Thursday, February 5, 2009

1st Option: Do Nothing

An important lesson I learned in b-school (mainly in business ethics class) was that in every situation, you can always do nothing. It may not be the best option, but you should always consider it.

Washington Times
President Obama's economic recovery package will actually hurt the economy more in the long run than if he were to do nothing, the nonpartisan Congressional Budget Office said Wednesday.

CBO, the official scorekeepers for legislation, said the House and Senate bills will help in the short term but result in so much government debt that within a few years they would crowd out private investment, actually leading to a lower Gross Domestic Product over the next 10 years than if the government had done nothing.

I repeat myself: If you voted for Obama/Democrats, you should pay more taxes. If you want this Hope'n'Change BS, then step up instead of forcing others to pay for your pet projects.


Anonymous said...

You have a lot of blog posts criticizing the tax increase that came (or will come) with the democrats rising to power, but not a single post talking about the republicans spending behavior...

From the massive increases in agricultural subsidies, to the medicare plans, to the ridiculous increase in defense budget, the federal government spending has soared by 33% during Bush's administration. I read that it is the highest in 30 years.

totochi said...

Yeah, so?

Anonymous said...

So much money being spent and so little coming back through tax revenue, no wonder the federal budget deficit has reached a record high. One could argue that all this deficit is just delayed taxes.

totochi said...

That's why spending in this "stimulus" package needs to focus on things that will actually stimulate the economy and eventually drive increased tax revenue by increasing the tax base. Unfortunately, a lot of crap in it is just transfer payments from taxpayers people that are not producing.

Tax credits to those not even pay taxes = $83B
Medicaid = $81B
Food stamps = $20B
Public housing = $8B
COBRA extension = $30B
Unemployment = $36B
Additional SSI = $4B

Some of that stuff may be necessary but it's not stimulus. If the Democrats want to increase welfare, be honest and put it on another bill so it can be debated. Obama is being dishonest by grouping all this together with a minimal amount of actual stimulus spending/tax cuts and screaming "Emergency!"

Anonymous said...

Agree, but I think without the welfare part of it, the bill will not pass, or will pass after weeks and weeks of debates. I'd blame the congress men and women seeking popularity among certain population classes.

Anonymous said...

I guess I got a little side tracked in my last comment...but what I'd like to say that perhaps a right wing government would make me pay less taxes than a left wing one. But I don't see the point of that with the economy around me is falling apart, my stock options are under water and my salary raise is delayed for 6 months.

I'm not a strong advocate of socialism or even wealth distribution, but if 3-5% increase in my income tax would help others, then I'd definitely say yes (provided it doesn't go to the defense budget)

totochi said...

Perhaps. I'm not against helping people but I don't believe in wealth distribution. Maybe it's the finance person in me but I don't believe I should fork over any more taxes when I'm already getting taxes >50% when you add all the income/payroll/sales/property (through my rent) taxes I pay. Where is all the money going? Of course some taxes are necessary but half? I can't believe that I'm using so much government resources that I'm essentially supporting another person 100%.

I guess two points shape my opinion: progressive taxes are unfair and socialism sucks. Politicians on both sides are in it mainly for themselves but am especially angry at Democrats for taking my money to and giving it to others in the form of welfare/subsidies/pork to buy their votes. The government needs to stay out of people's lives as much as possible and let people decide how to spend their own money and resolve their own issues.

Back to the stimulus package. If they strip out all the fat/pork/non-stimulating portions, it would probably pass immediately. The delay in the senate is because they need 60 votes to avoid a filibuster. Part of the economic downturn was caused by people buying houses they can't afford and banks making risky loans since the government was covering the risk. By rewarding the same people with bailout and mortgage relief, you're taking away the consequence of their bad decisions and punishing those that were responsible with their resources. I'm living in a so-so apartment. Why should I pay for people to stay in their houses? They should sell all the crap they bought on credit through eBay/Craigslist and move to an apartment they can afford.

Also by increasing entitlements as part of the huge stimulus package, it will be very hard to take it away in the future. It will be a permanent tax increase versus true one time capital spending for infrastructure.

Anonymous said...

Your money could be either going to a welfare program, or just leaving the US for some foreign business, like the war in Iraq (as suggested by the Economist). Regardless of where the money is going, you have the right to question where it is going and how it benefits you.

Didn't ex-president W (my favourite nickname for ex-president Bush!) start the idea of stimulus/bailout plans. Wasn't he the one who signed a $170 billion package in the form of tax rebates. And then he did it agian with the $700 billion bailout bill. Democrates just followed his foot steps, so it is fare to blame everyone not just one party.

The risky loans that was granted by banks was done during W's, and it was his administration that let this happen. System abusers and bad-decision makers have always existed, problem is the financial system has a "loop-hole" that would let these people pull loans out with a guarntee of returning it. It is amusing to me to know that I couldn't get a credit card because I don't have a credit score because I never pulled out a loan, but when now that I'm paying my car off a loan my credit score is improving. It seems to me that the system is punishing those who never borrowed from the government. You can't force everyone to be responsible but you can hope that the system will self-correcting enough to prevent people taking out loans without having enough resources to pay back.

And I agree that it will be very hard to take the entitlements that were caused by stimulus package away. Which is what I have mentioned in my earlier comment, the massive budget deficit that happened during the previous administration is a strong reason to raise taxes, or in other words, the deficit is just delayed taxes.