. And he needs to point out every opportunity to show the republicans as obstructionist minions tied to a worn out and failed ideology.

[tom_paine]

19. Blame the Jews...I mean... the Liberals

NOTE to Self: Remember, Nazis say "Jews" and but Bushies say "Liberals" because good old fashioned medeval Bushie racial hatred has briefly gone out of style...in public...unless you use Bushie codewords.

[stillcool]

20. I don't understand the logic behind..

the worries about the 'debt'. If we do nothing..continue to hemorrhage jobs, states go bust, banks go bust..yada, yada, yada...how are we going to pay back the debt we now owe? Is new debt the only debt that matters? Investment in our country, is a bad idea? If you can't spend the money so you can make the money, what is there to do? Tax cuts?

[Still Sensible]

28. Unfortunately it doesn't matter a whole lot because

politics today isn't about fiscal responsibility. The only argument is about what you go into debt paying for. On our side it is about effective government and social responsibility and on theirs it is about "protecting our way of life," whatever they define it to mean, more often than not it means protecting the wealth of the powerful.

[stillcool]

29. we already are in debt..

if people have no jobs how do we not incur more debt? I know these people don't give a shit about the condition of the country or the people, but who pays for the Pentagon, and where are they going to get the tax money they need to appease their greed?

[Still Sensible]

30. No question.

The only times we have made a significant and prolonged dent in the national debt it was because the economy expanded. If we do nothing now, the economy cannot expand and will instead contract in a scope we haven't seen in 80 years. Only the republicans, for whom the propagation of their failed ideology takes precedence over the common good, now claim some mantle of fiscal responsibility. Just like FDR faced so long ago, the way to climb out of this mess is to be bold. To significantly raise taxes now would be counterproductive to the effort. And frankly, there better be some measurable progress before 2012 or the GOP will just say "I told you so" and we could once again go marching down their failed path.

Since the Reagan administration the politics of fiscal conservatism have largely dissolved. It's not an issue of spending vs. not spending. It's a fight between multiple sides over what to spend money on. Once Reagan's policies disproved the dogma that deficit spending causes inflation (by running up record deficits at that time) it all changed.

And if he didn't think he needed to do it to get narrowly reelected, Bush wouldn't have pushed the Medicare prescription drug bill in '04 because such "social" spending is antithetical to them.

[leftofthedial]

21. the repukes will claim "credit"

for opposing it.

[eilen]

22. Well, i think the start of a stable economy

is for people, companies etc. to stop borrowing for day to day expenses. I am not anxious to see the return of needing big bank loans just to meet payroll. It is bad business.

Same goes for states. We all need to live within our means on a micro as well as a macro level.

Over leveraging is not sustainable.

So things won't go back they way they were. They will be better. The stimulus package, which really should be a relief package should be geared to assist the American people in the transition, bankruptcy reform, providing jobs, education grants, tax incentives for small business, micro grants, provide healthcare security, infrastructure updates, improvements, investment in r&d for green/sustainable energy etc. We should encourage the small local bank/credit unions with less emphasis on the banking behomeths that are so big they can't even conceive on how to scale back and provide service, fiduciary responsibility to their customers/members. How about giving the credit unions and small banks incentives to reorganize the mortgages and help prevent foreclosures in their communities? Use TARP funds for that!

And a real effort must be made to scale down our presence in the Middle East and end the wars going on. That is a black hole of bad karma and giant dollar vacumn.

[anonymous171]

24. A huge shitstorm. The GOP will blame excessive spending and the media will swallow it.

[kenny blankenship]

25. They will go back to the well, but they will find that it is EVEN HARDER to get money the 2nd time

Here's the problem with the stimulus bill - it's not big enough to fill the hole projected to open up in our GDP.

A contracting GDP sets up a feedback loop of effects that causes further contraction in GDP. To get out of this "trap" requires that you take all the fiscally stimulating medicine as fast as you can possibly swallow it, inject it, whatever. "All of the medicine" roughly equals the size of the projected hole in GDP. Wedding yourself to pallid incrementalism in such a dire emergency may prove worse than doing nothing. Say you have a projected 10 gazillion dollar GDP contraction coming. But you lowball your stimulus bill down to 6 gazillion in order to make it more palatable (to your enemies) Then after lowballing the initial figure, you further compromise with the people who actually want the economy to crash, (since they want your presidency to fail), by weighting the "stimulus" to the relatively ineffectual taxcuts (which are preferred by your enemies), and reducing the overall stimulus figures even more. Great, now you have a 5 gazillion dollar stimulus to fill in a 10 gazillion dollar tiger trap. It won't work, but you tell yourself it's worth passing anyway because you can always come back later for more money. And that's where you're setting yourself up for failure and empowering those who wish you to fail.

You have set yourself up for failure--painfully drawn out, incrementalist failure -- for two reasons: when you come back for more money your opponents will be even stronger than before, having been armed (through your prior timidity) with the argument that you're "now throwing good money after bad", and that you're simply continuing a failed and hideously expensive policy because you're a bad leader who dogmatically and arrogantly refuses to admit to failure. Your approach manifestly didn't work before- they'll all scream- so what fools do you take the people's represenatives for when you tell them it will work now, and they must let you try again? If you think the Repukes and Blue Repukes are a pain in the ass now, just wait til we have to negotiate with them on Plan B after Plan A doesn't cut it. Second, the effect of your second stimulus package together with the first stimulus will not be equal to the effect of applying the sum of the 1st and 2nd stimulus bills right from the start. If you pass a stimulus of size x and it doesn't work fully, passing a second stimulus of size x probably isn't going to work either - and now the odds are strongly against you getting a second stimulus equal to the first. It will almost certainly be smaller because you will have weakened your negotiating position and weakened the perceived validity of your argument pro-stimulus.

A doctor operating on a cancer patient doesn't remove half the known malignancy now with the idea that he can come back and get the other half later when the patient fails to go into remission. The doctor removes all the malignancy that can be found, as fast as possible. And a doctor certainly would not remove only half the known malignancy knowing that he'll probably be able to remove less than half of what remains later.

[EmeraldCityGrl]

32. There is no way out of this.

Start preparing, hone your survival skills and take care of each other.

[Greyhound]

33. We actually do have the means to address the collapse, just not the will.

We will continue to muck around and pretend that the problem is elsewhere until things are much worse.

The problem is the fractional reserve central banking system and the parasites that own and run it.

But we are not ready to address that problem yet.

[roamer65]

34. Hyperinflationary depression and then the country breaks apart.

Zimbabwe is a current example.