So, I have an econ paper which for fun asks us to plan our own stimulus bill giving us a reasonable amount of money of our choice (no 100 trillion deals!) and I figured it would be fun to open it up to the board here. I would do several things.

1)Improve the rail network. The United States is huge, and trains are one of the most efficient ways of transporting goods as well as passengers. A high speed rail network ranging from Boston to Tampa, Tampa to New Orleans/Dallas and then to Vegas, San Fran that would all be connected to a line ranging from San Fran to Portland would be an enviable achievement for any nation, and would offer an alternative to airports. If Canada wanted to extend lines as well as Mexico it would be a great investment made better.

2)Increase energy dependence by erecting large scale wind farms/solar farms in otherwise useless locations. This would keep valuable land free. I would also allocate money to research more efficient versions of various green energy plants.

3)Create more public/not for profit hospitals and a national medical school. This would be controversial, and probably could warrant another post, but I would like to see better designed hospitals placed around the nation, especially if a public health option is seen soon.

4) Repair infratstructure, quite broad I know but many bridges and roads are beat to hell, and many projects are awaiting demolition as soon as money is available so they can be rebuilt. It's time to do that before the infrastructure starts failing.

So toss out price tags, the top priorities for your administrations and why you would choose it!

A single $1 Trillion stimulus package that wouldn't have a dollar for the banks:

$100 Billion to NASA to fund high-tech ventures around space travel with the goal of starting a permanent manned base on the surface of the moon with restrictions that all of that money be spent on either in-house NASA operations or US-based contractors.

$900 Billion split among every man, woman, and child in households within the lower 1/3 tax bracket for the preceeding year.

A single-filing individual with no children would get $9,000. A married couple with two children would get $36,000. US economy would receive a massive jolt of activity causing a huge jump in jobs hiring and small business startups while allowing individuals all over the country to stave off foreclosures and such. Put people into jobs, get money going back to them, start the cycle all over again.

http://economistsview.typepad.com/.a/6a00d...a6579c43970c-pi[
We're looking at a cumulative output gap of around 5 trillion dollars, even after everything we've gone through. Over the next 2 years it's down to 2 trillion or so, so, ideally, we would have a second stimulus package at around, say, $1.25 trillion to close the gap entirely, over the course of the next 2 years, focused mostly in next year.

The focus of this should be reconstruction of the national infrastructure (which is a $2.2 trillion project itself if you believe the studies Decomp sites) and expansion of aid to state and local and government to keep them from cutting spending, especially education spending (which IS being cut).

Probably won't work for practical reasons. First is that we need shovel-ready projects, and planning for something like infrastructure upgrades is probably going to take years. Also, I am not sure if the unemployed workers are the folks that would be employed rebuilding the infrastructure. Ideally, the government would target these unemployed workers.

So for more useful reasons, I'd probably employ a lot of those out of work finance people and do a complete audit of every bank for soundness and investigate what they hell they are doing, and possibly use stimulus money to buy out old crappy banks and put in new management.

do you understand the consequences of doing that? We would have a higher inflation rate than Zimbabwe, which is extremely high.

1 trillion dollars would go to..

1. 100 billion to build a 20footconcrete wall along the entire US/Mexican border. That would employ thousands, and would fix our illegal immigration issue.

2. 300 billion to go towards a new missile defense system, and the military.

3. I would want to include a flat tax for all US citizens, which means the rich pay the same tax rate as the middle class.

4. 100 billion would want some money to towards National Parks and recreation areas.

5.$1 towards educational funding

6. 500billion towards tax credits to businesses that employ in America, along with a massive tax decrease.

7. I would drop the ban on off-shore drilling, and let oil companies drill wherever they want except on National Parks, to help pay for the 1 trillion

Australia has a population equivalent to about 1/15th of that of the U.S
The Australian government dished out a $52.4bn stimulus package mainly targetted towards Working Class families. And the effects have been stupendous, Australia has all but avoided the effects of the global recession. Your doomsday scenario of Zimbabwe-esque inflation fails in light of this.

Again, this is in hindsight, not in addition to the stimulus package that rewarded those who created this nightmare in the first place. The minute public money is given to the private sector, that company, business, entity, etc, should have been nationalised.

NASA gets a lot. Lets get a permanent Moon base already.

Infrastructure, like rail, gets a lot. Distribute this cash to the States themselves.

I'm not sure what the power plant situation in the states is like, but I would probably upgrade a lot of those to be cleaner, like nuclear.

Actually infrastructure does not get a very large cut of federal expenditure (around 3% of total expenditure) and I would target a lot of a stimulus package on infrastructure (which is a lot more than just roads and rail).
The CBO has a nice presentation that shows where money has been going for most of the last 50 or so years.
http://www.cbo.gov/ftpdocs/89xx/doc8958/02...nalInvestor.pdf

Inflation is the result of printing too much money. If the government simply gave a tax break to people it would be paid for by issuing Treasury Bonds that would largely be purchased by the wealthy. No inflation needed, the dollars just go from rich to poor

I would put it all into my personal bank account in order to "fight corruption".

well, all of it except for the parts that I spend on the private island (as a "nature preserve") that is.

Answered below quite well. Again, we're talking about an ALTERNATIVE stimulus to the ones already passed which amount to about $1.6 Trillion. If what you are saying made any sense at all, we'd already see hyperinflation (though not nearly what was seen in Zimbabwe). In actuality, the Fed's actions have far more potential for creating inflation. What the Federal government has done is to pass bills requiring that we sell debt to foreign and domestic buyers (the Chinese, etc). That doesn't spur inflation. Inflation is spurred by monetary actions such as those done by the Fed.



I strongly disagree with the idea of nationalizing anything. I think you can see some nasty after-effects of letting certain things fail, but I think you get yourself into 10 times more trouble when you adopt the "too-big-to-fail" concept as being correct. At the moment, there's little disincentive for the same companies to pull the same crap. In the good years, they made tons of money. When it all fell apart, they got bailed out anyway. Why wouldn't you simply go right back to the thing that made you all kinds of money if you're not looking at any risk?



NASA gets a lousy $13 Billion a year or so. The DoD gets about $600 Billion a year. We're paying over $500 Billion a year in interest on the national debt. NASA is pocket change in the Federal budget, yet it creates huge private sector opportunities both in jobs and in technological advances. I agree entirely on power plant construction. Our situation is basically that we're at 50% coal still which is really screwing up the environments local to the plants (we've even had massive coal waste spills) and a bunch of oil power plants doing the same stuff. The regulatory situation is such a challenge that building a new nuclear plant (or oil refinery for that matter) anywhere in the US is damned near impossible. Then there's the problem of Federal law barring reprocessing of nuclear waste, which is about the dumbest concept Congress has ever managed to enact into law.

I would be strongly in favor of blasting through Federal regulations holding up construction, eliminating the ban on reprocessing of waste (so we can build some nice CANDU plants), and then providing Federal backing for private construction loans. I don't think the Federal government should stick its nose into the business of power production, but I do think it's a national security priority to get us away from fossil fuels as quickly as possible. Ergo, it's entirely proper for the Federal government to ensure it's easy for nuclear and hydro power plant construction loans to be found and the smartest way to do that is simply to guarantee the loans. I think the best way to go about it would be to push the existing coal and oil power plant owners to shift their business into nuclear power such that they aren't fighting the move the entire way. I'd also be perfectly fine with the DoJ making its lawyers available to help fight local and state regulations making it impossible to construct new nuclear power plants. (Notice I didn't say that the Federal government should steamroll either, but should work within the state legal framework to help ease construction burdens)

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If the Fedgov sold $1 Trillion worth of Treasuries, it could simply send the money to the appropriate people (per my example, the bottom 1/3 taxpayers) and be done with it. No immediate inflationary risk there at all (unless the Federal Reserve decides to go purchasing a bunch like it has been to suppress interest rates). In point of fact, my stimulus plan would have seen much lower overall Federal spending than the two stimulus packages already passed.

Yeah, sorry, I mean in my Hypothetical stimulus, I would give NASA close to a blank cheque ("How much do you need to get a permanent moon settlement, plus a manned Mars mission in, say, 20 years"). I know they are running on peanuts now.

1) Hire consultants to help figure out what to do with stimulus bill.

2) Build a wall around everything. Not just the border, but houses, government buildings...everything. Keep those god-damn illegals out!

3) Spend 75% on the military. Specifically, towards the research and development into the fields of the paranormal and supernatural.

4) Spend whatever is left on purchasing 300million+ hats. Because everybody in America deserves a new hat.

$100 Billion is nearly 8 years worth of budget for them. It's enough to get them started on the project and get them to the point where they can somewhat estimate how much they'd actually need to make it happen. You ask them to estimate it right now without them even getting into the project, they couldn't even give you a ballpark figure. 90% of the cost of any ambitious NASA project is stuff they didn't forsee when they began it.

We know it'll cost more than $100 Billion, but if they come back after $100 Billion and say it'll cost $50 Trillion, we can laugh, say 'oh well', and look at doing something else.

Based on $1 Trillion:


1) $300 billion towards improving infrastructure among the states. The money would be given as a grant to each state based on need. Infrastructure projects would include fixing bridges, building and fixing roads, rail, etc. Improved roads will improve transportation and commerce and the construction will help create jobs.

2) $300 billion towards energy improvement and the building of nuclear power plants. Money in this area would also be used to fund creation of wind and hydro electric energy. Secure America's energy and create jobs.

3) $80 billion used for buying up crude oil, slowly, and storing it in strategic reserves while the price is somewhat low.

4) $100 billion towards education and the arts. Grants to states to hire teachers and promote the arts.

5) $120 billion for various underfunded agencies and projects as well as relief to struggling states.

6) $100 billion towards the single payer system!

$1 trillion? $999 billion to an off-shore bank account, and $1 billion to Bill Gates. (Hey, he obviously knows how to make money.)

More seriously, I would make a flat tax which would increase tax income (because less rich people would try finding loopholes) and legalize off shore drilling to make sure I can pay off this stimulus, then I would spend $100 billion on infrastructure, $500 billion towards small business loans and small business stimulus, $399.999 billion on education. Of course $1 million would go to some random charity. Oh, and I forgot that an additional $110 billion would go to my church for offering. (10% of your income. )

i would give education $1, they already get a TON of money, and corruption has spent all of their taxes they get. They need to learn how to control their finances, a new levy every year isn't going to fix the problem, just as they promised it would fix the problem the LAST levy they passed.

A nation-wide voucher program would resolve the problem in a hurry. Take the existing tax dollars, tie it to the enrollment of the child, and let parents decide where to send their kid. Oh noes, public schools having to compete with private and religious schools? Whatever shall we do? (perhaps learn?)

Why the hell did you have to pick Emperor Stranger's avatar? Seriously. You without Limbaugh, ES without the Joker, and Lam and Kenadian with the same avatar have really messed up my WC/BR... not cool.

Also, personally, I think all schools other than public schools should be banned (private, religious, home-school, charter, etc). Also, there should only be 1-10 schools per state (depending on population, of course). This would really simplify budgeting.

Are you kidding?

I really hope so. Banning non public schools is plain stupid, as is the thought that 1-10 schools could educate an entire state of children.

Mao's Great Education Leap Forward?

Obama's Super Awesome Education Leap Ahead.

Brevard county in Florida had to find ways to cut over $100 million due to underfunding in their budget... Education doesn't have a lot of money. (Actually, a lot of teachers and substitutes were fired recently due to our budget crisis.)



I have been boycotting the moderation by removing my avatar and signature. It doesn't seem to be working, but I guess I didn't care if it did or not.

Some general points about effective stimulus:

-Multipliers, multipliers, multipliers. The money the government spends isn't the only effect, but also the people who spend the money end up buying goods and services and employ other people. The higher the better so the government doesn't have to bear the full cost of kicking the economy back into gear. Not all forms of stimulus have the same multiplier effects, either. Tax cuts in particular seem to be a very poor form of stimulus, since the money just gets saved.

-You need to have an exit plan. Effective stimulus is temporary and designed to only boost demand during the depression/recession. If it continues into the recovery period, it's crowding out private investment. Permanently raising the NASA budget for the next century is not stimulus for 2010 and 2011, that's reallocating the budget. Building a dozen new nuclear power plants may or may not qualify depending on how long it takes to actually build them.

-It needs to be implemented quickly and hopefully efficiently. Value-destructive activities should not be undertaken (or maybe you CAN justify getting a return of, say, 98 cents on the dollar because it stimulates the rest of the economy and that SHOULD be productive). If you suddenly give a government agency 10 times their original budget, you are probably going to get a lot of waste because they aren't used to spending that much money and probably don't have any plans suitable to spend that much money. Same with infrastructure spending, a lot of it isn't "shovel-ready" so we effectively CAN'T spend that money today.

-Stimulus has to target unemployed resources. Specifically, the factories that aren't producing and the workers that aren't working.
Take a look at people who are actually unemployed:
http://stats.bls.gov/news.release/empsit.t11.htm
By number of unemployed:
-Manufacturing
-Wholesale and retail trade
-Professional and Business Services
-Construction
-Leisure and Hospitality
THOSE are the people the stimulus has to target to get back to work. If you don't, and instead target people who already have jobs because you feel they are more productive, all you succeed in doing is driving up their wages and move them to the government agencies without actually providing much stimulus to the economy.

Not to derail but:

1: They can go under, through, or over it quite easily.
2: Missile defense systems don't work, and won't until super pwnzors laser technology is available.
3: I agree.
4: Maybe not that much, but again, a good idea.
5: Maybe put $100 billion here, instead of that missile defense.
6: Maybe not that much, but again a good idea.
5: (misnumbered, btw) No.


A lot towards NASA, a lot towards infrastructure (levees, anyone?), and either a stimulus to small businesses or pay off all the sub-prime mortgages in America and let the people get a reset button.

Right on, and $%&@ all those people who took out reasonable mortages on smaller homes they could actually manage to afford and all those who looked at ARMs and other unaffordable offers from the banks and refused them!

If one group of people got lied to and then ended up losing their house because of it, they're a bit more deserving of government help than somebody who's paying off their mortgage just fine.

They didn't have a house in the first place. Losing their house to go back to where they started isn't such a bad deal.

True. Although people who managed their money poorly or made poor choices are not deserving at all.


(Trusting the government... smart choice, or not?)

Except their credit score is now somewhere near negative, they've been cheated out of large sums of money, and they're probably bankrupt, none of which they started at.

Normal people would go to jail and their credit scores would go back to normal. Unfortunately, our government can't be thrown into jail.

It's the governments fault that the companies screwed over their customers, while you also make the argument that less regulation is better?

If the shoe fits? (OK, I am dead tired right now, give me a break, lol.)

Ummm, first, how far has NASA really come with all their funding? Lets see, since a man on the moon, the farthest we've come is blowing up the moon?!?!

Yes and No, sure some major bridges, but no highways to nowhere and bridges to nowhere. SUre, some levees, but nothing else except a interstate here and there

And we shouldn't have people who pay their taxes and buy the appropriate house according to their income, bail out the ones that make 30,000 a year and buy a 300,000 dollar house?!?!

1: They've discovered quite a lot about the universe since '69, and they'd do it even better if they were actually funded from time to time.

2: More maintaining infrastructure than building it, although some mass transit systems and new energy grids/plants would be nice.

3: Because approximately the entire middle class buys houses that cost more than their annual salary, which is the purpose of the mortgage, which a lot of people got screwed by the sub-prime mortgage.

It still creates the same kind of moral hazard problems you get when you bailout the banks. With the added, the economy won't collapse just because these people's credit scores have been tanked.


Wait, what? What makes you think your credit score IMPROVES because you went to jail?

True, but the economy would improve if that many people didn't have to worry about that large portion of debt, which would allow people to put money back into the economy to some degree.

Why would YOU go to jail for falling for a scam?

The people CHOSE to get that sub prime mortgage on that 300,000 dollar house in L.A. They knew when they signed the contract they couldn't afford the house, but they still bought it. Now for the majority of people that but houses they can afford, to bail out these people that CHOSE to be in debt, is completely socialist.

The people chose to get that sub-prime mortgage because some salesperson at a bank told them it was totally affordable, while hiding the fact that the interest rate on it shoots through the roof later on and that they'd never be able to pay for it. And again, people buy houses that are very expensive all the time, but that's the entire idea behind the mortgage.

Also, the government helping people is not socialist. Go find a dictionary and look up socialism, and find me the part where that comes in.

Depends on where the money is coming from. The mortgage market in the US is pretty big. And there are other, better ways to be spending the money. The problem with delinquent loans is bank collapse, and it's cheaper to just give the banks money than to buy back the loans because of the leverage effects if your goal is to boost lending. Giving a bank $100 billion in capital will allow it to loan out up to $1 trillion. Buying back $100 billion of bad loans just lets the bank lend $100 billion somewhere else.


Oh, you're saying that once creditors realize that someone fell for a scam that the person's credit score will go back to where it was.
I am not sure this would happen in practice.

Maybe it would, who knows. Maybe the US government should just fix their credit scores instead of setting the loans back to nothing?

I assume bankers would. I am also opposed to government-dictated credit scores :/

You fell for a scam, that makes you a credit risk

Then no resets for the people who fell for the scam, not even paying off their loans.

Well I'm with you on that.

On the other hand, I am NOT opposed to mortgage cramdowns issued by courts.

Yes, if a group of people was defrauded, they deserve some form of relief from the judicial system. That group, however, is rather small. Most of those who took sub-prime mortgages were simply irresponsible people dealing with banks that had nothing to lose.

And by the way, they didn't lose their[]/i] house. The mortgage holder simply took possession of the asset once the other party no longer upheld their part of the contract. There was a contract whereby they got to live in a house bought by someone else (the mortgage holder) in exchange for paying a given interest rate on the house. If they took on a mortgage that was unaffordable to them, the only sane outcome is for the mortgage holder to take the asset at the other end of the mortgage.

Otherwise, you're saying you want me to give you $400,000 for a house, and when you don't pay me back, you're supposed to keep living in the house. WTF? [i]I bought the house for you. You're living there under an agreement with me. YOU violated that agreement, so get out of my house.



The idea of a mortgage is to get you immediate capital for asset purchase for an asset outside your immediate ability to purchase outright yourself in exchange for a surcharge paid to the holder of the mortgage and backed by the asset. It's not so Bill the fry guy at Wendy's can buy a multi-million dollar estate in Beverly Hills on his $12,000 a year salary.

People who were defrauded deserve judicial relief. Those who simply didn't read the paperwork and made poor choices deserve everything coming to them.



In cases of fraud? No, that's perfectly reasonable. In fact, that's really the simplest relief available for the court. Reduce the principle and adjust the interest rate to something the court finds acceptably decent.

That's what I meant. I didn't mean anybody can have any house, just that the idea that somebody who can't outright buy a house doesn't deserve one.

Ok, then you're looking at a very, very small percentage of the overall forclosures now taking place (or that have recently taken place). Countrywide customer come to mind. I can't think of any other lenders with widescale fraud reported against them off the top of my head.

"Sub-prime" simply means a high-risk loan where the applicant wasn't qualified under traditional standards. The banks didn't hand them out like candy because they were leeching from those people or wanted to take their homes. The banks handed them out like candy because the banks were packaging up those high-risk loans in complex financial products and selling them in bulk to investors. In other words, the bank had no problem giving the loans to people because the bank wasn't on the hook for any of the risks.

Simple common sense tells most people that if they're making $35,000 a year, they cannot afford a $500,000 house on a 30-year mortgage. Even at a ridiculously low interest and property tax rate, you're still looking at paying $1.2 Million over the course of 30 years for that house, which means you're paying $39,000 a year on average over the course of the loan. And if the bank structures the loan so you're only paying $10,000 a year for the first 5 years, that means the average amount you need to pay after that only goes up.

What kind of flippin' idiot signs on to a deal like that?

I think bankruptcy courts should have the same freedom to reduce mortgage debt that they have to reduce other debts, so not just fraud cases

My biggest problem there is that now you've got people playing the bankruptcy game with an asset that's very worthwhile to do so. I buy an enormous, overpriced house way outside my price range, declare bankruptcy, and get my $500,000 McMansion for $300,000. So tell me, why would anyone provide a mortgage to anyone without stellar credit when that happens? I mean, I just screwed the bank out of $200,000. Why should I be allowed to do that?

You know what? You declare bankruptcy, go fetch an apartment.