(NPR) Why Another Stimulus Might Not Help Us Rebuild

“Stimulus” may be a dirty word in Washington these days, but don’t we need another boost to kick-start the economy?

Many economists say yes ”” even if it may not be politically feasible after the election. Economic historian Niall Ferguson, however, says a second round isn’t a good idea at all.

The Harvard historian tells NPR’s Guy Raz that while it might have some impact on unemployment figures, another stimulus also carries with it a tremendous risk.

“The risk is that you finally stretch the credulity of financial markets to the breaking point, and investors ”” not only in the U.S., but abroad ”” say, ‘You know what? U.S. fiscal policy really is out of control,’ ” Ferguson says.

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Posted in * Culture-Watch, * Economics, Politics, Economy, History, The Credit Freeze Crisis of Fall 2008/The Recession of 2007--, The Fiscal Stimulus Package of 2009, The U.S. Government

4 comments on “(NPR) Why Another Stimulus Might Not Help Us Rebuild

  1. Sick & Tired of Nuance says:

    If they want to stimulate the economy, give everyone a one year income tax holiday with no business asset depreciation and no income tax credits (so the half of America that is sponging off the folks that are productive through tax credits, do not get to continue to benefit from the wealth transfer). That would put thousands of extra dollars in earner’s pockets and money has a tendancy to burn holes in peoples pockets. Meanwhile, the massive increase in spending will make corporations much more profitable and they will send more tax dollars back to Uncle Sam. The lack of depreciation (tax credits for businesses) should stimulate businesses to purchase new equipment rather than keeping old stuff around for the depreciation.

    Hey, it may not be a perfect idea, but I bet it would work better than the Trillion Dollar stimulous they already tried.

  2. John Wilkins says:

    He makes a good point – but wouldn’t have that already have happened? There’s no hint of deflation, and people are still buying American bonds.

    #1 – the reasoning behind a tax “holiday” and a stimulus are effective when they increase spending. But very wealthy who get lower taxes tend to save rather than spend. Right now, businesses are hoarding rather than expanding, because that is where there confidence level is.

    Targeted increase in taxes can incentivize companies to spend on their company. Instead of hoarding, they spend their profits on improving their businesses. The profits spent are not taxed (except, perhaps, as a sales tax) as income, because they are… expenses.

    But if the money is not taxed, there’s no incentive to reinvest in the company.

  3. Sarah says:

    RE: “If they want to stimulate the economy, give everyone a one year income tax holiday . . . ”

    But see, Sick and Tired, if they did that, they would not be able to try to control how individuals spend their money.

    And deciding how best your money is spent is what the State likes to do, in both parties’ leadership.

    Can’t wait until November, when we can purge some of that desire to control others’ expenditures out of the corrupt nest in DC.

  4. Sick & Tired of Nuance says:

    [blockquote]But if the money is not taxed, there’s no incentive to reinvest in the company.[/blockquote]

    Huh? You are joking, right? Obama just called for permanent research and development tax credit for U.S. companies to stimulate the economy. By your reasoning, giving companies a tax break for research and development would act as a disincentive for them to invest in research and development! That’s just crazy talk.