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Politics : American Presidential Politics and foreign affairs -- Ignore unavailable to you. Want to Upgrade?

To: Peter Dierks who wrote (34250)	3/20/2009 3:06:37 PM
From: DuckTapeSunroof	Read Replies (1) \| Respond to of 71588

So I suppose we are theorizing about THREE different scenarios: 1) Do absolutely nothing. (No policy at all to react to the financial crisis). Likely results deeper and more prolonged near-term phase for the financial crisis and deeper initial trough in GNP. Also however, no "moral hazard". 2) Do as was done... TARP I & TARP II... TALP, etc. Likely results: truncated initial period of economic decline, but at risk of longer-term inflation (unless subsequently mopped-up). Also GREAT "moral hazard" as nearly all the Fat Cats who's extremely imprudent risk-taking and excessive leverage (example: AIG selling ten times as much in CDS based on subprime mortgage originations as existed in all the American subprime market in original paper to begin with... MASSIVE un-collateralized PURE GAMBLING. Other examples: 60-to-1 leverage at Fannie and 40 or 50-to-1 leverage at some I-banks) have their bacon pulled out of the fire, and all on the backs of citizens making perhaps 1/100th. of what they make.... 3) Option #3 --- rescue NONE of the financial institutions (or consumer products companies, or industrials, etc., etc.) Instead, use Ben's 'helicopter' and just 'air-drop' $10,000 to every man, woman and child in America. Likely results: Every bit as good a 'Keynesian' counter-cyclical economic stimulus (cutting short the plummet in GNP) as the TARP/TALP 'save the Fat Cats' policy, (with exactly the same long-term inflation risks unless subsequently mopped up), but with NONE of the "moral hazard". On the other-hand we lose (for a while anyway) the top tier of our banks.... Conclusion: crazy as it sounds, #3 probably has a better risk/reward profile then either #1 or #2. :-)

To: Peter Dierks who wrote (34250)	3/21/2009 10:06:32 AM
From: Jim S	2 Recommendations Read Replies (1) \| Respond to of 71588

I heard some "expert" on TV the other day say that personal income taxes in the US amount to just over a trillion dollars a year. So, imagine the "stimulus" if instead of spending a trillion dollars in pork, Congress instead were to simply announce that for the year 2009, there would be NO PERSONAL INCOME TAX. Cost to the gov't would be about the same, but just imagine the boost to the economy. Not to mention the goodwill it would inspire to have a full year with no 1040s to send in next year. Of course, such a system would never pass Congress. They want to provide favors to friends and repay donors. It would be "unfair" that rich people would get more dollars of benefit than blue collar workers. Worse still, those who pay no taxes would get no benefit at all -- horrors. Even so, it's nice to dream.