The Jaker

Mostly rational politics, with occasional rants about how a few crazy Republicans are ruining the country.

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Tuesday, January 13, 2009
Is it really "Stimulus" we need, or something more like "Hardship protection"
I'm totally out of my league here - the likes of Paul Krugman, Larry Summers, Tyler Cowen, and other economists are much better equipped to opine on these matters.


When I read in the news that the trade deficit has dropped to its lowest level since 2003, or that Americans are forswearing credit card debt and instead actually saving money, it makes me think... aren't there some good long-term things being learned during this recession, and perhaps we should let them sink in a little more before we try to spend our way out?

Yes, I recognize that this is easy for me to say: I have my job and my house. I realize that millions of people are out of work, facing agonizing choices of what bills to pay, losing their homes. And I think we should help those people by providing direct assistance in the forms of longer-lasting unemployment insurance, universal health insurance, education grants, and mortgage revalautions.

What I have a problem with are the measures aimed at increasing spending. American consumer spending was unsustainably high. Yes it's tempting to try to push it back up to that high to get rid of the temporary pain, but that is itself only a temporary solution. Instead we need to reset to sustainable consumption rates, and I think to some degree the recession is helping accomplish that.

While I'm on the subject (and because who knows when my next post might be), we could really improve things by taxing consumption and use of public goods (carbon tax, gas tax, etc.) instead of income the way we do now. The conversion should be revenue neutral, to ensure that the tax system remains progressive (the less money you have, the greater percentage you spend on consumption, gas, etc.). Our tax system could be set up to much better incentivize the behaviors that are favorable to the public.

For more on the unsustainability of US consumer spending, I recommend the 30-minute movie I.O.U.S.A you can watch free here:
posted by CB @ 11:24 AM  
  • At 9:42 PM, Blogger Bryce said…

    Colin, I totally agree with you regarding a consumption based tax if it replaces the income tax system. Hell, look at half the people Obama has tried to appoint. Apparently none of them could understand the tax code. Instituting a revenue neutral consumption tax that is progressive combined with a larger estate tax would do wonders.

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