Obama's Stimulus Theory: Will it Work?

[_Black Moclips]

Corporations are evil? I think that statement is ridiculous. Corporations do what they are designed to do. Produce goods and services and make money doing it. They are neutral at worst. Certainly there are individuals within corporations than have committed crimes against the public and their own companies, but when we find them, we prosecute them and toss them in jail. But the benefits our society has received from the private sector are innumerable. I would venture to say there isn't anything on the planet that a government can do better or cheaper than the private sector. The profit motive brings speed, quality, efficiency, and innovation - things which we clearly do not see in the federal government.

[_Nimrod]

Corporations are evil? I think that statement is ridiculous. Corporations do what they are designed to do. Produce goods and services and make money doing it. They are neutral at worst. Certainly there are individuals within corporations than have committed crimes against the public and their own companies, but when we find them, we prosecute them and toss them in jail. But the benefits our society has received from the private sector are innumerable. I would venture to say there isn't anything on the planet that a government can do better or cheaper than the private sector. The profit motive brings speed, quality, efficiency, and innovation - things which we clearly do not see in the federal government.

Corporations are collections of people. Some contribute capital (the shareholders). Some contribute labor (the employees). Corporations are only evil to the extent they are controlled by evil people. Which, I think, is sometimes the case. With a corporation the stock of which is publicly traded, the shareholders are so diverse and unaware of each other as to make the board of directors and CEO virtually unremovable and therefore not having to answer up to the shareholders. For example, the Board keeps giving the CEO big raises and big stock options (options which the CEO usually exercises when most opportune per his 'inside' knowledge). Then, the CEO returns the favor as he sits on the board of another company the CEO of which is on the Board of the first company. I would be in favor of regulation that prevented this incestuousness between board members and CEOs of differing companies. I also think in this day and age of the Internet, government regulation ought to require that there be blogs set up for any shareholder to comment on an issue put before the shareholders, such as who ought to be elected to the Board--and then online voting. The current proxy system for voting at shareholder meetings generally just perpetuates the continuation of the exiting Board and its membership, and the CEO.

[_Black Moclips]

Corporations are evil? I think that statement is ridiculous. Corporations do what they are designed to do. Produce goods and services and make money doing it. They are neutral at worst. Certainly there are individuals within corporations than have committed crimes against the public and their own companies, but when we find them, we prosecute them and toss them in jail. But the benefits our society has received from the private sector are innumerable. I would venture to say there isn't anything on the planet that a government can do better or cheaper than the private sector. The profit motive brings speed, quality, efficiency, and innovation - things which we clearly do not see in the federal government.

Corporations are collections of people. Some contribute capital (the shareholders). Some contribute labor (the employees). Corporations are only evil to the extent they are controlled by evil people. Which, I think, is sometimes the case. With a corporation the stock of which is publicly traded, the shareholders are so diverse and unaware of each other as to make the board of directors and CEO virtually unremovable and therefore not having to answer up to the shareholders. For example, the Board keeps giving the CEO big raises and big stock options (options which the CEO usually exercises when most opportune per his 'inside' knowledge). Then, the CEO returns the favor as he sits on the board of another company the CEO of which is on the Board of the first company. I would be in favor of regulation that prevented this incestuousness between board members and CEOs of differing companies. I also think in this day and age of the Internet, government regulation ought to require that there be blogs set up for any shareholder to comment on an issue put before the shareholders, such as who ought to be elected to the Board--and then online voting. The current proxy system for voting at shareholder meetings generally just perpetuates the continuation of the exiting Board and its membership, and the CEO.

I understand this criticism, and maybe it should be modified for transparency purposes. I'm not saying there can't be improvements to the system with respect to public companies and the private sector in general. But its laughable to think that somehow the government is the answer, or better with these problems. How is a loan shareholder voting for a board member different than me trying to vote against an incumbent senator? You think that senator doesn't have people lining and greasing his pockets with money for favors? You don't think he isn't asking for other favors in return? He is just as corrupt as anyone else, and probably because of the things he has access to, more corrupt than anyone else. Yet the critics who cry "evil corporate America" turn around and say more government is the answer. That is utterly ridiculous.

[_Nimrod]

How is a loan shareholder voting for a board member different than me trying to vote against an incumbent senator? You think that senator doesn't have people lining and greasing his pockets with money for favors? You don't think he isn't asking for other favors in return? He is just as corrupt as anyone else, and probably because of the things he has access to, more corrupt than anyone else. Yet the critics who cry "evil corporate America" turn around and say more government is the answer. That is utterly ridiculous.

Totally agree, Black Moclips. Power corrupts, absolute power corrupts absolutely.

[_Jason Bourne]

The thing is, cuts have already been made to our taxes and the corporate tax rate is about as high as it was during Reagan, and there is little reason to believe that by cutting their taxes more, that we'd see a jump in jobs. Corporations are evil in my view. If they create any jbs, they're likely to be overseas. They have no sense of loyalty to America or Americans. They're the ones who got us into this mess, I say let them pay for the brunt of it. Why should the little guy pay more when he is already bailing them out? Who bails out the little guy?

Where is the evidence that the conservative economic strategy would create more jobs, increase GDP and reduce the deficit? The only time in history that compares to today is the great depression, which is why the Keynesians think they have a leg up on the rest. All the other proposals are just theoretical solutions.

Well Kevin I live in the real world. I deal with businesses and taxes every day. The companies I work with are primarily small to mid size closely held businesses. Because most of these businesses operate as either S Corporations or partnerships the tax is all paid on the persons Form 1040. Typically these businesses end up pushing the tax rates to 40% fed and state and beyond. These companies do not create jobs overseas. They create them locally, where I and they live. And tax rates have risen, and if Obama has his way they will go higher on this exact class of business owners. Most of the jobs are created there. So I have a client that wants to expand vertically. He pays about 43% fed and state tax. If Obama pushes his rated up he will be at about 48% to 50%. He said if that happens he will not add the about 2.5 million expansion to his business, which would add about 7-10 local manufacturing jobs.

I could tell you story after story. But Obama rather would do the worthless It Pays to Work Credit that gives anyone under about $150k an $400 credit for their FICA tax. Whoopy doopy! So what does someone do with that amount in their pay over 52 weeks? Cut rates for everyone and let them spend and invest where they will.

[_Kevin Graham]

== Corporations are evil? I think that statement is ridiculous.

Then I don't think you understand what a corporation is.

== Corporations do what they are designed to do. Produce goods and services and make money doing it.

Actually they are only designed to make money, however they can.

== They are neutral at worst.

They are neutral only in the sense that they are pathological entities that do not distinguish between right and wrong, they only distinguish between what's profitable or not.

== Certainly there are individuals within corporations than have committed crimes against the public and their own companies, but when we find them, we prosecute them and toss them in jail

I'm not talking about individual crimes, I am talking about the corporate structure.

== But the benefits our society has received from the private sector are innumerable.

But at what cost? Most people haven't the foggiest idea.

== I would venture to say there isn't anything on the planet that a government can do better or cheaper than the private sector. The profit motive brings speed, quality, efficiency, and innovation - things which we clearly do not see in the federal government.

You're right, but again I ask, at what cost? The reason corporations can be more efficient, profitable, quicker, etc, is because they are legally obligated to do so and share holders in corporations cannot be held accountable for the externalities. The government has to consider many factors that have nothing to do with corporate interests and the people running the government are held accountable for their actions, whereas those who own a corporation are not.

== Corporations are only evil to the extent they are controlled by evil people.

Actually no. It doesn't matter if a corporation is run by a CEO who is pure of heart, he has to operate according to the desires of the BOD who answer to shareholders. That is he LEGAL obligation., to make them money! Every decision made will be based on one factor alone: is it profitable? That's it. If a profitable decision comes at the cost of human jobs, environmental pollution, etc, then so be it. Many times governments fine corporations and they continue to break the law anyway simply because the fines are not high enough to make their decision financially beneficial. this is why so many corporations move abroad, because in thrid world countries, the environments are usually corporate friendly.

Take for instance in a town in Bolivia where a San Francisco based company managed to privatize the water. EVEN RAIN WATER. So the poor who were caught gathering water that fell from the sky, could have their homes repoed. Of course corporations could never get away with this in America, so Americans typically think its all a bunch of hooey. But this is the true nature of corporations. Profit is everything. If they can get away with tyranny, then that is what they will do to make a buck.

Jason, Obama is offering tax breaks for small businesses. You knew that right? Also, Bush dropped the taxes for corporations and two terms and eight years later we had a net gain of zero jobs. How do you explain this? I mean you knew unemployment was skyrocketing well before Obama took office, right?

[_bcspace]

Obama's Stimulus Theory: Will it Work?

Of course not. Marx's surplus value theory (wealth redistribution) never works. Private capitalists, the "selfish owners," as those who save and invest are so often called, are the greatest charity givers of all. Which is of course why Bush's tax breaks worked and Obama's "stimulus" hasn't yet.

Obama will really REALLY have to screw up in order to keep the economy from eventually righting itself. But his policies are currently slowing the day it does and when he will claim his programs worked. Unfortunately, that he will screw it up even worse is not so far-fetched after all given his Ayers-like modus operandi and proposed policies (such as nationalized health care).

[Guest]

Thus, Obama was a genius for preventing our nation from plummeting into a depression, although he could have acted faster. I suspect Analytics, Gadianton and JSM will take this position.

From what I can tell, the argument from deficit spending is that the economy needs a sudden "jolt" to keep it alive during a recession and only by pouring money into the system in the form of stiumulus,

I have no idea if it was a good move or not. I think economics is really hard, so I honestly don't think about current issues very often or even watch tv to know what's going on. I doubt Obama or Bush can do any more than listen to their advisors and pull desperation moves hoping either something will work, or at least appease people's expectations that something should be done. If other countries are willing to finance our debt, we can steal from them effectively and forge ahead, that might be the best argument for deficit spending.

One theory in particular has changed the way both liberal and conservative economists think -- Rational Expectations. I haven't read about economics in years, if I were to pick it up again and I think it's a boring subject so that's unlikely to happen, I'd start by looking for the influence of this theory on macroeconomics.

The big scores for Rational Expectations were market efficiency studies surrounding the stock market beginning in 50s. The basic idea is that markets use all available information to predict the future. In the stock market, where traders all have equal information and use it instantaneously, the result is that it's impossible to beat the market by using trading schemes or by doing fundamental analysis.

Let's say the government has discovered that whenever the conditions of the economy are x, y, and z, then they should do a, b, and c, independent of whether a, b, and c represent monetarist or Keynesian perspectives. Let's be generous and say (since this is a theoretical example to make the point) the government does this ten times over the course of twenty years. You can open your paper in the morning and see that economic conditions are x, y, and z, it's bad, but fantastic, you know that president Obama is at the helm and will quickly act with a, b, and c. After acting with a, b, and c, the economy recovers and goes back to its ideal conditions of p, q, and r.

What's wrong with this picture? Well, if I'm I'm a little savvy, when I open the paper and see x, y, and z, I know a, b, and c, are coming, I know this will effect the economy in predictable ways, exactly as it has ten times in the past. So I take my money and invest it all, as highly leveraged as possible, in whatever investments naturally ride the trends back to p, q, and r. But in the act of making the investments, I'm affecting the economy in the direction of the policies (analogous to buying a stock, if I buy a stock, it ticks up), I'm anticipating them, and if thousands of other financially savvy investors are doing the same thing, then by the time the policies are put into place, the work has been done. This implies there are no trends in history that can be exploited for policy making, it doesn't matter what kind of policies. If president so-and-so is perceived to have saved the day by doing x, y, and z in 1941, then the current economic climate already reflects the value of x, y, and z and the move can't be repeated with the same effect in the future.

Objections could be made that there are the Warren Buffetts out there who clearly have "beat the market." Why couldn't Obama be the "Buffett" of policy making? It's reasonable to believe there are anomalies. But there is only one president, and the chances he's "that guy" are about as low as picking Buffet by his resume prior to his success. It's mind-boggling to me how this should inform the way we vote. My hunch is that it's mostly a wash, presidents get unlucky or lucky, and probably are never as bad or good as anyone thinks they are. I mean, if I'm paying for an active portfolio manager, chances are if I pick one at random (like a random president), I'll perform at the market average and the most I'll be out are his management fees. And whether or not I have a solid gain or loss, that fee probably won't matter significantly when compared with the total value of the fund.

[_Black Moclips]

Kevin -

I don't mean for this to sound offensive, but you sound like someone who has never been in corporate america much. Reading about it from staunch critics of capitalism is one thing, but participating in it first hand is another. I've been an accountant, CPA, and/or a financial statement auditor for a big 4 accounting firm for my whole career, so I have some experience with corporations, both private, public, and non-profit. Your comments have almost a negative, feverish zeal to them, almost making it sound like some company really screwed you over and you have an axe to grind. Anyway, that's just the feeling I get from your comments and of course I could be wrong. I have always really liked you as a poster, and I know you really get into the topic at hand, whatever it is.

So I really do understand what a corporation is, and what its designed to do. All large corporations started small at some point, usually with a founder with an idea to make or do something useful for people. Having met many owners of smaller companies, its usually not some ultra greedy loon with glowing green eyes, pacing back and forth in a dark basement, wondering and considering every conceivable option on how he can squeeze a buck from unsuspecting innocent customers. I realize you didn't say that, but that is the picture I get when you say "evil corporations". that's what communists want you to believe. But business leaders and founders of companies are usually very intelligent, very driven people with great ideas that want to share them. Sure, they want to profit from what they do to provide for their own families, employees, and the company itself. And while profitability is the main goal of the company, because you have to have it in order to survive, there are many other aims and goals of the company. Most want to provide quality products and quality services to their customers. Most want to do it the right way, above board, without cutting corners in safety or quality, and in accordance with the rules and laws where they operate. The cost in breaching any of these is too high to go after temporary gains. The profit motive keeps most companies in check.

In my experience, in all of the companies I've audited and reviewed, I can say most companies are not the evil thing you think they are. They don't try to make money "however" they can. Corporations are led by people, and those people have morals and ethics just like everyone else. You seem to think that there isn't anything the most corporations wouldn't do to make a buck. That is absolutely not the case. Not to say there aren't bad companies out there that break the rules. But when it happens, its usually a few isolated individuals at fault, not the entire mass of the company. But just like any cross section of people, you have good, bad and ugly. There are just as many corrupt individuals in government as there are in corporations. Based on my personal experiences with both, I think the corruption is far greater in government.

The government has to consider many factors that have nothing to do with corporate interests and the people running the government are held accountable for their actions, whereas those who own a corporation are not.

Really? How can you type that with a straight face. The people running the government are held accountable? How? By whom? In this whole mess over the last few years, how many politicians have gone to jail for the fiscal state of this country? Anyone? You are extremely naïve to believe that those in government are held accountable while those in corporations are not. Businessmen go to jail all the time. Yet why is Barney Frank walking around free? If any CEO was as incompetent and full of fraud like Frank has been with Fannie Mae and Freddie Mac, they would be wearing stripes. I just can't believe you are serious with this one. The only true accountability a politician has is when its voting time and we vote them out. Otherwise, they can back room deal and sell out this country all they want, and rarely do they feel any accountability from the law.

Take for instance in a town in Bolivia where a San Francisco based company managed to privatize the water. EVEN RAIN WATER. So the poor who were caught gathering water that fell from the sky, could have their homes repoed. Of course corporations could never get away with this in America, so Americans typically think its all a bunch of hooey. But this is the true nature of corporations. Profit is everything. If they can get away with tyranny, then that is what they will do to make a buck

Ok, an extreme example, that I'll take your word for happened. But tell me, did anyone really have their home repossessed for collecting rainwater? Just curious. But if this happened, it is as much a fault of the Bolivian government as the company doing this. Corporations operate according to the laws where they reside. One of the legitimate functions of government is set ground rules and the infrastructure for business to operate and protect its people. But in this case, someone or some department at the Bolivian government is corrupt, probably taking bribes or kickbacks from this company rather than protecting the people. So you attack and criticize the company, yet no words for the Bolivian government? But I would bet if you went to most companies in America and advertised privatizing rainwater in Bolivia, and you could make a pretty buck by doing it and foreclosing on people homes, most would say "Absolutely NO". Not worth the press, not worth the trouble. So your example is an aberration.

I just don't get your love and high esteem for those in government. Are you blind to what our politicians are and how they operate?

(I bolded my edit)

[_Black Moclips]

I guess in summary, I say be as critical of capitalism and the free market as you want. There are many things that can be changed and be improved. But the answer is NOT to turn things over to the federal government and give them more control than they already have. Many of the problems in corporate america can be tied to the federal government trying to do to much and intervene to create some goal or position, but screwing it up by not understanding what they are doing and the consequences. (subsidies, stimulus, etc etc). They need to set the framework, the rules and laws of business, and then get out of the way.

But in any case, you need to be as critical and skeptical of government and politicians as you are of capitalism (more so IMHO).