Landlords are probably more ready to continue using the income these renters send them as investment income, growth income, and using it for leisure and acquiring other goods, which is good for fudiciary reasons. Landowners typically buy what are classified as durable goods. Machines, appliances, etc. Those are the prime goods for a manufacturing economy, because the manufacturers can demand a good price for them.
And, best of all, it keeps these workers in their apartments on their own money, and out of the workers' unemployment insurance and welfare streams. Which goes to help ensure property values stabilize. In Japan's crisis, property values continued to decline even though interest rates to buy property were 0. You can't buy property or even rent it from a landlord if there are no jobs. And if property owners can't get payment for their property, they can't create jobs so that people can rent or buy. Infrastructure takes care of both sides. It bouys property values, and stabilizes the job market, while increasing the capacity for investment well into the future.
However, we should note that any infrastructure project run by a corporation will be more economical and less costly than one run by a beaurocracy. The Internet is a good example of this. The government saw that privatizing it's control would be much better than controlling it within government. This can be said of the utilities, rail, and space industries as well. Imagine if the government would have built the transcontinental railroad without bonding it to the railroads to build and eventually own.
(Sorry, this got really long)
What is your take on Morris' claim that even funding good infrastructure projects, the workers who benefit by building them will again spend most of the paycheck on existing debt thus doing little as an economic stimulus. Morris seams to favor direct tax cuts instead to businesses and individuals in order to lower overhead costs and put money into investor's pockets so they can invest in building the economy. What are your thoughts on this approach? I need to hear from my economic panel.
Also, Nevin is having difficulty getting affordable travel to NO and may put his two bowl tickets up for sale.
From: Tijs Limburg [mailto:tijis311@gmail.com]
Sent: Wednesday, December 10, 2008 3:12 PM
To: Limburg, Garth
Cc: Eric Limburg
Subject: Re: FW: OBAMA'S STIMULUS PLAN WON'T STIMULATE
I think Morris's take on this is fairly accurate. For one, I didn't agree with the stimulus we got earlier in the year, so I used it to pay off credit card debt, just as he says. While I am now practically debt free, this doesn't help the country or uncle sam very much.
Two, he's right about infrastructure projects. They take forever. look at how long it took to get Legacy Highway, 1-80 reconstruction, and UTOPIA. It took over 30 years to get practically universal cell phone coverage, and that was mostly privately funded. Cities like Saratoga Springs, Harriman and Eagle Mountain don't have cable service yet.
However, as we discussed with Nevin, there are already projects planned and ready to go that are already in the pipe. This renewed funding could be immediately applied to those projects to ensure they don't get halted when governors like Huntsman want to take a quick axe to their budgets.
Industries are created and destroyed on infrastructure. Lincoln was a genius because he saw that the only way to get all of that gold wealth generated in the 49er gold rush from the West coast to the East coast where it was needed in treasury to pay for war debts was to build a railroad so that Californians could buy products manufactured and grown in the East, and thereby tranferring their gold. This started a whole new shipping industry dominated by the age olds like Wells Fargo and Burlington.
FDR saw the same thing with the Tenessee Valley project and the building of dams. Ike saw it in building interconnecting highways that spawned the new 'cowboy' industry of trucking and distribution giants such as FedEx and UPS, as well as a mammoth auto industry and dependence on oil. And Kennedy's spending on NASA and the creation of the space infrastructure industry revolutionized the communications industry which affects are still being discovered. Google maps and GPS, anyone?
Japan tried coming out of a deep recession without spedning on infrastructure. This resulted in stagflation that took 10 years to overcome.
I recommend the book Building Wealth, by Lester C. Thurow for any that are interested. I began reading it again and I am glad to see that the Federal Reserve is following a lot of the recommendations in the book. I think we are on the right track to turning this thing around.
TijsOn Wed, Dec 10, 2008 at 2:24 PM, Limburg, Garth <Garth.Limburg@slcgov.com> wrote:
We have talked about this issue. Here is Dick Morris' take on it.
-----Original Message-----
From: Dick Morris Reports [mailto:subscribers@dickmorris.com]
Sent: Wednesday, December 10, 2008 1:51 PM
To: Limburg, Garth
Subject: OBAMA'S STIMULUS PLAN WON'T STIMULATE
OBAMA'S STIMULUS PLAN WON'T STIMULATE
By DICK MORRIS
Published on TheHill.com
<http://reports.dickmorris.com/t/215670/7907599/1954/0/?u=aHR0cDovL3d3dy
50aGVoaWxsLmNvbS8%3d&x=65c6beb1> on December 9, 2008
Printer-Friendly Version
<http://reports.dickmorris.com/t/215670/7907599/4173/0/?u=aHR0cDovL3d3dy
52b3RlLmNvbS9tbXBfcHJpbnRlcmZyaWVuZGx5LnBocD9pZD0xMjQ5&x=be30cbbf>
The economic stimulus plans unveiled by President-elect Obama over the
weekend won't do much to help the economy. But they will vindicate all
the dreams of liberal Democrats for higher government spending.
Get Palin's Book, Just Pay Shipping
<http://reports.dickmorris.com/t/215670/7907599/4174/0/?u=aHR0cHM6Ly93d3
cubmV3c21heHN0b3JlLmNvbS9ubV9tYWcvc2FyYWguY2ZtP1BST01PX0NPREU9NzJBRC0x&x
=30f1a6f6> Of course, the basic choice facing any politician
seeking to stimulate a moribund economy is whether to catalyze the
supply side with tax cuts on business or the demand side by way of
spending increases. Obama obviously made that choice years ago: He will
work the demand side.
But once a leader makes that decision, he faces another: Will he
emphasize important and valuable public works projects or will he just
try to pass out the largest amount of money possible? By announcing that
he is not "going to throw money" at the economy in the hopes of getting
a pulse, Obama signals that he will stress the former approach and fund
important public works such as school reconstruction, fiber optic
cables, alternative energy generation and the like.
The problem is that such projects take a long time to plan and longer to
build. Their immediate economic impact is highly attenuated.
In all federal capital projects, only about one-quarter of the funds
appropriated are actually spent in the fiscal year. It just takes that
long to plan, engineer and begin construction. And for every $6 spent in
the last stimulus package, only $1 actually got spent on goods or
services. Five dollars out of every six in the Bush stimulus package of
2008 went to pay down debt, mortgage or credit card or student loan or
home equity, and not into the acquisition of new products or services.
So, do the math. If only 25 cents out of every dollar actually is spent
in the fiscal year, and only one-sixth of that sum actually gets spent
by the workers who get paid on new goods and services, only about 4
cents from every dollar actually stimulates the economy. And who says
those 4 cents will be spent on domestically produced products? A lot of
the stimulus will just feed Chinese imports, particularly with their low
prices.
FDR faced just this problem in combating the Great Depression. In the
National Recovery Act (NRA), Roosevelt set up the Public Works
Administration (PWA) headed by Interior Secretary Harold Ickes (the
original one). Ickes was a stickler for making sure nothing was wasted
and in keeping the costs down. He managed a spectacularly successful
public works program and built, without scandal or corruption, some of
our most important national infrastructure. But he took his sweet time
doing so. The economic stimulation was slow in coming.
Exasperated, FDR did an end-run around Ickes and set up the Works
Progress Administration (WPA) under Harry Hopkins. WPA spent its money
quickly and on projects involving little overhead or preparation. My
mother got a WPA job teaching English to foreigners. Virtually all the
WPA funds were spent in the fiscal year and the stimulative effect was
immediate.
But in opting to go the Ickes route, Obama will find that he leaves a
legacy of important contributions to our national infrastructure, but
little in the way of real economic stimulation.
While a WPA-type approach might hasten the ameliorative impact of the
stimulus package, Obama still faces the conundrum that most of those who
get extra paychecks as a result of his spending will use the money to
climb out of debt. In the '30s, credit cards didn't exist and consumer
debt was very limited. Most people lived paycheck to paycheck. Extra
money equaled extra spending. But now that most consumers will use money
to pay down their debts, not to spend it, demand-side stimulation has
its limitations. But Obama's ideology won't allow him to indulge in tax
cuts "for the rich," which might work to get us out of the depression
faster.
<http://reports.dickmorris.com/t/215670/7907599/2120/0/?u=aHR0cDovL3BvbG
xzLm5ld3NtYXguY29tL2hpbGxhcnkvP1BST01PX0NPREU9NjNCRi0x&x=02ed2411> Get
Palin's Book, Just Pay Shipping
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=30f1a6f6>
<http://reports.dickmorris.com/t/215670/7907599/4174/0/?u=aHR0cHM6Ly93d3
cubmV3c21heHN0b3JlLmNvbS9ubV9tYWcvc2FyYWguY2ZtP1BST01PX0NPREU9NzJBRC0x&x
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Tijs Limburg
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Get eXcited!
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Blogs:
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The "Don't Tread on Me" Flag: The First Navy Jack is enjoying renewed popularity these days thanks to an order from the Secretary of the Navy that directs all U.S. Navy ships to fly the First Navy Jack for the duration of the War on Terrorism.
--
Tijs Limburg
Chairman and CTO of DMX - Digital Media eXceleron, Inc.
Get eXcited!
www.dmxed.com
Blogs:
http://phystrings.blogspot.com/
http://getoutofthedark.blogspot.com/
The "Don't Tread on Me" Flag: The First Navy Jack is enjoying renewed popularity these days thanks to an order from the Secretary of the Navy that directs all U.S. Navy ships to fly the First Navy Jack for the duration of the War on Terrorism.
