Ok, so giving money directly to people who are supposed to immediately spend it won't stimulate the economy, we agree on that. So your opposition to the package is, what, in the specifics?

Actually it will stimulate and there are two possible outcomes.

1. The extra spending induces people and firms to spend more/expand production, thus "jump starting the economy".

2. People see the extra money and save it or pay down debt. This has little simulative impact.

Which of these two effects dominates will determine the success/failure of the stimulus package. Hence the question of who gets the money. Ideally you want to give it to those who will spend it vs. saving it.

Further, there are timing issues as well. If the stimulus takes a year to get into the economy you might the recession is already over and all that extra spending is no considered inflationary by Fed who will raise interest rates to clamp down on inflation.

Then there all the things economists have learned from the public choice school of thought in economics. The government is gearing up to spend an unprecedented amount of money in a short time. You are the CEO of a large corporation...do you:

A. Call in your lobbyists and have them get to work on securing a chunk of that money before your competitors do?
B. Review the lunch menu?
C. Call it an early day and have your secretary book you a 1:45 tee off time at the country club?
D. Call in your secretary for a quickie on the couch in your office?

You can select multiple answers if you like, but to get it right your answer must have at least one of the above and the one that is correct.

You just, after a fashion, figured out Milton Freidman's permanent income hypothesis, or at least an implication of it.

It took an economist to figure that out?

Ok, so giving money directly to people who are supposed to immediately spend it won't stimulate the economy, we agree on that. So your opposition to the package is, what, in the specifics?

And my recollection is that Arnold came in during the dot-com aftermath. I was in the process of retiring from a dot-com, getting a new passport, and at the federal building were all those folks registering to "run" in the recall election.

See Figure 4, here. Spending per capita peaked 2000-2001, darned if that doesn't coincide with the dot-com bubble.

Of course not, that was my point. For any action to actually bring the economy back, it needs to be self-sustaining after the initial stimulus. Giving a one-time injection of money to people to spend won't necessarily accomplish that.

You just, after a fashion, figured out Milton Freidman's permanent income hypothesis, or at least an implication of it.

The permanent income hypothesis (PIH) is a theory of consumption that was developed by the American economist Milton Friedman. In its simplest form, PIH states that the choices made by consumers regarding their consumption patterns are determined not by current income but by their longer-term income expectations.

[...]

The key conclusion of this theory is that transitory changes in income do not affect long run consumer spending behavior.

Uh, er, uh........Michael. And if you were a business owner, would you hire people if you knew govt spending was a just a brief spike benefitting your business???

Of course not, that was my point. For any action to actually bring the economy back, it needs to be self-sustaining after the initial stimulus. Giving a one-time injection of money to people to spend won't necessarily accomplish that.

Wrong, customers pay the benefits, since they provide the revenue that employers later pay in taxes.

Apparently, as an employer I am entitled to customers, and what's more I am entitled to customers that I can freely pass on any and all tax burdens, with a little bump to maintain my margins as well. Who knew?

Anyway, double plus wrong. Customers pay their invoices for products and services rendered, or at least I hope they do. Customers do not pay my taxes, salaries, utilities, benefits, COGS, interest on loans, etc, etc, etc. Jumpin' bejesus, have any of you experts every actually run a company? Or even accounts payable or accounts receivable? Next I suppose you'll tell me that the government is paying for my gas since I'll be buying gas and I'll be getting a tax refund check this year -- assuming of course that California hasn't set yet another trend.

Some people really do seem to think that taxes can be raised indefinitely without any deleterious effect. Amazing. I wish I could fall for this kind of magical thinking. It would make the government cheese we are all going to have to depend on soon so much tastier.

Look, the bottom line is that if you want to engage in stimulus spending just send the unemployed the money. They will spend it. In fact, send money to the people in the lower end of the income distribution. This, we are told time and again, are the people who will spend it.

Unless you plan on continuing to give those people free money, they won't be a reliable source of spending. If I were a business owner, I wouldn't hire new employees because of a brief spike in sales following the distribution of stimulus checks, would you? Getting people to spend money you give them is easy, getting them to spend their own money after you stop giving it to them is the hard part.

Who pays unemployment benefits?

The states.

Who receives unemployment benefits?

Unemployed manufacturing, construction and other workers.

Oh yes, that is oh so much better than having a job. All that additional leisure time and what not. Please.

If you want to argue that this move doesn't accomplish the goals of the bill, that's fine. But it sounds like you're saying that money should be going to prop up declining industries, simply because they are declining.

My problem is that a vast portion of the bill is bullshit. It is being sold on the notion of stimulus when, as we can see, it is anything but.

If you don't fund the states you'll have more than just California in crisis (teetering on default).

California is in a mess because of its politicians...whom I might add are mostly Democrats. If the budget had grown at a rate equal to inflation and population growth the state would be running a surplus.

California has a very foolish legislature, no doubt, but all they really did was assume that the business cycle would not turn.

Don't you live in California? This is patently NOT true. California had a budget issue when Arnold came into the governor's mansion and we have an even bigger one now. The rate of increase in spending has been wildly out-of-line...so much so it is borderline insane.

It was a fore-runner of what other states are experiencing now. A business downturn, which they should have expected and prepared for, catches them flat-footed.

As Steve Plunk said, they were foolish. So the solution: reward foolishness. Brilliant. Incentives schmincentives.

I smell hackery. How much of that 39% goes to pay state workers, and how much is distributed to the private sector via contracting for goods and services?

Look, the bottom line is that if you want to engage in stimulus spending just send the unemployed the money. They will spend it. In fact, send money to the people in the lower end of the income distribution. This, we are told time and again, are the people who will spend it. We aren't doing that. When given the opportunity the Democrats don't do it. The level of intellectual dishonesty here is quite apparent.

In the Sacramento area, a sizeable fraction of those revenue-generating customers are state employees. Let the state apply a 10% across-the-board pay cut, and see how well local private business does.

Who pays unemployment benefits?

The states.

Wrong. Employers pay unemployment benefits. The states collect the money and skim a litle off the top before writing the checks to the unemployed.

You don't know what your talking about.