The economy is, according to some, headed for a recession. President Bush has asked Congress to enact an economic stimulus package. Federal Reserve chairman Ben Bernanke agrees, as does Congress. Many of the presidential candidates (Romney, Clinton, McCain, Obama) have issued their own packages while some (Thompson, Kucinich) are not so sure.
I’m curious – if one believes in free markets, then government intervention seems to be a no-no. (The stock market fell immediately after the Bush announcement.) So I really have two questions.
First, do you believe it is the proper role of government to intervene? And secondly, if you do, why not in other cases, such as banning smoking in public places or setting usury interest rates?
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VIVIAN J. PAIGE | All Politics is Local 
I do believe that free markets are the best way to economic prosperity. The problem is that our government punishes productivity and success. If you work longer hours to earn more, the government taxes you at a higher rate than it does on your regular hours. If you start a company, and that company is successful, the government takes a higher percentage of your earnings — money that could be spent expanding the business and hiring more people.
Um, AEM – you didn’t answer the question. Hint: this has nothing to do with taxes 🙂
First we need to exit Iraq asap…we can’t afford o stay there.
I think the government should first get the accounting problem fixed at the Pentagon and make them accountable and responsible for the vast sums of money they get (and then don’t know where it went)…This leaking at the Pentagon has got to stop asap….we should also assess which bases in other countries we can close and close them….saving additional monies….
Then the government should intervene to assist folks who aren’t making it…
Our other major problem, the environment and energy, should receive government funding to help ge solar and wind power going…this would also result in increased jobs.
Other than that let the market straighten itself out.
buzz…buzz…
I pause during what appears to be the Patriots’ impending trouncing of the Chargers to answer this question. First, a Republican administration which is always prattling about the free market and all that has little justification for an economic stimulus package which essentially consists of manipulating the economy through temporary tax cuts and tax incentives. Some free market 🙄
Second, just how much of a benefit can be gained through a stimulus package which appears to be aimed at $100 billion to $170 billion of an economy worth hundreds of trillions of dollars, and how permanent a bump would it be? Moreover, the government is already squeezed by a cash crunch. How do we decrease the deficit with a stimulus package, and if we’re not going to decrease our deficit and we’re issuing tax incentives to stimulate the economy aren’t we going to end up having to borrow even more money from our buddies in China and elsewhere?
I slept through most of my Econ classes in college, and I do try to read up on such things, but a close friend yesterday told me of her suspicion that I’m seriously ADD, and she’s probably not too far off base. I lack the discipline to truly school myself on this issue so will gladly hear someone else’s point of view.
You’ve asked two interesting questions.
The lst question is very hard to answer at this point, at least for me and what I know. Before I could answer the overall question, I’d have to ask the question(s): What happens if the government doesn’t act? Will the stock market collapse if the government doesn’t intervene? Will revenues drop and entitlements can’t be paid? …and questions like these. And if a reasonable number of people agree that the overall good for the citizens would be for the government to intervene, then I would concur, given that the intervention didn’t enrich those not derserving.
Rhetorical question: Does the second question have to have any relation to the first since the consequences of the negatives are so different (not sure of the soundness of this question)? But you’ve asked the hard question.
The first scenario could have massive consequences on a large part of the population in a fairly quick timeframe. The second question/scenario has a less deliterious effect, at any one time, on parts of the population and would take longer to have its effect. BUT, to argue against myself, what is the difference if the negative effects happen quickly or slowly when a country tries to decide what is best for itself. Democracy is complicated isn’t it.
Thanks for positing this “if. then” thougt provoker, Vivian.
And another question, who decides what is actually a problem? That might open up some interesting answers.
Yes, Vivian, it DOES have to do with taxes, because our tax system distorts the free market and impedes the growth of our economy.
I do not have it handy, but a WSJ editorial Friday made the point very well. Any “stimulus” would simply be some kind of a transfer from people who invest to those who spend. A better way would be to fix the tax code so that it does not penalize success, and that allows our companies to compete on an equal footing with foreign companies.
Eliminating corporate income taxes would go a long way to all of those goals.
That wasn’t the question, Mouse. That is a separate question. Try answering the question posed.
Lawmakers determine how taxes are collected and spent. the Fed sets interest rates. The Treasury decides how much money to print. I don’t think it’s ever been a pure free market anyway, so this kind of stimulus package could be seen as little more than adjustment like anything else.
Taxation only impedes the growth of our economy if the government doesn’t spend the money they collect. Now, I don’t think that means the government should go out and tax all of your money out so you can’t spend it, but the simple fact is that teachers, FBI special agents, the guy who fills in the potholes in the road, publishers who sell textbooks to school boards, researchers at the NIH who study the transmission of disease, and US Navy SEALs all receive government paychecks financed by your tax dollars, and then they go spend that money on food, shelter, gasoline, movie tickets, college tuition for their children and basically everything else that you spend money on, too.
I understand people don’t enjoy paying taxes because you’d rather YOU were the one spending that money instead of our theoretical US Navy SEAL. To you I saw, “waaaaah.” But taxes aren’t a black hole where money disappears, never to re-enter the economy again.
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To answer your question Viv, I think the role of government in this situation is to help people survive by facilitating their growth with a retooled economy post-market correction. Every bad piece of economic news is a new opportunity for growth, and I’m optomistic that if we finally ween ourselves off the unsustainable status quo that the faux free marketers in the Republican party are addicted to and allow the market to correct itself, we will end up with a naturally stronger economy in the long run. Unfortunately, the GOP hasn’t been especially eager to allow the housing market to correct itself after a period of ill-advised lending practices artificially inflated the price of housing, and now that personal debt and low levels of personal savings are catching up with us and starting to influence other areas of our economy, their solution is generally to play the Enabler and hope that we will continue to spend, spend, spend instead of reinvesting in ourselves or paying down some of our outstanding bills.
The cynic in me says that this is just an election-year ploy, an attempt to make people feel better. After all, putting a little cash in people’s hands, especially when that is borrowed money, does little to solve the overall problem.
If the situation were more dire, I don’t think I’d have a real problem with the infusion of cash. But this isn’t the 1930s and we’ve not given the market time to respond to other monetary policies (such as interest rate reductions by the Fed) so I think this is premature. Much of the slow down in the economy can be tied to real estate and the exuberance of all the related investments in it. Not unlike the exuberance of the stock market of the 1990s. It seems to me we should be allowing things to correct themselves.
anon – I think the cash refunds will be used to pay down bills. That’s why I think it will have little effect. I just don’t see folks spending the money.
So I don’t think the government should be intervening here, any more than I think they should be doing anything with our money to help subprime borrowers or lenders. And no, they should not be involved in the smoking ban. And unless the usury laws apply to all, they shouldn’t exist.
“First, do you believe it is the proper role of government to intervene?”
It is the role of the government to get out of the way of economic progress. If they want to call it a “stimulus,” it would be no different than the thousands of other misnamed bills they pass.
“And secondly, if you do, why not in other cases, such as banning smoking in public places or setting usury interest rates?”
They should stay out of that, too.
Oh my goodness, Viv, are you implying this is more of a cynical manipulation of the public by our wondrous Bush Administration? The noive! And I agree wholeheartedly. Could have knocked me over with a feather when I heard Bush’s announcement the other day. It’s already a day late and a dollar short, but it will make the public feel like the government is “doing something”, and when it fails you can bet it will be pinned squarely on the Dems in Congress.
“A wise and frugal government, which shall restrain men from injuring one another, which shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned. This is the sum of good government.” – Thomas Jefferson
There’s really no need to make it more complicated than that. Government exists to secure our rights. When it goes beyond that, it deteriorates into something less than good government.
Aside from which, any stupid enough to think he can manage a free market economy has proven himself unqualified to try.
The electrons were barely dry on my last post and I read a article from the NY Times
in which Hillary states that the government must take a far larger role in managing the economy to protect us from the excesses of the free market.
Thus proving my last post true.