Sky - I'm with you on this one.

Without demand there is no economy. Put the money in the hands of those who will spend it.

R

Toritto,

Exactly! Hell, I don't know what the big guys have a problem with this idea for, it''l end up in their hands eventually anyway. "Money trickles upwards" is only an adage; in fact it zooms upwards by great, galloping leaps and bounds!

Most people would have put that money in their bank. That would have supplied all that the banks got from the government as bail-outs! Then it would have passed through the hands of those the banks loaned to - the manufacturers and investors - then back into the population as wages to increased work forces, and back to the banks again..... the usual cycle. And every step of the way, everyone but the workers skims off a percentage for themselves. The money moves up.

Not only that but it would have been a classic example of how to defeat the recurring downward spiral that capitalist economies suffer from in regular cycles. Imagine how things would be in Greece and the half-dozen countries in Europe that are faltering, if that were to be applied there too!

Investors cannot bring an economy back up. Bankers cannot bring an economy back up. The rich cannot bring an economy back up.
BUT...... customers CAN! In fact buyers are the ONLY ones who can. And one certain way to make sure that everybody is a buyer is to give them some money to spend. You won't have to pass any laws forcing them to spend, I'll tell you that!
.

You wrote:

"For years I've been saying - and enduring the chuckles of those who think me naive about economics - that if all adult Americans had been given the modest sum of only $5,000 each, the economy would have revived in jig time. It is my contention that the huge quantities of sales such an investment in the American People would have led to, would have in turn created a heavy demand for manufactured goods and the services of service providers."

Uhhhhhhhhhhhhhhhhhh Ohhhhhhhhhhhhhhhhhhh. . . ..

The national government spend about $2.2 trillion each year on mandated social entitlement welfare benefits -- Social Security, Medicare, Medicaid, Section 8, Unemployment, Food Stamps, government pensions, etc.,. Our nation has a population exceeding three hundred million.

Dividing these annual social welfare outlays by the total number of adults AND children in America yields:

($2.2 trillion)/(300 million) = $7,333.33 for every American

. . . every year. . .

Uhhhhhhhhhhhhhhh Ohhhhhhhhhhhhhhhhhhhhhhhh. . ..

Uncle,

Good, thoughtful comment, but..........

Lets not kid the kiddies here now, sir. The "costs" you mention includes all administration costs also. Since those administration costs run from about 50% to 65% of the budgets of those departments, the recipients of those funds only get - at best - half of that money. That would be in the range of $3,600 per American, per year; or $300 per month. If we assume that only 1/3rd of Americans get this largess and that it is shared equally among that 1/3rd (it isn't but anyway....) that's still only $900 each per month. That's a poverty level survival income. Much of that money is never even seen by the recipient since it goes to pay for medical and other programs directly.

This can hardly be said to be a single, once-in-a-lifetime, windfall that would generate an economic mini-boom. You will note that the much, much higher incomes of the working middle -class totals a great deal more money than that pittance given to the poor and doesn't create a boom of any kind unless it is consistent over time for a high percentage of them. If the middle class, with incomes that average at least 4 times what the extremely poor get, can't foster a boom, then that pittance that the poor get, in monthly driplets, surely wan't do so.

No sir, what I'm talking of is a different thing entirely. I am contrasting giving trillions of dollars to the wealthy "too big to fail" corporations and banks as opposed to spreading that kind of windfall out in a cash bonus to everybody. It wouldn't be spread out over time as just a small monthly add-on. It would be given just the way those trillions were given to the banksters - one good shot all at one time.

The difference is that the money given to the banksters and corporations stayed right there in the hands of those same banksters and corporations. It never got anywhere near the majority of the citizens. It coagulated in the hands of the big guys, In a capitalist system when money coagulates it stagnates. And when money stagnates it clots and actually prevents or slows the desired recovery.

This money would get back to the banksters and corporations too..... BUT only after it had passed through the hands of the citizens and provided a major boost to the economy in doing so. It couldn't maintain the economy but it could kick-start it into the usual upward spiral years ahead of the time when such an upward spiral usually begins after a serious recession/depression.

We've seen this cycle operate a number of times before, haven't we? We expect that the economy will, in time, recover. It always has in the past. This "shot-in-the-arm" is not intended to do something that has never happened before; it is, in fact, intended to do exactly what has happened before - just a whole lot sooner than it usually takes.

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Sky,

First, I am certain that the vast majority of OSers, who post and comment on political matters, will assure you that our national government administers its welfare entitlement programs with great efficiency. Several of those who argue with me on this point have proudly claimed that administrative costs do not exceed 4% of disbursements; but they usually limit their assertion to the 'big three': Social Security, Medicare, and Medicaid. Together, these three programs account for a little more than half of our welfare spending at the national level.

Of course, no left leaning OSer has yet provided the source of their information regarding the efficiency with which our national government writes checks to entitlement beneficiaries. Therefore, I am not inclined to absorb such claims without the seasoning of a great deal of skepticism.

Nevertheless, despite my own cynical view of our national government, I doubt your claim that the inefficiency with which Washington DC administers the dole approaches the ratios you cite. However, I am open to reading your sources.

Second, regarding the ubiquity of the national largess, the statistic I can confirm is that nearly 48% of all households in America receive some form of welfare benefit. In this vein, Rudy Giuliani claimed on television today that nearly half of all Americans received one or more benefits from national welfare programs.

Perhaps Rudy was being sloppy and/or exaggerative. However, we do know, from the IRS, that only about half of those filing income tax returns paid income tax. This would seem both causal and correlative if half of American taxpayers were receiving national welfare.

We also know from the IRS that about 143 million personal income tax filings were made in 2009. Then, making the presumption that such welfare is spread equally among the members of the taxpayer’s family mentioned on their associated return, I would be willing to modify my calculation, to wit:

($2.2 trillion)(96%?)/(143 million)(50%) = $29,538.46

. . . . . per tax filing welfare recipient family . . . every year.

Note that my (143 million)(50%) = 71.5 million isn’t that much different than your (300 million)(33%) = 100 million. Certainly, I am willing to admit that all welfare recipient families do not file tax returns. Therefore, I can accept this alternative to my calculation, to wit:

($2.2 trillion)(96%?)/100 million = $21,120 . . . per welfare recipient per year


Even after accepting your claim that this is not an amount evenly distributed among all welfare recipients, it nevertheless translates to an amount exceeding $5,000 per adult. Further, this amount is awarded every year. Further, we borrow $1.4 trillion every year in order to fund these disbursements; and Maynard claimed that this part is, by definition, stimulative.

Uhhhhhhhh Ohhhhhhhhhh

Now, this does not address the additional “bankster”, “one-time payment”, and “timing” aspects of your response, which you did not mention in conjunction with your posted claim about the effectiveness of $5,000 per adult payments from the government. However, my belief is that, if such payments were issued today, then they would be used mostly to pay off old debts. Hence, no stimulus.

Ahhhhh........ Uncle,

What preposterous silliness. The average welfare recipient gets over $21,000 EACH per year?!!!! Hey dude, I was born at night; but it wasn't last night, y'know? I mean a family of four getting over $80,00 per year just stretches the imagination a little tooooo far!

I'm Canadian and our welfare system, differently handled but still more generous than the American system (so I'm told by some who have experienced both, anyway) manages about $24,ooo per year for a family of four. Your numbers just don't make sense.

Additionally, I'd bet a Canadian dollar (worth more than its American counterpart) that any time any government agency, in either country, can actually operate on only 4 or 5 percent of its budget, capitalism - of any kind - will instantly be replaced by socialism. I didn't see any links in your comments as to sources so I'm presuming that they are probably similar to mine - articles read, blogs read, news stories, government pronouncements, life experience, etc., etc.

I have no specific academically examined sources; just 71 years of living in this North American society of ours with my eyes and ears open.

And occasionally thinking about things a wee bit. I'd recommend the thinking part to you before you claim that each person on welfare in the US gets over $21,000 per year; that's about what? - $1,800 per month. Over $400 per week is one hell of a lot more than your minimum wage jobs pay!

HOWEVER my blog had nothing to do with this topic at all. Even a rich person will, upon winning a small sum from a lottery or finding a bit of money on the street, often treat himself to a "little something extra". His normal income not withstanding.

You, by your argument, appear to hold that the trillions of dollars in stimulus money that was lavished upon a few large corporations and banks, was a better investment in America than the same amount given to the consumers of goods and services. I hold that such a windfall is better spread around the whole population. I made no mention of this silly straw man of yours about what welfare people get or do not get and am not prepared to argue it here. Put up a blog about it and let's argue it there.

The American government had (although it seems not to have known it) the choice of funding wealthy corporations and banks or of funding the American population. The banks don't create jobs and large corporations are automating and off-shoring American jobs out of existence as fast as they can.

Now that seems reasonable, don't ya think? Borrow money from the Chinese, lend it to American corporations (like General Motors) who will use it to open up plants in China (as they've been doing for many years now - in PARTNERSHIP with the Chinese (communist) government! That'll help put Americans back to work. Yup, and the moon is made of green cheese, too!

The American public is 100% consumers of goods and services. They, and only they, can effectively kick-start the economy again. They can do that by massive buying of goods and services. And 200,000,000 adult people can, and would have, spent one hell of a lot more than those banks and corporations did right there in the USA!!. They'd spend it on the kind of goods that come from the production lines and services that employ people just like them. And that, my friend, of necessity, translates into jobs, jobs, jobs.

All your (and others') attempts to compare a sudden influx of "not-earmarked-for-survival" cash with the regular income that a huge portion of the population MUST spend for mere survival, doesn't wash. A windfall is NOT a factor in normal daily survival.

As to the oft-repeated argument that such a windfall would mostly be used to reduce debt; so what?

Two things would happen if that were to occur. First, as quickly as those credit cards and other debts were paid off, people would start using them again. And credit card spending is still spending as far as the retailers and manufacturers are concerned. So long as people buy their goods and services, they sure as heck don't care where people get the money from!

Second, those payments to financial institutions and corporations by people reducing their debt, would provide investment money for those corporations to use/borrow from the banks. And with the economy on the up-rise the banks would be only too happy to "place" it where they'd get a nice return.

I stand by my original thesis......

.

Sky,

Last go around . . . .

Here are my sources for the data that follow . . .

========
Sources:

Table S-4
http://www.whitehouse.gov/sites/default/files/omb/budget/fy2011/assets/tables.pdf

Table 473
http://www.census.gov/compendia/statab/cats/federal_govt_finances_employment/federal_budget--receipts_outlays_and_debt.html

========
Data:

Non-Discretionary Outlays by National Government (FY09)
Social Security $ 678
Medicare $ 425
Medicaid $ 251
Troubled Asset Relief Program $ 151
General Retirement and Disability (not SS) $ 8
Federal Employment Retirement and Disability $ 127
Unemployment Compensation $ 135
Housing Assistance $ 69
Food and Nutrition Assistance $ 107
Other Income Security Assistance $ 177

Sub-Total - Mandatory Spending $2,128

(All amounts are in billions of dollars.)

========
Look anywhere, the population of America is slightly over 300 million.

Look anywhere, the number of tax returns filed annually is about 143 million, about half of them pay little, if any tax.

Do all the division you want.

Remember your original claim was that $5,000 to each adult would have stimulated America’s economy, presumably into recovery.

Take the total non-discretionary amount above ($2.128 trillion) divide it buy the population of America (300 million), you get about $7,000 for every adult AND child in my country. This is $2,000 above what you claimed would be effective, even if only given to adults.

Try your excuse again that only half this money makes it to the beneficiaries. If you do, then you just prove my point why we shouldn’t be giving our government money at all.

Uncle,

I cannot believe that you did this again!

I must advise you, sir, that merely repeating your claim that seems to hinge on the idea that since the poor in the US are already getting bare survival income in small monthly increments, that this in any way is relevant to the concept of a sudden windfall of $5,000, no matter WHAT their average yearly survival income is.

You are comparing apples to oranges, sir.

* Are you unable to see the difference? Or are you locked into a formula of economics that is determined to equate everyday expenses with a sudden windfall?

*Are you trying to say that having more money would not encourage people to spend more?

*Are you trying to say that spending more (buying products and services) would not help to create an increased demand for those products and services?

*Are you trying to say that an increase in the demand for products and services would not result in people being hired to meet that demand?

*Are you trying to say that those, now working, people would not use their employment income to purchase more products and services?

*Are you trying to say that an increase in demand, supported by steadily employed people, who have come off welfare, would not benefit the American economy?

*Did you notice that I DIDN'T say that the windfall stimulus I proposed was in any way limited to that portion of the population that is living at, or below, the poverty level, but to EVERYONE?!

*Are you aware of the fact that "Demand creates suppliers who create jobs which create income that creates more demand", is the very essence of capitalism? You may have heard of it: It's called the "Supply & Demand Theory."

*And did you even read the article at the site I provided a link to at the top of this blog? If not, please do so. It explains pretty clearly how demand (buyers) are a necessary component of a healthy economy. I'm sure that you can see that people cannot be buyers without having funds with which to buy.

Since our form of capitalism combines buyers and workers in each person when it is working right, it seems reasonable to say that an increase in buyers ability to buy will result in an increase in sales. If so that increase in sales will require an increase in production and that increase in production will require that more people be employed as producers.

Can you not see that those with barely enough income to meet their survival needs will spend that income only on survival needs? How could that possibly lead to them buying enough to stimulate the economy? That's a closed circle. They get a small bit - they spend a small bit. End of story. Same is true of the working poor.

When the number of people who can buy more than bare necessities grows, so does the economy. None of this is new or esoteric economic theory. This is stuff we already know from hundreds of years of experience.

When the economy stagnates, such as now, it needs something to give it a jolt. Something that is unusual. Something that puts money in the hands of buyers. Or it very slowly, over a long time, rebuilds itself.

Since the previous government and the present one have both seen fit to inject massive amounts of money into the economy, the question becomes one of, "at what point in an economic system will such an injection do the most good?"

They both chose to inject it at points that DO NOT increase the buying power of those who buy products or services. Because of that no jobs have been created and the buying power of the population continues to fall and take the entire economy down with it.

That stupid investments, spurred by greed, such as those made during the mortgage bubble can initiate such a fall, we can see. But that doesn't much matter at this point. What started it is not as important, right now, as what will end it.

The answer to that is pretty obvious; massive buying by the population. A windfall of cash will stimulate that buying.

.

The usual errors of Chris' tired old one note argument aside, saying 5K wouldn't be stimulative because money spent on SS and Medicare, etc hasn't provided stimulus is just freakin' stupid.

Remove those payments and watch the economy sink like one of Chris' outrageously inept arguments.

PS---Once you zero-out SS and Medicare A from your list, as they are paid for with a dedicated tax, the largest cause of deficit spending is defense and stupid conservative policies that stripped government of revenue.

And Keynes never said all deficit spending is stimulative. "By definition" or otherwise. He certainly wasn't so stupid as to think striping government of revenue causing deficit spending is stimulative.

Of course, he was no Chris. If he had been, he would have been a clown, not an economist.

Marx used a virtually identical argument (in more opaque convoluted language) to argue that capitalism would collapse eventually. He said the capitalists would eventually run out of people to sell stuff to. A lot of Marxist economists feel it happened in the 1970s - only instead of allowing capitalism to collapse, the capitalists shrewdly started selling financial products instead of manufactured goods.

Dr. Bramhall,
I didn't know that about Marx. Not too up on him, I'm afraid.

Even financial products need buyers. I kind of thought that it might have been credit that allowed people who no longer had any money to keep on buying for as long as they did.

Perhaps I should have also mentioned that the kick-start I proposed would not do one blessed thing to prevent the eventual fall of greed-base capitalism. I don't think that anything can prevent that.

Yet I'd prefer to see us try Citizens' Capitalism than go into the dead-end street of socialism. Neither greed capitalists nor socialists will even acknowledge that capitalism does not have to be American style greed capitalism but , if firmly controlled by the social system, and used as a tool to ensure that its benefits (profits) are fairly and properly shared with those whose labour actually creates wealth, it can be the Rolls Royce of systems.

What happens when it is not properly controlled by the social system is what we see today. Make no mistake about it, capitalism is a dangerous tool. But mankind has learned to use dangerous tools before now and we can learn to do so with capitalism. It requires that we only allow it to serve the interests of the entire society rather than the interests of the few. I've said more on that elsewhere.

.

Paul,
(Almost missed you!)

You have a great point. It's only a shame that you tainted it with that ad hominem slap at Uncle Chris. It wasn't needed. Nor is it appreciated. Keep it clean friend Paul, keep it clean. His intelligence, or lack thereof, is NOT the topic under discussion. Thanks.
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If you don't like it, delete it. I don't play pussy-foot with insulting assholes like Chris, nor would I ever make the mistake of entertaining his asinine ideas as if he had something resembling a valid point. Some do, obviously, but only out of lack of knowledge.

Ad hominem would be an attempt to attack a truth by aiming at the person, not the assertion. He offers no relevant truth and more than makes up for that with falsehoods, such as 48% on welfare and all deficit spending being Keynesian stimulus.
I countered his false statements with fact, showed the obvious lack of logic in his SS Medicare/fiscal stimulus comparison, and then offered he's a better clown than economist.

It was pure courtesy that I didn't explain why your 5K idea wouldn't do what you claim.

As to your scolding, thanks for the laugh. Your blog, your prerogative. I will remember to never waste a comment here, even if I find jumping between 2 really bad arguments compelling.

Paul,

Yes, you have permission to never comment on any blog of mine again.

If you should slip up and do so, I'll help you out by deleting it.

Best to you........

.