WASHINGTON - NO, the big US economic stimulus plan won't 'save or create 3.5 million jobs,' as the president and congressional Democrats claim - at least not this year.
The economy will remain feeble through 2009, analysts warn, and businesses will keep shedding jobs, though not as many as they would have without the US$789 billion (S$1.19 trillion) boost.
The stimulus agreement, heading for final votes in the next day or so, goes to the heart of President Barack Obama's strategy to revive the economy and will go far in shaping how Americans view his economic leadership.
What it won't do is quickly snap America out of the painful recession, now in its second year.
It should provide some relief, economists say, though some argue it won't plow enough money into the economy to prop it up.
Tax cuts will spur at least some spending by consumers and businesses, and that should help save or create jobs. Aid flowing to cash-squeezed states will prevent some layoffs.
And money for big public works projects, such as bridge and road repairs, and longer-term ventures, such as networks for more high-speed Internet connections, will eventually generate jobs and stir economic activity.
But even with the stimulus, many economists predict a net loss of 2 million, 3 million or even more jobs this year. The recession already had cost 3.6 million through January. The unemployment rate, now at 7.6 per cent, highest in more than 16 years, will probably hit at least 9 per cent by next year.
'The stimulus package is not going to turn the economy around right now,' said William Gale, director of economic studies at the Brookings Institution.
'The best-case scenario is that it mitigates the depth and the severity of the downturn. That's not a bad thing. It's just not the magic bullet that fixes everything.' Some analysts say the job market won't return to normal health - with unemployment hovering around 5 per cent - until as late as 2013.
And the broader economy? No sudden revival there either.
The economy is expected to slide backward for all of 2009 - a decline in gross domestic product of more than 1 per cent. That may not sound like much, but it would be the first yearly decline since 1991.
'Congress put the minimum charge into the stimulus battery,' said Brian Bethune, economist at IHS Global Insight. 'We're taking this big chance, turning the key and praying there is enough juice to turn over the economy. We should have juiced it up so much that we are guaranteed that this engine will start' through a bigger package of tax reductions.
What clues should people be looking for to judge whether a turnaround is near? Companies will start easing up on their cost cutting. That would mean fewer pay freezes or cuts. Companies will start boosting workers' hours. And demand for temporary workers will rise. After that, companies eventually will call back workers.
This recession has proved especially stubborn and dangerous. The root causes - housing, credit and financial crises - are the worst since the 1930s and don't lend themselves to quick fixes.
The package includes Mr Obama's signature 'Making Work Pay' tax credit for 95 per cent of workers. But negotiators scaled it back from Mr Obama's campaign promise: to US$400 a year for individuals, instead of his US$500, and US$800 for couples, down from his US$1,000.
That equals around an extra US$13 a week in most paychecks this year, and it should show up very quickly after Mr Obama signs the bill.
The hope is that Americans will then feel more inclined to go out and buy, which would help bolster the economy.
But will recession-shocked consumers, spooked by vanishing jobs, shattered nest eggs, tanking home values and surging foreclosures, actually spend money? 'Chances are people are going to save much or most of the tax cuts because of the climate of uncertainty and doom and gloom,' Mr Gale said.
Given the severity of the problems, economists said, the bigger the economic revival package the better. Some said it needed to be US$1 trillion to make a noticeable difference this year.
Others, like Mr Bethune, argued that the package should have been front-loaded with a lot more money - at least US$500 billion - in tax cuts, which tend to act more quickly to boost economic activity.
Congress' package is close to what Mr Obama wanted: nearly two-thirds in spending initiatives and just more than one-third in tax cuts.
Mr Obama heralded the package, declaring it will 'save or create more than 3.5 million jobs and get our economy back on track.' House Speaker Nancy Pelosi, a fellow Democrat., mentioned the same 3.5 million figure, which an aide said was for a two-year period.
A problem with such predictions: It's virtually impossible to calculate whether a job has been 'saved.' -- AP
http://www.straitstimes.com/Breaking%2BNews/Money/Story/STIStory_337839.html
The answer is very simple. It won't!
US Treasury Secretary and most economists are right that $800,000,000,000 is obviously too little and that the U.S. needs probably $3,000,000,000,000. Who are going to shoulder this burden? The only way is American taxpayers financing it because if they continue to let Asian countries do so, then this would only delay and worsen the problem.
Countries with their own agricultural sector will have something to fall back on as a relief. But countries without one and relying heavily on banking and services industries will suffer.
US$3 trillion is a damn lot of money. It is going to increase their debt!
Given the severity of the problems, economists said, the bigger the economic revival package the better. Some said it needed to be US$1 trillion to make a noticeable difference this year.
Money is an indication of the problems. The main issues are that:
1) wholesale speculation is still part and parcel of the banking system. Urgent reform and overhaul of the banking system is needed. The longer this takes, the harder it is to restore consumers' confidence.
2) the liability of some of the rescued banks has outstripped the asset, thereby making their operation untenable on the long run. As day passes and time ticks by, this chasm is widening. Bitter pills like closure, merger and acquisition are unavoidable and still have to be melted out.
3) the poor handling of the Obama adminstration. Obama must learn to work behind closed door rather than takes the battle to the street. For Goodness sake, he is now the President of the United States Of America. This bungling is already creating a
dominoes effect to the rest of the economies.
The failure to reform quickly, urgently and take dicisive actions will have long and lasting impact.
Originally posted by Only-Way-4-Destiny!:US$3 trillion is a damn lot of money. It is going to increase their debt!
duh. as if 800 billion won't increase their debt.
Originally posted by tai gok nang:The answer is very simple. It won't!
US Treasury Secretary and most economists are right that $800,000,000,000 is obviously too little and that the U.S. needs probably $3,000,000,000,000. Who are going to shoulder this burden? The only way is American taxpayers financing it because if they continue to let Asian countries do so, then this would only delay and worsen the problem.
Countries with their own agricultural sector will have something to fall back on as a relief. But countries without one and relying heavily on banking and services industries will suffer.
need 3 trillion ah. cannot give than how? give up? or try their best?
the US is not debating whether they should spend 800 billion. they are debating how to spend it, tax cuts or government spending. In this political climate, any politician that suggest they do nothing is just commiting political suicide.
Why worry about other people when there are dishonorable despots destroying your own country?
Robert Kuttner and Michael Hudson on the Obama Administration’s $789 Billion Economic Stimulus Package and $2.5 Trillion Bank Recovery Plans
http://www.democracynow.org/2009/2/13/rober
Originally posted by AndrewPKYap:
Why worry about other people when there are dishonorable despots destroying your own country?
i supposed is a distraction from the 58 Bil.......to make themselve feel good.
Originally posted by AndrewPKYap:
Why worry about other people when there are dishonorable despots destroying your own country?
Originally posted by Only-Way-4-Destiny!:US$3 trillion is a damn lot of money. It is going to increase their debt!
Of course, it is going to increase their debt to an unimaginable level (possibly 100% of GDP). But it is still better than letting the entire economy collapse, which would surely cause chaos and panic around the world. I totally agree with Krugman's advice.
My opinion is Asia should no longer give a shit about what the U.S. will do. We should now assume the U.S. is printing $3 trillion to finance the stimulus package, which is the worst case scenario, so we can formulate ways to cope with it. We could see contraction after contraction. I mean let's face it!
As the Thai saying goes "เงินทà¸à¸‡à¸‚à¸à¸‡à¸¡à¸²à¸¢à¸² ข้าวปลาสิขà¸à¸‡à¸ˆà¸£à¸´à¸‡" or "money is illusion, food to fill your stomach is reality".
it wont work.the stimulus plan will not work if the banks toxic asset are not out of its book. the balance 350billion TARP funds are not enough to save the banks much longer. the USA porbably need a further 1 trillion of TARP funds to get rids of the toxic asset from the banks balance sheets. that is if the private sector wish to participate the purchase of the toxic asset from th banks.
I think it may work , but the result may not be as good as intended. With the start on launching multi millions project on infrastructure or energy , a lot of companies will be able bidding for those projects.
Depending on the tenders and projects, the projects may require the bidders to have financial backing. This will be a time whereby banks and some companies can work together afterall its also the intent and initiative of the govt.
Its is defiantely a improvement as compared to the situation now. It may build another pillar for the US economy. The result will not be as good as expected because the banks are still going to be mismanaged. Afterall the concept of the a private bank is to make money, it does not create as much value as the other industries and yet they have too much power to besiged or affect the economy. Until the balance of economy return back to the actual value creating industries will the bank sector work and not trying to outsmart themselves.
From what I heard, the Democrats played this one really dirty. They currently control both congress n senate. They came up with a 1000page bill on a friday evening, and expected the Republicans to vote on a Saturday morning. Best part was, they even got 3 of the Republicans to vote for them, pushing the voting pass the 60 vote requirement, avoiding any filibusters. In other words, they pulled a really fast one.
Originally posted by Shotgun:From what I heard, the Democrats played this one really dirty. They currently control both congress n senate. They came up with a 1000page bill on a friday evening, and expected the Republicans to vote on a Saturday morning. Best part was, they even got 3 of the Republicans to vote for them, pushing the voting pass the 60 vote requirement, avoiding any filibusters. In other words, they pulled a really fast one.
From what you heard? Trying hearing all sides of the story. how do they get the 3 republican to vote for them? kidnap their family and threaten them?
the bill that was drawn up by a team including republicans... surprise?
There was hardly any republican input at all, in fact the republicans were locked out of talks on it
http://seattlepi.nwsource.com/national/1153ap_congress_stimulus.html
the stimulus bill isn't going to do much and the average american will only see an extra $13 a week in their paycheck ....it's a joke
http://www.chron.com/disp/story.mpl/nation/6261570.html
from the above - WASHINGTON — Millions of workers would soon see an extra $13 in their weekly paychecks and thousands of small businesses operating in the red could get tax refunds under the economic recovery bill nearing completion in Congress
Yeah, that was my understanding of the issue as well. The Democrats being in control of both senate and congress, basically drafted the entire bill and forced it down the throats of the Republicans. "Bipartisan" is a joke as far as this bill is concerned.
As far as I know, those 3 Republicans who voted for the bill has committed political suicide. I don't know what the reasons are that those 3 Republicans voted for it. However, it is rather telling that most of the Republicans don't agree with the details of the bill. The 3 guys may have helped push the bill through, but as far as bipartisan agreement, its still far away.
FYI: Democrats hold 58 seats in the senate currently IIRC. 60 votes make the bill filibuster proof.
Originally posted by Shotgun:Yeah, that was my understanding of the issue as well. The Democrats being in control of both senate and congress, basically drafted the entire bill and forced it down the throats of the Republicans. "Bipartisan" is a joke as far as this bill is concerned.
As far as I know, those 3 Republicans who voted for the bill has committed political suicide. I don't know what the reasons are that those 3 Republicans voted for it. However, it is rather telling that most of the Republicans don't agree with the details of the bill. The 3 guys may have helped push the bill through, but as far as bipartisan agreement, its still far away.
Want to know why they support the bill even though it is basically committing political suicide? Well, since they will very well lose their political career over this, and they support the bill anyway, they probably thought it is the right thing to do.
Some democrats in the house voted against the bill. My guess is, they thought this is the right thing to do too.
So why did so few republicans voted for the bill? well, it is basically commiting political suicide, and that is definitely a huge factor in shaping their decision, maybe even more than the well being of their country. The feeling i get is that the republicans are very uncooperative, rather than the democrats very unreasonable.
finally, all the senators were elected by the people of their state, and they have been chosen by their state to represent them, to vote for them. Majority wins, so be it... that's how decisions are made in their country.
Originally posted by Only-Way-4-Destiny!:WASHINGTON - NO, the big US economic stimulus plan won't 'save or create 3.5 million jobs,' as the president and congressional Democrats claim - at least not this year.
The economy will remain feeble through 2009, analysts warn, and businesses will keep shedding jobs, though not as many as they would have without the US$789 billion (S$1.19 trillion) boost.
The stimulus agreement, heading for final votes in the next day or so, goes to the heart of President Barack Obama's strategy to revive the economy and will go far in shaping how Americans view his economic leadership.
What it won't do is quickly snap America out of the painful recession, now in its second year.
It should provide some relief, economists say, though some argue it won't plow enough money into the economy to prop it up.
Tax cuts will spur at least some spending by consumers and businesses, and that should help save or create jobs. Aid flowing to cash-squeezed states will prevent some layoffs.
And money for big public works projects, such as bridge and road repairs, and longer-term ventures, such as networks for more high-speed Internet connections, will eventually generate jobs and stir economic activity.
But even with the stimulus, many economists predict a net loss of 2 million, 3 million or even more jobs this year. The recession already had cost 3.6 million through January. The unemployment rate, now at 7.6 per cent, highest in more than 16 years, will probably hit at least 9 per cent by next year.
'The stimulus package is not going to turn the economy around right now,' said William Gale, director of economic studies at the Brookings Institution.
'The best-case scenario is that it mitigates the depth and the severity of the downturn. That's not a bad thing. It's just not the magic bullet that fixes everything.' Some analysts say the job market won't return to normal health - with unemployment hovering around 5 per cent - until as late as 2013.
And the broader economy? No sudden revival there either.
The economy is expected to slide backward for all of 2009 - a decline in gross domestic product of more than 1 per cent. That may not sound like much, but it would be the first yearly decline since 1991.
'Congress put the minimum charge into the stimulus battery,' said Brian Bethune, economist at IHS Global Insight. 'We're taking this big chance, turning the key and praying there is enough juice to turn over the economy. We should have juiced it up so much that we are guaranteed that this engine will start' through a bigger package of tax reductions.
What clues should people be looking for to judge whether a turnaround is near? Companies will start easing up on their cost cutting. That would mean fewer pay freezes or cuts. Companies will start boosting workers' hours. And demand for temporary workers will rise. After that, companies eventually will call back workers.
This recession has proved especially stubborn and dangerous. The root causes - housing, credit and financial crises - are the worst since the 1930s and don't lend themselves to quick fixes.
The package includes Mr Obama's signature 'Making Work Pay' tax credit for 95 per cent of workers. But negotiators scaled it back from Mr Obama's campaign promise: to US$400 a year for individuals, instead of his US$500, and US$800 for couples, down from his US$1,000.
That equals around an extra US$13 a week in most paychecks this year, and it should show up very quickly after Mr Obama signs the bill.
The hope is that Americans will then feel more inclined to go out and buy, which would help bolster the economy.
But will recession-shocked consumers, spooked by vanishing jobs, shattered nest eggs, tanking home values and surging foreclosures, actually spend money? 'Chances are people are going to save much or most of the tax cuts because of the climate of uncertainty and doom and gloom,' Mr Gale said.
Given the severity of the problems, economists said, the bigger the economic revival package the better. Some said it needed to be US$1 trillion to make a noticeable difference this year.
Others, like Mr Bethune, argued that the package should have been front-loaded with a lot more money - at least US$500 billion - in tax cuts, which tend to act more quickly to boost economic activity.
Congress' package is close to what Mr Obama wanted: nearly two-thirds in spending initiatives and just more than one-third in tax cuts.
Mr Obama heralded the package, declaring it will 'save or create more than 3.5 million jobs and get our economy back on track.' House Speaker Nancy Pelosi, a fellow Democrat., mentioned the same 3.5 million figure, which an aide said was for a two-year period.
A problem with such predictions: It's virtually impossible to calculate whether a job has been 'saved.' -- AP
http://www.straitstimes.com/Breaking%2BNews/Money/Story/STIStory_337839.html
It won't. Thats just like trying to put out a fire by starting many more fires. The flawed fundamentals still remain and are aggravating the current situation.
"As the Obama administration pushes through Congress its $800 billion deficit-spending economic stimulus plan, the American public is largely unaware that the true deficit of the federal government already is measured in trillions of dollars, and in fact its $65.5 trillion in total obligations exceeds the gross domestic product of the world.
The total U.S. obligations, including Social Security and Medicare benefits to be paid in the future, effectively have placed the U.S. government in bankruptcy, even before new continuing social welfare obligation embedded in the massive spending plan are taken into account.
The real 2008 federal budget deficit was $5.1 trillion, not the $455 billion previously reported by the Congressional Budget Office, according to the "2008 Financial Report of the United States Government" as released by the U.S. Department of Treasury.
...
Calculations from the "2008 Financial Report of the United States Government" also show that the GAAP negative net worth of the federal government has increased to $59.3 trillion while the total federal obligations under GAAP accounting now total $65.5 trillion.
The $65.5 trillion total federal obligations under GAAP accounting not only now exceed four times the U.S. gross domestic product, or GDP, the $65.5 trillion deficit exceeds total world GDP.
...
"Put simply, there is no way the government can possibly pay for the level of social welfare benefits the federal government has promised unless the government simply prints cash and debases the currency, which the government will increasingly be doing this year," Williams said, explaining in more detail why he feels the government is now in the process of monetizing the federal debt.
"Social Security and Medicare must be shown as liabilities on the federal balance sheet in the year they accrue according to GAAP accounting," Williams argues. "To do otherwise is irresponsible, nothing more than an attempt to hide the painful truth from the American public. The public has a right to know just how bad off the federal government budget deficit situation really is, especially since the situation is rapidly spinning out of control.
"The federal government is bankrupt," Williams told WND. "In a post-Enron world, if the federal government were a corporation such as General Motors, the president and senior Treasury officers would be in federal penitentiary."
WTF? US$65.5 trillion deficit. Is the source reliable? Thats shocking... "Federal obligations exceed world GDP"
Originally posted by Only-Way-4-Destiny!:WTF? US$65.5 trillion deficit. Is the source reliable? Thats shocking... "Federal obligations exceed world GDP"
No, it is not deficit but obligations (items that will come due in the future).
I believe the only way to go is America printing more money. Then it would indirectly put a lot of pressure on countries like China, Japan, and Asia that have accumulated dollars to do something with their reserves. I think America and China might have talked about this. America may not churn out dollars too fast and allow China a reasonable amount of time to spend the dollars and reform its domestic economy. China cannot dump the dollars all at once as it is no good to both itself and America.
Originally posted by skythewood:Want to know why they support the bill even though it is basically committing political suicide? Well, since they will very well lose their political career over this, and they support the bill anyway, they probably thought it is the right thing to do.
Some democrats in the house voted against the bill. My guess is, they thought this is the right thing to do too.
So why did so few republicans voted for the bill? well, it is basically commiting political suicide, and that is definitely a huge factor in shaping their decision, maybe even more than the well being of their country. The feeling i get is that the republicans are very uncooperative, rather than the democrats very unreasonable.
finally, all the senators were elected by the people of their state, and they have been chosen by their state to represent them, to vote for them. Majority wins, so be it... that's how decisions are made in their country.
They pushed the bill through 60-38... there are 58 democrats in the senate. From the maths, I don't think any of the democrats voted against it.
Why do you think that the republicans are voting against it? Just to be uncooperative and behave like a spoilt child? Your feelings cloud better judgement.
The republicans don't believe in intervening into the economy; prefering to let it self-correct. They don't believe in the amount of handout and welfare that the democrats are trying to force the government to spend. That is why they are against it, and not just trying to be uncooperative as you say.
What is worrying about the political situation is how easily the democrats will be able to push through any bills in future. Imagine if they try to pull US troops out of Iraq before it stabilizes sufficiently? We look at this not to criticise them, but to prepare ourselves for the consequences of bad policy from the US.
Originally posted by tai gok nang:No, it is not deficit but obligations (items that will come due in the future).
I believe the only way to go is America printing more money. Then it would indirectly put a lot of pressure on countries like China, Japan, and Asia that have accumulated dollars to do something with their reserves. I think America and China might have talked about this. America may not churn out dollars too fast and allow China a reasonable amount of time to spend the dollars and reform its domestic economy. China cannot dump the dollars all at once as it is no good to both itself and America.
yup, the obligation includes ALL the money they need to pay for social securities and medisave to be paid in the future. Of course, they don't need to pay now...
Sort of like singapore CPF... If pay out all the CPF, also heavily in debt, but Singapore don't need to pay now...
Seems kind of weird to lump it together that way right? It will be easier to not lump it that way. just look at the situation year by year.for example, last year US deficit is 455 billion... 2009 deficit is whatever... and so on...
that's sort of like telling me i will be spending $12 000 in the next years on food, transport and whatever, while my income is only $1k per month... not exactly saving money, but not exactly like the end of the world too...
Thanks skythewood. Its easier to comprehend now.
Originally posted by Shotgun:They pushed the bill through 60-38... there are 58 democrats in the senate. From the maths, I don't think any of the democrats voted against it.
Why do you think that the republicans are voting against it? Just to be uncooperative and behave like a spoilt child? Your feelings cloud better judgement.
The republicans don't believe in intervening into the economy; prefering to let it self-correct. They don't believe in the amount of handout and welfare that the democrats are trying to force the government to spend. That is why they are against it, and not just trying to be uncooperative as you say.
What is worrying about the political situation is how easily the democrats will be able to push through any bills in future. Imagine if they try to pull US troops out of Iraq before it stabilizes sufficiently? We look at this not to criticise them, but to prepare ourselves for the consequences of bad policy from the US.
House and senate diff... that one you need to google.
ehh... the republicans under president bush thought very very differently than they thought under Obama. They were fine in supporting a war that cost 700 billion to destroy and rebuild other countries, being Iraq. now ask them to spend money to rebuild their own country and they hesitate? Are you sure they not playing punk?
as for your worry for early US pull out, the threat is always real, be it under democrat or republican. Somehow, the US citizen voted and made the senate this way, and put their trust in the democrats.... so that's the way it is. I don't know what your point is pointing this out, but the fact remains that there is only 58 democrat senators.