Stimulus, Recovery and the Problem with Politicians

Nov. 01, 2009 6:06 AM ETDIA, SPY, QQQ8 Comments
Tom Lindmark profile picture
Tom Lindmark
452 Followers

fiscal stimulus

There seems to be a lot of agreement that the positive GDP report for Q3 was in retrospect not as positive as the headline number might lead one to assume. Coupled with the disappointing personal income data on Friday as well as the sales numbers and many seem to have concluded that we’re still deeper in the woods than we think.

Henry Blodget has a nice short post on this subject with some good links that I recommend. Other than that, I don’t want to spend much time merely echoing points of view with which I find myself in agreement, rather let me offer another observation.

Recall if you will that when the shape that any fiscal stimulus plan should take was being debated there was a sharp divide as to whether it should be accomplished via tax policy or direct government spending. A lot of the discussion was centered around multiplier effects with many arguing that government spending represented a better bang for the buck.

The tax advocates argued for broad based tax relief and some of the proposals suggested a suspension of the payroll tax, tax credits for businesses that increased employment, accelerated depreciation for new equipment purchases as well as a cut in personal and corporate taxes. Of course, those in favor of government spending won the debate.

We may now be seeing the fruits of that decision. The problem isn’t so much that direct fiscal stimulus is better or worse than a tax reduction approach as it is that the former allows the political class to get their hands on the money as it flows through the government coffers and direct it those whom they support or perhaps it would be more correct to say those that support the politicians.

To be sure, tax policy can be

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Tom Lindmark profile picture
452 Followers
About a year ago, a company asked me to write a daily blog for them. I told them that I’d never read a blog and had absolutely no idea how to write one but sure, if you want to pay me for it, I’ll give it a shot. It was either my good or bad fortune to start at the beginning of the credit crisis. Good because there was a lot to write about, bad because they didn’t really want me to chronicle and opine on the disaster of the day. Guess who won that standoff. But I was hooked on blogging, so I started my own blog, called it But Then What and here we are. I’m not sure that credentials mean much when it comes to writing about things but people seem to want to see them, so briefly here are mine. I have an undergraduate degree in economics from an undistinguished Midwestern university and masters in international business from an equally undistinguished Southwestern University. I spent a number of years working for large banks lending to lots of different industries. For the past few years, I’ve been engaged in real estate finance – primarily for commercial projects. Like a lot of other finance guys, I’m looking for a job at this point in time. Given all of that, I suggest that you take what I write with the appropriate grain of salt. I try and figure out what’s behind the news but suspect that I’m often delusional. Nevertheless, I keep throwing things out there and occasionally it sticks. I do read the comments that readers leave and to the extent I can reply to them. I also reply to all emails so feel free to contact me if you want to discuss something at more length. Oh, I also have a very thick skin, so if you disagree feel free to say so. Enjoy what I write and let me know when I’m off base – I probably won’t agree with you but don’t be shy. Visit my blog http://www.butthenwhat.com or follow me on twitter at twitter.com/tomlindmark.

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