Obama talks stimulus. He hopes you are listening

Barbara. how about sending a link to the Times article to Boehner and McConnell. They don't seem to get it.

the problem with Obama's plan is that it relies on new massive deficits piggybacked on already unsustainable "structural" deficits created by Bush's tax cuts and spending policies. The Times also has a very important article about China's increasing reluctance to finance US debt -- and what that means for the US economy.
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Short version -- higher interest rates in the US, and a lack of private capital available to fund continued economic expansion. One "bright spot" in the near-collapse of the economy is that US Treasuries have become such a "safe haven" that interest on new debt is the lowest its ever been. But the minute people gain some confidence that the economy is back on track, the market for US treasuries at current interest rates is going to disappear completely; the government is going to have to pay much higher interest rates on its debt, and there is going to be far less money to invest in "job creation" since the government is going to need so much more new capital, and China isn't going to be a source for it.
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In other words, Obama's plan to "stimulate" the economy is self-limiting...as soon as it looks like its working, its going to create conditions that depress economic growth.
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The only solution, IMHO, is for Obama to pay for his stimulus plan through higher taxes -- and that means a tax on wealth. There is no reason why we should wait until someone dies before we tax their assets -- and given the enormous (and ever-increasing) concentration of wealth in this country, the best source for new government capital is the wealthy.
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Bottom line here is that the US government is going to be going to the wealthy to fund the stimulus anyway -- the only question is whether we raise the money by borrowing from the rich, or by taxing the rich. The latter strategy is the one that makes the most sense.

here's Feldstein's testimony from yesterday http://www.nber.org/feldstein/EconomicStimulusandEconomicGrowthStatement.html

Barb...
Thanx for that link... it was pretty funny.
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The guy from Cato is particularly amusing, if you find stupidity funny. He doesn't understand Keysian theory which (of course) is dependent upon the "churn" of money put into the economy through deficit spending. He also ignore the fact that while the government may borrow as much as it spends, much of that spending winds up back in the government's pocket through taxation.
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That link from Boehner's site was pretty funny. Marty Feldstein needs to make the sunday morning talk show circuit.

pLuk,
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I must agree. That Cato guy was hilarious...hilariously stupid in a Sarah Palin playing chess sort of way.

Barack Obama said in this speech - "A world that depends on the strength of our economy is now watching and waiting for America to lead once more. And that is what we will do."

This is absolutely right. US leadership in kickstarting the international economy is crucial. But the case for this is also partly because the United States itself is dependent on the good health of the world economy.

The Bank of England said this just now in explaining its latest historic interest rate cut - "The world economy appears to be undergoing an unusually sharp and synchronised downturn. Measures of business and consumer confidence have fallen markedly. World trade growth this year is likely to be the weakest for some considerable time." As Obama said soon after the election - "We must also remember that the financial crisis is increasingly global and requires a global response."

In the discussions of recent months it has become increasingly clear to me that both the US and the wider global economies need:
1. coordinated macro-economic stimulus (both through monetary and fiscal policy)
2. strong international economic institutions like the IMF and World Bank (both of which seem to have been contributing positively to dealing with the current crisis), and
3. every possible measure to maintain an open international trading system and to avoid the perils of protectionism.

This is very much in line with what we can learn from the now-revived John Maynard Keynes (as understood from Skidelsky's and Moggridge's biographies, and Markwell's study of Keynes and international relations).

It is good to see Barack Obama place emphasis on the international context, and the importance of US leadership. It would be even better to see him commit clearly to those three points, including to be clear that he will stand strongly against the self-destructive economic nationalism and protectionism that has done so much harm in the past.

US economic leadership in this way will serve the interests both of the United States and of the wider world.

Obama is just following the Bush policy: save the rich, dump the poor.

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