Is this a trick question? Um..., taxpayers?

Okay then, which taxes? Income? FICA? Capital gains? Sales? How will that help the people who need the help?

But if not Citigroup, who would tax cuts save?

Is this a trick question? Um..., taxpayers?

Well, to keep it circulating, obviously.

But why bother to circulate it if it's all perfectly fungible?

That's because what people do with their water is significant. Where it goes reflects peoples' ideas about value and utility, and that lets other people know what the most productive activities are.

Oh. Wait. So it does make a difference when somebody transports water to one end of the pool rather than the other?

No, of course not. What difference could it make if you just transported water from one end of the pool rather than another?

Sorry. Couldn't resist.

I said nothing about wanting to bail out Citigroup. In fact, given their current value, the Government should just outright buy all the Citigroup shares, put it in receivership and gracefully liquidate the assets so as not to cause any panics or other problems or bring it back to health and then sell it again.

Fair enough, and pretty much in line with what I was suggesting at the start of the bailout talks.

But if not Citigroup, who would tax cuts save? And again, which taxes should we cut, and how will that help them?

I said nothing about wanting to bail out Citigroup. In fact, given their current value, the Government should just outright buy all the Citigroup shares, put it in receivership and gracefully liquidate the assets so as not to cause any panics or other problems or bring it back to health and then sell it again. My preference is for the former, rather than the latter. There'll be significant corruption and graft either way, but at least it will end in one case rather than go on forever.

An Obama administration could still do the buy-out right? (or to call it by its name "seizure", if it is non-voluntary)

Lots of good money chasing bad here. The fact that it is tax dollars, or more accurately further debt, doens't make it any better. Viewed correctly, it just provides a convenient method to grossly underestimate the true cost of the bailouts. Any "cost" that doesn't include interest on this massive debt until it is retired is delusional.

One of the problems today is that companies are borrowing money just to sit on it. Many companies are fully drawing their credit lines in fear that the banks will withdraw the unused portion of the lines. The companies don't need it for anything other than future liquidity and the only way to assure that liquidity is to draw the line now.

Actually, to some extent that is kind of good for the banks. They now have a source of interest income. Better than having the money sitting there not being borrowed.

Also, the largest poriton of GDP is personal consumption expenditures, as such even if a number of firms are doing this it wont be a large factor. Now if consumers were doing it....

People borrow money to spend it, not just sit on it.

One of the problems today is that companies are borrowing money just to sit on it. Many companies are fully drawing their credit lines in fear that the banks will withdraw the unused portion of the lines. The companies don't need it for anything other than future liquidity and the only way to assure that liquidity is to draw the line now.

Using Odograph's link and the numbers provided therein lets suppose President Obama decides on a $200 billion food stamp stimulus package since that will provide the bigggest bang for the buck.

Now using the multiplier in that article we'll get an extra $146 billion in economic output or about 1% extra GDP more or less.

Now if GDP declines, in other areas, by more than that then we wont see any growth. If the economy declines by just 1% then it will just offset the losses.

Mind you this has to all be in food stamps. Any other program will not give us nearly the same jump. Of course our current food stamp program is somewhere in the neighborhood of $33 billion. I'm not sure that a $200 billion increase is going to net us the same multiplier, but what the heck.

There you have it, Obama's stimulus package to improve economic growth by 1%. Of course, if we took $1 trillion of the $7.76 trillion that we've put towards bailing out wall street into food stamps why we'd have 5% growth for every year we did it. That is amazing growth! Why we could go this route and let Wall Street burn to the ground.

Here's a radical thought, what if, instead of bailouts, they just cut tax rates instead?

Cut tax rates on what? Profit? Payroll? Land? Where can you cut taxes that will stabilize Citigroup?

Here's a radical thought, what if, instead of bailouts, they just cut tax rates instead?

Historically the impact here hasn't been that great either. For pretty much the same reason. The government doesn't reduce spending, so whatever extra money a consumer finds in his pocket ends up getting borrowed by government to provide the same services as before. Hard to get much extra bang there.

Maybe permanent tax cuts along with a permanent reduction in spending. Of course, the impact wouldn't be felt most likely until the current economic problems are long past. Fiscal policy in any shape happens to be an imprecise tool at best and if any good does come it is usually be happenstance not pre-planning.

And again, this money has to come from somewhere else in the economy. That means that somewhere else in the economy there is likely going to be a decrease in output.

I call this the Divisor Effect, and I've still yet to meet a Keynesian who had an answer for it.

Here's a radical thought, what if, instead of bailouts, they just cut tax rates instead?

The folks that wrote that paper were discussing #2, and I don't think they missed that the money had to come from somewhere.

No, they are Keynesian/New Keynesian economists who hold, unsurprisingly, to the Keynesian view that there is a multiplier that is significantly greater than 1.

Who were they anyway? The Economic Policy Institute? Who are they, a bunch of first year economics students?

The EPI is/was staffed by people who complained that Bush's fiscal stimulus, the tax cuts, was actually going to do nothing except return us to trend (at best) in terms of unemployment/employment. Now to be fair they thought the money should be "targeted" like the authors of the story to get the most bang for the buck.

Problem is those "big bang" areas are small, and injecting even $200 billion into the economy, if we had it lying around, would be pretty small compared to a $14 trillion dollar economy.

Maybe if they took the trillions they are using to bail out Wall Street and gave it to consumers.....

Funny how that never crops up from these types.