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Government Spending Is No Free Lunch
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As the Obama administration plans a large stimulus spending plan that may approach $1 trillion over several years, considering also the second phase of the $800 billion first phase stimulus, there is a concern that there may be wasteful spending and social costs of borrowing and spending by the government of such proportions. In economics jargon this hinges on whether there is amultiplier effect of spending, higher if its efficiently and well spent with less impact on private consumption and investment, and lower if the opposite were true. The assumption behind amultiplier of 1.0 for an additional bridge or road is that resources like manpower and capital that would be otherwise idle are deployed to produce something useful. An increase in one unit of government purchases increases by one unit the real gross domestic product. The government has effectively created the additional bridge or road without a cut in anybody's consumption or a businesses investment. The other contrasting approaches are to say there is a multiplier of zero, meaning there is a social cost in two ways. One the reduction of consumption and the crowding out of businesses investing in new products and technologies for example, and second in the inefficent use of resources if a government bureaucracy is put to work allocating money and the additional dangers of favoritism and corruption. To say that there is a multipier of 1.5 would mean that the government figures out a way to get private investment through conversion of plants for automotive parts say to make wind turbine blades by giving incentives, tax benefits and grants, spends on a dilapidated road and public transportation infrastructure that may provide benefits in increased growth capacity over future years. The limits of a government bureaucracy and inefficiency of government would in this case be addressed by transparency rules adopted and measures that track progress that are freely available to all citizens say on a website on the internet, and by bringing in fresh management talent from the private sector. There appears to be no generalization that can be applied for one multiplier for all projects. It may be that the multiplier will vary with the project. Some projects like the conversion of a factory making unneeded auto parts to a badly needed wind energy part, to change the dynamics of energy market pricing, to meet energy needs and cut emissions, may end up having a multiplier much above 1.0. A redundant or less needed bridge has a lower multiplier than a bridge rebuilt before it leads to breakdown. And also the complication that too large a movement in one direction say of stimulus spending, might result in a shift of the curve towards a smaller multiplier and diminishing returns, as the resources to track such a large expenditure and the talent to adminster are overextended. The social cost of private investment not making that investment in new technology, new product or improved product has to be figured into all this, both at the conceptual level as all costs and benefits may not be picked up in the analysis, and at the macro level keeping in mind that the animal spirits, as they were once described, may just not be there to absorb the huge outlays which a government can make. These do not come without an opportunity cost and borrowing costs. All this leads one to to conclude that spending has to be carefully evaluated and projects assessed on a case by case basis for costs and benefits. The spending has to be balanced to provide just as many incentives for private investment to invest in new products and technologies. One way the Obama team is attempting to address this is to include a $300 billion tax cut for businesses and individuals. The business tax cuts are aimed at helping small business with losses, and for future investments and making hires and forgoing layoffs. The other part relates to careful evaluation of spending projects and transparency so the people can see if they are effective. See the link to this.
How the Obama Stimulus and Tax Cuts are being fashioned to get the most punch- 2008-2009
11/25/2008
The tax cuts of $300 billion to business and individuals will form part of the stimulus spending of some $800 billion. The idea is to get the money where its needed to help unemployment and the middle class without wasteful spending.
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Jon S. Corzine - A Bold Stimulus Package -- $1 Trillion Bold -- Is Needed
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Canada Stimulus.
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Canada Says Its Stimulus Betters U.S.
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Canada Is Flexible on Stimulus, Harper Says
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Government Spending Is No Free Lunch
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Economist 01/29/2009
France's stimulus spending
01/22/2009
The spending of 75% of stimulus money in 2009.
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Wall Street Journal 05/29/2013
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France, Unlike U.S., Is Deep Into Stimulus Projects
New York Times 07/07/2009
Government Spending Is No Free Lunch
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Cutbacks at the state and local level and tax increases to offset much of the Stimulus impact in the USA.
07/28/2008
Much of the Stimulus impact may be eroded by the cutbacks at state and local levels.
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Funds for Highways Plummet As Drivers Cut Gasoline Use
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Facing Deficits, States Get Out Sharper Knives
New York Times 11/17/2008
Gov. Paterson to Propose $4 Billion in Taxes and Fees to Close Deficit
New York Times 12/15/2008
States Squeeze Cities, Spreading the Economic Pain
Wall Street Journal 12/18/2008
Jon S. Corzine - A Bold Stimulus Package -- $1 Trillion Bold -- Is Needed
Washington Post 12/24/2008
Budget Woes Hit Mass Transit as Tax Revenue Falls
Wall Street Journal 03/20/2009
Japan Stimulus Spending 2008-2010
09/02/2008
The efforts by the administration of prime minister Taro Aso to promote stimulus spending.
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Japan Sets $100 Billion Stimulus Plan
Wall Street Journal 04/06/2009
Japan’s Prime Minister Resigns
New York Times 09/02/2008
Japan Offers Stimulus Package to Spur Its Economy
New York Times 10/31/2008
Japan Unveils $51.5 Billion Stimulus
Wall Street Journal 10/31/2008
Japan Enters Recession as Firms Cut Spending
Wall Street Journal 11/17/2008
Japan to Take Stakes in Ailing Companies
New York Times 01/28/2009
Impact of U.S. Stimulus spending
01/16/2009
Grouped Articles
New York Times 09/06/2011
Stimulus and the Depression: The Untold Story
Wall Street Journal 09/26/2011
New York Times 08/08/2010
New York Times 10/10/2010
The Obama Stimulus Impact? Zero
Wall Street Journal 12/09/2010
Wall Street Journal 09/08/2011
Unemployment in Europe, Japan and the USA. Stimulus measures in the U.S. and safety nets in Japan and Europe: 2008-2010
01/05/2007
How safety nets in Japan and Europe do what the stimulus helps to do in the USA. Coping with high unemployment.
Grouped Articles
New York Times 09/06/2011
Stimulus and the Depression: The Untold Story
Wall Street Journal 09/26/2011
Japan Is a Model Not a Cautionary Tale
New York Times 06/09/2013
The Next First (and Only) 100 Days
New York Times 12/10/2011
New York Times 10/10/2010
New York Times 10/30/2014
The Obama administration and cost of jobs created under Stimulus projects, including solar and other energy projects
01/22/2009
Grouped Articles
New York Times 09/06/2011
Obama green-tech program that backed Solyndra struggles to create jobs - The Washington Post
Washington Post 09/15/2011
Wall Street Journal 09/16/2011
Solyndra Told White House in May It Was Healthy
Wall Street Journal 09/16/2011
New York Times 09/23/2011
New York Times 09/24/2011
Russia's Stimulus Spending
01/22/2009
Russian stimulus spending and the priorities for spending in Russia. Nature of the spending there.
Grouped Articles
Putin Pledges Stimulus for Russian Economy
Wall Street Journal 06/21/2013
Economist 02/03/2009
Russia Girds for Deficit, High Inflation
Wall Street Journal 02/26/2009
In Putin’s Economic Plan, an Emphasis on Spending
New York Times 04/07/2009
Government Spending Is No Free Lunch
Wall Street Journal 01/22/2009
Stimulus spending and other investments in education under the Obama administration.
01/22/2009
Large investments in education under the Obama administration.
Grouped Articles
New York Times 09/06/2011
U.S. Schools Chief Arne Duncan Labors to Straddle Political Divide
Wall Street Journal 07/22/2013
Stimulus Plan Would Provide Flood of Aid to Education
New York Times 01/28/2009
Trimmed Bill Still Offers Vast Sums for Education
New York Times 02/10/2009
For Education Chief, Stimulus Means Power, Money and Risk
New York Times 02/17/2009
U.S. to Nation’s Schools: Spend Fast, Keep Receipts
New York Times 03/09/2009
Britain's 2011 stimulus plan
01/22/2009
The British Treasury will buy corporate bonds issued by medium sized UK businesses that lack access to bank loans.
Grouped Articles
U.K. Unveils New Stimulus Plan Amid Cuts
Wall Street Journal 10/04/2011
Government Spending Is No Free Lunch
Wall Street Journal 01/22/2009
Britannia Not Cool, But Not Undone
Wall Street Journal 01/22/2009
China Stimulus Spending and investment in infrastructure- 2008-2011
08/02/2008
China's efforts to revive its economy with a large Stimulus Spending Plan.
Grouped Articles
BusinessWeek 04/14/2010
Fixing a Perception Gap for the Underappreciated G-20
Wall Street Journal 08/27/2013
New York Times 04/03/2009
Chinese debt: The great hole of China
Economist 10/17/2014
Wall Street Journal 08/25/2015
China Lets Banks Lend 5% More This Year
Wall Street Journal 08/02/2008
Germany's Stimulus Plan
09/11/2008
The reluctance of the German government and Chancellor Merkel to introduce a big stimulus plan for the economy.
Grouped Articles
Germany's Surplus Isn't the Problem
Wall Street Journal 11/11/2013
Germany Propels Growth in Euro Zone
Wall Street Journal 08/14/2010
Europe Slashes Growth Forecasts for 2008
New York Times 09/11/2008
German Government Plans Fiscal Stimulus
Wall Street Journal 10/31/2008
EU to Coordinate $164 Billion Stimulus
Wall Street Journal 11/20/2008
Survey Logs Pain to Come in Germany
Wall Street Journal 11/25/2008
How only $144 billion of the $825 billion U.S. 2008-2009 Stimulus adds value to the economy, the rest increases U.S. Debt
01/16/2009
As much as the Stimulus was needed a lot goes to stabilize the economy and shore up the banking system, only a small portion 17% goes into productivity increasing improvements. The rest increases the nation's debt which has implications for the future in terms of austerity measures to reduce debt to GDP ratios. These future costs are all part of the costs of the bubble and financial crisis.
Grouped Articles
New York Times 09/06/2011
Stimulus and the Depression: The Untold Story
Wall Street Journal 09/26/2011
New York Times 10/10/2010
How Righteousness Killed the World Economy
New York Times 10/12/2014
Wall Street Journal 01/16/2009
Government Spending Is No Free Lunch
Wall Street Journal 01/22/2009
The Energy Department's $39 billion portion of the stimulus package and its implementation.
01/22/2009
Implementation to promote energy efficiency and create green jobs, and the allocation of $39 billion in stimulus funds by the Energy Department.
Grouped Articles
Economist 07/06/2009
New York Times 08/01/2009
White House pushed $500 million loan to solar company now under investigation - The Washington Post
Washington Post 09/14/2011
Wall Street Journal 09/16/2011
Solyndra Told White House in May It Was Healthy
Wall Street Journal 09/16/2011
Government Spending Is No Free Lunch
Wall Street Journal 01/22/2009
Vietnam Stimulus efforts 2009.
01/22/2009
Grouped Articles
Vietnam Plans to Extend Subsidized-Lending Effort
Wall Street Journal 10/13/2009
Vietnam Battles Dark Side of Boom
Wall Street Journal 12/15/2010
Vinashin's Default a Symptom of Vietnam's Growth Mania
Wall Street Journal 12/26/2010
Behind Firm's Default: Vietnam's Growth Mania
Wall Street Journal 12/26/2010
Vietnam Devalues Currency by 8.5% as Inflation Looms
Wall Street Journal 02/14/2011
Government Spending Is No Free Lunch
Wall Street Journal 01/22/2009
U.S. Stimulus spending and meeting long term sustainability goals and short term job goals.
12/24/2008
Reconciling short term job goals and longer term goals to build an America in which we live and work with sutainability in mind for a global economy/ and build education and infrastructure to compete in a global economy.
Grouped Articles
New York Times 09/06/2011
Stimulus and the Depression: The Untold Story
Wall Street Journal 09/26/2011
U.S. Schools Chief Arne Duncan Labors to Straddle Political Divide
Wall Street Journal 07/22/2013
New York Times 08/08/2010
Obama Calls for $50 Billion Public Works Plan
New York Times 09/06/2010
Obama's Infrastructure Plan: More Cash Could Hit the Road
BusinessWeek 09/08/2010
India's stimulus spending.
01/22/2009
Grouped Articles
Rebound in India Leaves Some to Struggle
New York Times 10/23/2009
Q&A With Finance Minister Chidambaram
Wall Street Journal 10/08/2012
Government Spending Is No Free Lunch
Wall Street Journal 01/22/2009
The 2008-2009 U.S. Stimulus and solar energy projects
01/16/2009
Grouped Articles
New York Times 09/06/2011
Wall Street Journal 09/09/2011
White House pushed $500 million loan to solar company now under investigation - The Washington Post
Washington Post 09/14/2011
Obama green-tech program that backed Solyndra struggles to create jobs - The Washington Post
Washington Post 09/15/2011
Wall Street Journal 09/16/2011
Solyndra Told White House in May It Was Healthy
Wall Street Journal 09/16/2011
The gap between stimulus money infrastructure spending timelines in the U.S. and China and France- 2009-2012
01/22/2009
China moved the fastest, the USA very slowly, with two different political systems and sense of crisis, and infrastructure project speed capabilities. The French also moved quickly. Of $37 billion in spending for infrastructure stimulus, about 75% will be completed in 2009. India is slow but France's experience shows democratic governments or political systems are not necessarily the cause of slow execution.
Grouped Articles
New York Times 09/06/2011
Wall Street Journal 05/29/2013
Economist 05/07/2009
France, Unlike U.S., Is Deep Into Stimulus Projects
New York Times 07/07/2009
Lots of Stimulus Money and Concerns About Where to Put It to Work
New York Times 10/23/2009
China Sees Growth Engine in a Web of Fast Trains
New York Times 02/13/2010
Obama looks for a stimulus spending plan that packs the greatest punch for the middle class and unemployment.
01/05/2009
About $300 billion of an estimated $800 billion stimulus spending plan by the Obama administration will be for tax cuts to individuals and businesses. There will be incentives for businesses to make net new hires and make new investments. The idea is to avoid wasteful spending if there is only spending on infrastructure and other spending.
Linked Articles
Obama Eyes $300 Billion Tax Cut
Wall Street Journal 01/05/2009
Government Spending Is No Free Lunch
Wall Street Journal 01/22/2009
The Obama Stimulus: Looking for ways to get the most punch for the middle class and unemployment.
12/24/2008
Avoiding wasteful spending, including tax cuts, evaluating projects carefully are ways the Obama stimulus is trying to calibrate the plan for ways to help the middle class an unemployment without risks of overborrowing and overspending in wasteful ways.
Linked Articles
Government Spending Is No Free Lunch
Wall Street Journal 01/22/2009
For Stimulus Plan, Obama Team Weighing 'Green' Jobs vs. Traditional Projects
Washington Post 12/24/2008
Details of the Obama Stimulus package that is emerging and the need to create spending that is effective.
01/16/2009
Avoiding wasteful spending and balancing government initiative with efforts to get private investment and initiative through tax cuts and incentives to companies.
Linked Articles
Wall Street Journal 01/16/2009
Government Spending Is No Free Lunch
Wall Street Journal 01/22/2009
How government spending if effectively targeted to productive purposes can have a multiplier effect.
01/22/2009
Government spending that can have amultiplier effect, reduce social costs and not lead to crowding out of private investment. The pardox of thrift in economic downturns and the role of government spending and private savings in a situation like what the USA faces in 2009 and coming years.
Linked Articles
Government Spending Is No Free Lunch
Wall Street Journal 01/22/2009
Go Ahead and Save. Let the Government Spend.
New York Times 02/15/2009
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