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Forum Post: How To Get Our Economy Out Of This Catch-22 Trap

Posted 9 years ago on Feb. 22, 2012, 1:04 a.m. EST by TerryH (1)
This content is user submitted and not an official statement

Part 1 of 2

Corperations, who are sitting on $2 trillion of idle money, won't hire more workers until they get more customers; but they won't get more customers until they hire more workers -- Catch 22. What to do?

1) Idle money held by millionairs and billionairs - bad stimulus. So we tax the money away and spend it on good stimulus. 2) Year 1: Direct Payments To Everybody: $50 tax-free every week. And $120 billion in Aid To States. 3) Year 2: $524 billion in Infrastructure Spending. And $90 billion in Aid To States. 4) Year 3: $600 billion in Infrastructure Spending. And $60 billion in Aid To States. 5) Year 4: $674 billion in Infrastructure Spending. And $30 billion in Aid To States. 6) 12 million jobs above population increases in 4 years instead of 10 years. And 350,000 jobs per month instead of 200,000. 7) On Day 1, a guarenteed government job -- $300 per week -- for any American who will show up for work and work. 8) The government's total debt would be smaller by $464 billion after 10 years. And our Debt-To-GDP Ratio would improve. 9) $1.0 trillion in student loan debt would be repaid in 10 years.

First, a term called Permanent Jobs Per Trillion. That's how many jobs get created by every $1.0 trillion of stimulus spending. Here are the Permanent Jobs Per Trillion for our different stimulus types: Unemployment Insurance (2,900,000), Food Stamps (3,000,000), Aid To States (2,400,000), Infrastructure Spending (2,800,000), Corporate Tax Cuts (500,000), Bush 43 Tax Cuts (500,000), Capital Gains Tax Cuts (700,000), Direct Payments To Everybody (1,800,000), Payroll Holiday Tax Cuts (2,200,000).

Second, a term called Return Revenue Percentage. That's how much money the government gets back in tax revenue for every $1.00 of stimulus spending. Here are the Return Revenue Percentages for all of our different stimulus types: Unemployment Insurance (41%), Aid To States (34%), Food Stamps (43%), Infrastructure Spending (40%), Corporate Tax Cuts (7%), Bush 43 Tax Cuts (7%), Capital Gains Tax Cuts (9%), Direct Payments To Everybody (25%), Payroll Holiday Tax Cut (32%).

Now that we have THE ONLY 2 TOOLS WE NEED to do competent back-of-the-envelope stimulus calculations, lets get revenue:

According to the Economic Policy Institute, over the next 10 years we can obtain $3.1 Trillion in extra revenue by: href="http://www.epi.org/publication/ib316-joint-select-committee-good-options-progressive/" Enacting a millionair surcharge ($383 billion); taxing capital gains as ordinary income ($168 billion), further limiting the tax benefit of itemized deductions ($888 billion); enacting a progressive estate tax ($73 billion); enacting a financial speculation tax ($821 billion); enacting a cap-and- trade program and a climate dividend ($472 billion); enacting sweetened beverage tax ($184 billion); and ending the deferral of foriegn corporate income ($114 billion).

According to Robert Reich, we can obtain $70 billion per year by taxing all personal wealth in excess of $7 million by 2%. href="http://robertreich.org/post/11591880881" So we'll make the tax 3% per year, which will obtain $105 billion per year and $1.050 trillion after 10 years.

This is just about the top 1%, which has $8.4 million and above. They also have investment portfolios that grow their wealth at a rate faster than 3% per year -- they will still keep getting wealthier. And check out their low low tax rates. href="http://krugman.blogs.nytimes.com/2012/01/18/check-out-their-low-low-taxes" And corperations used to pay between 3.5% and 4.5% of GDP in taxes. But today, they only pay between 1.5% and 2.5% of GDP in taxes.

So how many jobs do we lose? We'll over-count the job losses by treat- ing our taxes as Capital Gains Taxes. And $4.15 trillion X 700,000 JPT = 2,905,000. Or 291,000 jobs lost per year. We won't count revenue losses: That was done for us.

Now lets take a look at the jobs part of our stimulus:

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[-] 1 points by TerryH (1) 9 years ago

Our economy will, from here on out, create 200,000 jobs per month on its own, without our stimulus. But we can only count 100,000 of those jobs per month for the good because our economy needs 100,000 jobs per month just to keep up with increases in the population.

100,000 jobs per month X 12 months = 1,200,000 jobs per year.

Now our Job Guarentee. We have 15 million unemployed workers. Only 40% of them recieves unemployment compensation. So 60% do not. And 0.60 X 15,000,000 = 9,000,000. We'll assume that the maximum amount of workers takes advantage of this. But that won't be the case.

Thus, after we figure out how many workers are going to take advantage of this, we'll compensate for the lesser numbers by increasing Food Stamps, which is our best stimulus -- they get spent fast! -- to needy people after we have more data.

We'll assume that 9 million workers are in the program in Year 1 and Year 2. In Year 3, 6 million. And in Year 4, 3 million. Remember: Our economy is gaining 3 million jobs per year. so in years 1 and 2, we will still have 9 million workers in the program. But in Year 3, this will go down to 6 million. And in Year 4, down to 3 million.

$300 per week X 9,000,000 paychecks X 52 weeks = $141 billion in Years 1 and 2. Year 3: $300 per week X 6,000,000 paychecks X 52 weeks = $94 billion. Year 4: $300 per week X 3,000,000 paychecks X 52 weeks = $47 billion.

Years 1 and 2: $0.141 trillion X 2,900,000 JPT = 409,000 jobs. Year 3: $0.094 trillion X 2,900,000 JPT = 272,000 jobs. Year 4: $0.047 trillion X 2,900,000 = 136,000 jobs.

In Year 1, w're giving every American citizen $50 tax-free every week. $50 per week X 3,013,000 paychecks X 52 weeks = $784 billion. And $0.784 trillion X 1,800,000 JPT = 1,411,000 jobs.

Infrastructure Spending is uniquely the gift that keeps on giving. But it takes 1 year to get going -- the 1 year time lag -- so none of it in Year 1.

In Year 2: $0.524 trillion X 2,800,000 JPT = 1,467,000 jobs. Year 3: $0.600 trillion X 2,800,000 JPT = 1,680,000 jobs. Year 4: $0.674 trillion X 2,800,000 = 1,887,000 jobs.

I would like to add here that some Infrastructure Spending should be replaced by Clean Energy and Desalination.

Now, Aid To States: Year 1: $0.120 trillion X 2,400,000 JPT = 288,000 jobs. Year 2: $0.090 trillion X 2,400,000 jobs = 216,000. Year 3: $0.060 trillion X 2,400,000 JPT = 144,000 jobs. Year 4: $0.030 trillion X 2,400,000 JPT = 72,000 jobs.

In Year 1, we gain 1,200,000 jobs from the economy. 409,000 from our Job Guarentee. 1,411,000 from Direct Payments To Everybody. 288,000 from Aid To States. We lose 291,000 from taxes.

1,200,000 + 409,000 + 1,411,000 + 288,000 - 291,000 = 3,017,000 jobs.

In Year 2: We gain 1,200,000 from the economy. 409,000 from our Job Guarentee. 1,467,000 from Infrastructure Spending. 216,000 from Aid To States. We lose 291,000 from taxes.

1,200,000 + 409,000 + 1,467,000 + 216,000 - 291,000 = 3,001,000 jobs.

In Year 3: 1,200,000 jobs from the economy. 272,000 from our Job Guarentee. 1,680,000 from Infrastructure Spending. 144,000 from Aid To States. We lose 291,000 from taxes.

1,200,000 + 272,000 + 1,680,000 + 144,000 - 291,000 = 3,000,000 jobs.

Year 4: We gain 1,200,000 from the economy. 136,000 from our Job Guarentee. 1,744,000 from Infrastructure Spending. 72,000 from Aid To States. We lose 291,000 from taxes.

1,200,000 + 272,000 + 1,680,000 + 144,000 - 291,000 = 3,005,000 jobs.

3,017,000 + 3,001,000 + 3,000,000 + 3,005,000 = 12,023,000 jobs from our stimulus above population increases.

Now lets take a look at the cost of our stimulus:

Direct Payments To Everybody has a RR% of 25%. And 100% - 25% = 75%. And 0.75 X $0.784 trillion = 588 billion.

Aid To States has a RR% of 34%. And 100% - 34% = 66%. Year 1: 0.66 X $0.120 trillion = 80 billion. Year 2: 0.66 X $0.090 trillion = $60 billion. Year 3: 0.66 X $ 0.060 trillion = $40 billion. Year 4: 0.66 X $0.030 trillion = $20 billion.

Aid To States: $80 billion + $60 billion + $40 billion + $20 billion = $200 billion.

Infrastructure Spending has a RR% of 40%. And 100% - 40% = 60%. Year 2: 0.60 X 0.524 trillion = $315 billion. Year 3: 0.60 X $0.600 trillion = $360 billion. Year 4: 0.60 X $0.674 trillion = $405 billion.

Infrastructure Spending: $315 billion + $360 billion + $405 billion = $1.080 trillion.

Job Guarentee: Unemployment Insurance has a RR% of 41%. And 100% - 41% = 59%. Years 1 and 2: 0.59 X $0.141 trillion = $83 billion. Year 3: 0.59 X $0.094 trillion = $56 billion. Year 4: 0.59 X $0.047 trillion = $28 billion.

The program stays in effect for 6 more years and we gain 136,000 jobs every year.

Job Guarentee: $83 billion + $83 billion + $56 billion + ($28 billion X 7) = $418 billion.

Paying off student loans at $100 billion per year for 10 consecutive years costs $1.000 trillion.

We'll also extend the Payroll Tax Cut, which lowers Social Security Taxes by 2% down to 4.2%, for 4 more years.

$100 billion per year X 4 years = $400 billion.

$0.588 trillion + $0.200 trillion + $1.080 trillion + $0.418 trillion + $1.000 trillion + $0.400 tillion = $3.686 trillion as the cost of our stimulus.

$4.150 in total revenue - $3.686 trillion in total costs = a $464 billion surplus after 10 years.

Finally, we don't have to worry about inflation. The world is sooo awash in idle money that the government can lock in an interest rate of under 2% on 10 year loans!

Now 1 final loose end: Where did our JPT and RR% come from? They come from multipliers. A multiplier is how many dollars are added or subtracted to GDP 1 year after either a tax cut, a tax increase, an increase in government spending, or a decrease in government spending.

And the multiplier is directly derived from how much of the stimulus money -- what percentage? -- ends up getting spent.

Here are the multipliers for our different stimulus types:

Unemployment Insurance $1.64, Food Stamps $1.73, Infrastructure Spending $1.59, Aid To States $1.35, Corporate Tax Cuts $0.030, Bush 43 Tax Cuts $0.29, Capital Gains Tax Cuts $0.37, Nonrefundable Lump Sum Tax Rebates $1.02, and Payroll Tax Cuts $1.29.

http://www.economy.com/mark-zandi/documents/Small%20Business_7_24_08.pdf

Direct Payments To Everybody compare to Nonrefundable Tax Rebates which have a multiplier of $1.02.

Assumed: The JPT and RR% for our different stimulus types are in exact proportion to their multipliers. Not perfect. But almost perfect.

Our first reference point comes from Infrastructure Spending: It has a JPT of 2,800,000. (page 10)

htp://fpc.state.gov/documents/organization/122480.pdf

Our second reference point comes from Infrastructure Spending: It has a RR% of 40%.

http://krugman.blogs.nytimes.com/2009/09/28/crowding-in/

Thus: PJT = The multiplier X 1,761,000

Thus: RR% = The multiplier X 25.157

Economics makes us very very sleepy. But if we don't wake up soon, and re-discover Keynes, we'll end up with a Lost Decade.

http://www.youtube.com/watch?v=NNLc41ArS-k&feature=related

[-] 0 points by XenuLives (1645) from Charlotte, NC 9 years ago

Wow, you put a LOT of work into this from what I can tell! This might be bit easier to digest if the numbers were in a spreadsheet, so that we could create charts and reports from the data.

Oh, and ignore the trolls. They're just butt hurt that we are working towards real change...

[-] -1 points by uncensored (104) 9 years ago

Step 1) Take a shower Step 2) Get a job Step 3) Spend your money (with my company) Repeat.