All in the Family featured the curmudgeonly Archie Bunker. Archie was television’s most famous grouch, blunt, blustering, straightforward and untouched by the PC crowd. He was the archetype of the conservative male. Michael desprately tried to reeducate him, but he persisted in his breviloquence.



Looking back at the last 40 years, we realize: ARCHIE WAS RIGHT!

3/25/2016

Stimulus and Bailouts

I heard a remark the other day about the bank bailouts, auto bailouts and stimulus payouts during the Obama administration.  That remark got me thinking and doing some math on my own.  Here is what I came up with:

According to Forbes:  The bank bailouts rack up to $4.6 Trillion already spent with an additional $12.2 Trillion committed for future contingencies.

Sum Total on the auto bailout, a measly $26.5 Billion.

Obama Stimulus comes in at $830 Billion.

In case you are interested there are 121.76 million people working full time in the United States and 28.3 million working part time.

Now for some money math:

$4,600,000,000,000
$12,200,000,000,000
$26,500,000,000
+$830,000,000,000
$17,656,500,000,000
 
Provided I lined up all those zeros correctly that number is $17.656 Trillion.  To be fair the government hasn't given the bankers that $12.2 Trillion, yet.  For argument sake lets drop that out of our equation.  The new number is $5.456 Trillion dollars that has already been blown by the government for bailouts and stimulus.
 
By comparison people working:
 
121,760,000
+28,300,000
150,060,000
 
That's 150.06 million working folks.  A number of those part timers are kids and some of them are working retirees that are just trying to keep busy.  In other words, they are working but might not really need a job.  The problem is, I can't tell from the statistics who is who.  I'm going to include all of those as "employed".  I'm also going to do some rounding.
 
If we divide the $17.6 Trillion by the number of folks working we get $117,700 per person.  If we divide the $12.2 Trillion by the number of folks working we get $81,000 per person working.  It doesn't matter how much they make, its just what the numbers break down to based on being employed.
 
The government didn't really have that money.  They browed most of it from future generations that will have to pay it back at interest.  The reasons given for this depend on who you are taking to, but the more common ones included a need to introduce "liquidity" in the markets, stimulate spending and aid cash flows for the banks.  Assuming that those are legitimate reasons (they aren't) for our government to borrow trillions of dollars, wasn't there a better way to handle the process?
 
What if the big ATM on Potomac had given every single wage earner $117,700 tax free to do whatever they wanted to with it?  Talk about economic stimulus.   What would happen to all that money?
 
For a married couple that both work, that would mean $235,400 in one big chunk.  In our house that would more than pay off the mortgage and purchase a new vehicle with plenty left over to save, spend or invest.  For a kid working part time that might mean a car and college paid for.  For a young adult just getting started, that would pay off some serous student loans and probably get them a car as well as some other goodies.  Retired or near retirement?  How about a nice little addition to your savings or investment account?
 
In every one of the above life situations individuals would have the ability to decide what to do with the money that was borrowed on their behalf.  The individual could choose what was best to do with the debt they incurred, save, spend, invest, or pay off their personal debts.
 
So what would happen to the banks and auto makers and that faceless thing called an economy?  I think we already covered that.  Some people would pay off or down their mortgage, car, student loans or credit cards.  In which case the banks would have received their injection of liquidity.  Folks would suddenly have the ability to purchase big ticket items, like cars, boats, appliances, new furniture, etc.  When that happened the car manufactures and other industrialists would have been the beneficiaries of new sales.  In the short term that money would go into the bank and then been used to pay wages, suppliers etc.  In other words, more liquidity for the banks.
 
What would happen if everyone saved or invested that money instead of spending it?  Not everybody is going to do that, but some will.  If they save it in a bank, more liquid assets are available for the banks (see a pattern yet?).   If they invest in the market, companies will have that capital available to use to increase production or engage in new opportunities.  That in turn helps out the great money go round; again increased bank liquidity. Those investments potentially will produce future income and capital gains for the individual, which would created tax revenue.
 
The thing that doesn't happen with the individual wage earner getting the bailout money is congressmen don't get campaign contributions.  The Clintons don't get foundation donations.  Bankers don't get multi-million dollar bonuses.  People who write grant proposals don't get nearly a million bucks to study why kids drink malt liquor and smoke pot.
 
Every Keynesian theory economic goal would be met, and probably more effectively, by handing the cash over to the people with jobs, with no strings attached, and letting them do as they please.
 
But what if the common man spends his check on coke and whores?  I guess that would be two steps up from donating it to a congressman.



3 comments:

  1. WaterBoy4:22 PM

    "What if the big ATM on Potomac had given every single wage earner $117,700 tax free to do whatever they wanted to with it? Talk about economic stimulus. What would happen to all that money?"

    There's still one major problem with this. They're still borrowing the money from future generations. It might be a better way to stimulate the economy now, but it's still just kicking the can down the road.

    Better to do it the Icelandic way -- tear the bandaid off quickly, and get the pain over with now.

    ReplyDelete
    Replies
    1. The government shouldn't do any of it. The point is they did. If the taxpayers are going to have to foot the bill, maybe the tax payers should get a say on how the money is wasted. Doing so would provide just as much "stimulus" if not more, than repaying campaign donors.

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