Micromanaging billions of "knobs" on the economy is a losing proposition and it creates "regime uncertainty", where folks are afraid that the rules (on taxes, regulation, inflation, contracts, etc.) can change out from under them at any time.
Money is a commodity. When the government prints more it reduces the value of all other dollars in circulation. This inflation is a hidden tax that we will be paying off for years.
The CBO says that growth would restart by the end of the year without the stimulus. If that's true, why do we need additional spending afterwards?
Note that Keynes said counter-cyclical spending while Obama's spending establishes a higher baseline. (The only significant savings is for Iraq after Bush said that we'd be out.)
AIG has multiple divisions. Many folks in many of these divisions (a) have contracts specifying that they get 90% of their annual compensation in a lump sum known as a bonus; (b) did a great job over the past year in areas of business entirely unrelated to CDOs and other issues.
...and now we've got a Republican senator saying that these people should commit suicide, and we've got a Democratic president and a Democratic senator saying that these workers will either have to give their salaries back or they'll be slapped with after-the-fact 100% tax rates.
In a political environment like this, I'd suggest that a lot of folks who can deliver massive amounts of value would be quite leery of signing up for a new job with variable, results-based compensation.
Thanks - that's really helping the economy!
Don't forget the recently passed legislation exempting these bonuses (contracts signed before Feb last year) from the executive pay limits. Said legislation was voted for unanimously by Dem senators, nearly unanimously by Dem house members, and signed by Obama.
I guess it's a relatively small amount.. so I'll still continue hating his policy mostly for the decision to tax my charitable donations.
Business loans are fundamentally different, aren't they? Sure, a lot of these businesses will fail, but at least the whole point of a business is to create value, and there will be a lot of winners, too. Money has to move around, that's how the economy works. I'd much rather see it moving around trying to drive people to create value, than to consume concrete assets.
A couple of points though. First, there were a lot of "concrete assets" created in recent years. As simple evidence google "condo glut." Also, you're right - these business loans are fundamentally different. Unless I'm missing something, they're fundamentally riskier - there's no collateral (overvalued collateral is better than none), and the entity you loaned money to is FAR more likely to simply disappear.
As to whether they'll go to better uses - hey - I hope you're right. I hope it helps create more value / helps the economy, etc. However, plenty of people took money "out of equity" in loans and spent it on stuff that created value in a similar manner. For instance, there used to be quite a burgeoning business in selling solar panels to homeowners.. many would argue it's good for the environment, adds value to the home, etc. The interesting part here though is that the salesman weren't really just selling solar panels. Their job was to walk the homeowners through how to get the money in a mortgage "out of equity" on the always-rising value of their home and collect any tax credits available.
To be fair, I'm probably one of very few that are/would be affected by the proposed charitable deduction changes. If you go out and earn more money to support a charity, then Obama's proposed changes can result in you adding the IRS to the list of charities you're supporting. I don't know about you, but they're near the bottom of my list of non-profits to support.
