"Is The Deficit A Threat To A Future Recovery?"

Jamie Galbraith responds to the question posed by the National Journal, "Is the deficit a threat to future recovery?"

James K. Galbraith, National Journal:  No. The question is grossly misconceived. Right now and for the immediate future, the budget deficit is the only source of demand that can fuel a recovery. Our present problem is not that it is too big, but that it is too small. Far too small.

In principle, economic growth can come from household consumption, business investment, government spending, or exports. This is a tautology, indisputable and known to everyone who has ever opened a textbook....

[T]he entire private sector, across the entire country and indeed the world, is pulling the economy downward at the present time. ... [A]s consumption, investment and exports decline, so will tax revenues. The government budget deficit is destined to rise, by a lot, on this account alone. This is helpful: a falling tax burden in a progressive tax structure keeps money in private pockets. But it is a weak device to promote expansion, since tax savings will be used first to try to pay down debt... A major tax cut, focused on working Americans such as by remitting the payroll tax, would help sustain after-tax incomes and provide funds to pay mortgages and buy cars. But even these effects are uncertain in a debt deflation.

In these conditions, only government spending can pull the economy out of the ditch. Government must spend. It must do so by as much as necessary in order to maintain a high level of employment. Aid to states and localities, an infrastructure fund, increased social security benefits, foreclosure relief, loans or grants to industry, a green jobs program -- all can be useful in coping with the crisis. All will, of course, add to the public budget deficit.

There is no harm in seeking out wasteful or unnecessary programs to cut as the President-elect proposes. The war in Iraq is a huge waste of money with minor benefits to employment. Missile defense is a vast waste of construction, engineering and scientific resources with no benefit to security. Bridges to nowhere and roads to the wilderness add nothing to the value of the national capital stock. But the point of cutting waste and boondoggles is not to reduce the deficit, but to release real resources for better uses. The obligation to use those resources, and to deploy the public funds necessary to ensure that they are used, remains.

Will the projected future deficit "crowd out" future private investment as so many claim? This is absolutely improbable. To the contrary, a successful program of public expenditure will create profit opportunities that will encourage private businesses, many of which will otherwise close, to stay open and eventually to expand. A general improvement of economic conditions can only lower, not raise, the presently prohibitive risk premiums on interest rates being charged private borrowers! There is no way that present or future public spending, even in very large volumes, would under these conditions raise long term interest rates generally by enough to offset the positive effects of an increase in activity and a reduction of risk. Quite the contrary! Public spending will crowd in, not crowd out, private investment.

Whether they know it or not, those who argue a "crowding out" model are working from a mental construct under which the economy is always operating at or near full employment, and under which there is a fixed supply of credit resources, a pool which government and the private sector must share. This is not the case! We are far below full use of available resources now and will certainly fall very much farther in the months ahead... And there is no fixed pool of credit! The entire purpose of the capitalist banking system under the Federal Reserve Act, ever since 1913, has been to create an "elastic currency" not subject to fixed limits to the supply of finance. With due respect to those who continue to have reservations about "crowding out", please stop. This is a moment when an unfamiliarity with the most basic economic and financial facts can be very dangerous to national well-being.

Finally, there are those who have argued, in times past, that projected future deficits might have a psychological or other effect, detectable in statistical data, on long term interest rates and therefore on private business investment. But whatever the merits of the statistical case, there is no risk under present conditions that something so remote and ethereal as a psychological fear of deficits in the distant future is going to drive up the long-term interest on public debt. We are in a full- fledged flight to safety! That is a flight to cash and to Treasury bonds and bills..., as witnessed by the rising dollar. Right now and for the foreseeable future Uncle Sam can borrow, for whatever term, on whatever scale, for practically nothing. In fact, he has suddenly become a creditor to much of the world -- notably the European Central Bank -- because of a worldwide shortage of dollar assets!

Finally, there is the question of whether it is possible to go too far. The answer is yes. Maybe my diagnosis is wrong. Maybe private credit will recover faster than I think likely. But even allowing for this possibility, action now should be on a grand scale. It is far easier to trim back tax relief in an expansion, than it will be to repeat the political effort of passing a large expansion package if the first one is too small. For this reason, the conditions call for error on the side of action, not of caution. "Wait-and-see," in an emergency, is the worst possible advice. ...

In these circumstance, large budget deficits are essential, and preoccupation with budget balance is counterproductive. ... Those who hang on to simple views of economic virtue in present times need to rethink: time is short and action is needed.

On the crowding out issue, two conditions are required for this effect to be significant. First, an increase in the supply of bonds to finance a larger deficit must cause interest rates to increase. But in a liquidity trap, or near one, changing the supply of bonds has little if any impact on interest rates (this also makes it hard for monetary authorities to reduce interest rates). But even if interest rates do change, a second step is required for crowding out to occur. Investment must be sensitive to changes in the interest rate. However, in a recession this sensitivity is very low (and again, this makes monetary policy ineffective since it relies upon investment responding to lower interest rates). As noted above, near full employment things are different, but crowding out is not a worry in big recessions.

On the question of what if the stimulus is too large, we've heard for years how sensitive upper income households are to variations in the tax rate. If these claims are correct, then a way to slow down an overheated economy is available. In any case, [the extra revenue will help with deficit worries and,] as Jamie says, scaling down is easier than scaling up and that asymmetry points to more aggressive action.

Comments

[ctindale]

Goolsbee disagrees with your last paragraph, he was saying similiar things on the campaign trail, upper incomes have grow in themselves to quickly for tax aspects to have anything but a minimal effect

http://faculty.chicagogsb.edu/austan.goolsbee/research/laf.pdf

"VII. Conclusions
This paper has used evidence from seven different tax changes since 1922 to examine the
evidence in support of the high-income Laffer curve and the New Tax Responsiveness Literature.
While that work emphasizes the potential importance of behavioral responses to marginal tax rates, the
results in this paper suggest that the evidence on which those conclusions are based—evidence from the
1980s—is atypical in the historical experience. Using the same methods that NTR authors have used
for the 1980s, the elasticities of taxable income calculated for other tax changes seem to be much more
modest with several indistinguishable from zero. This is true in the aggregate cross-sectional tax return
data as well as in panel data on executive compensation. The largest estimates of the taxable income
elasticity from all of the previous historical periods is lower than the smallest estimates of the elasticity in
the literature based on the 1980s. Given the importance of the behavioral response to taxation, it is my
hope that this will stimulate further research on the topic using data outside of conventional tax returns in
the 1980s and 1990s."

[Easy Money]

Spending on infrastructure, health insurance, and futuristic science projects can be enablers that may be worth the money. However, all other government spending is not just a waste of money, it largely destroys private incentive and capital.

Guess there's never a shortage of meddlers that think the government can fix everything.

[mmckinl]

Both yourself and Jamie Galbraith Mr. Thoma are correct but you limit your analysis to currently existing monetary policy ... What about Lincoln's solution for paying for the Civil War, just printing the money with no debt. This can easily be done under a nationalization of the financial industry.

As long as deflation is rampant the printed money need not have any inflationary effects.

[ccm]

I think the NR's concern about the deficit deserves at least a nod: Bush's tax cuts should be allowed to expire in order to offset some of the money that will be used in ways that are more likely (than low taxes on the wealthy) to stimulate demand.

[ccm]

Looks like I read that first line wrong. I seem to be showing my biases.

[Demand Side]

Galbraith is completely correct to the extent that government spending must begin before the private sector will come it. By "crowding in," I believe, he refers to the private investment that will be generated, for example, by contractors gearing up for infrastructure spending.

At some point there will be competition for investment capital, the interest rate would be bid up. We're afraid of this?

[Dope]

Who knows? Throwing enough money at the financial disaster will keep the boat afloat. Then what?

If in ten years we have a productive economy, plenty of good jobs at good wages, a sound banking system, balanced trade balance, minimum price inflation, universal health care with costs controlled, reasonable household debt levels, realistic asset prices especially housing, then no.

The real question is how to establish a sound, productive economy over the next 5 to 10 years. Hope for Change. The ol Hope-A-Dope Strategy. You might get knocked out. You Hope? You Dope.

[Farrar]

Prejudice dies hard -

"However, all other government spending is not just a waste of money, it largely destroys private incentive and capital."

Your evidence?

What about education? Only one of many examples you have forgotten.

[Bruce Wilder]

mmckinl says..."What about Lincoln's solution for paying for the Civil War, just printing the money with no debt."

The Congress did create a national paper currency -- the so-called greenbacks -- and a system of national banks, for the first time since Jackson destroyed the Second Bank. This was rightly regarded as a necessary measure to maintain economic stability in the context of the huge expansion in wartime spending. The Greenback did help to finance the war, but it would be wrong to think the Union was simply "printing money"; the Union enacted a vast array of excise taxes and an income tax, payable in greenbacks. Large numbers of people only marginally attached to the money/market economy were drawn in, and taxed, and the greenback was essential to that happening smoothly. (The tariff was still payable in specie, necessary to finance issues of gold bonds.) In addition, Jay Cooke rather famously invented the war bond drive, and mass-marketed huge quantities of war bonds. Battle Cry of Freedom: The Civil War Era by James M. McPherson has a good brief summary of Union and Confederate finance, which gives proportions.

Exchange of greenbacks for specie (gold or silver coin) was suspended for the duration, but the nominal value of greenbacks was still tied directly to gold coin. Inflation, in the Union, was modest. (Probably for reasons relating to the nature of technological change in the industrial revolution, real wages actually stagnated or fell slightly during the Civil War -- a strong contrast to WWI and WWII). The U.S. returned fully to the gold standard (with disastrous deflationary results) after the war, and the greenbacks were redeemed.

The Confederacy, in contrast, really did just "print money"; the planters were never willing to enact taxes on themselves, and the Confederacy depended to a large extent on in-kind taxes, which created no demand for the currency they did issue. Rather stupidly, the Confederacy stumbled, without planning or central direction, into an embargo of cotton exports, self-enforcing the Union blockade before there even was a Union blockade, and depriving themselves of the principle basis for European credit.

The plantation economy was autarkic in principle, and the many small farmers were only marginally attached to the money economy; the Confederacy lost much of its very modest industrial and commercial institutions and infrastructure to Union conquest early in the war, with the fall of middle and western Tennessee and New Orleans.

[save_the_rustbelt]

I don't think this is a problem in the short run - when the ship is sinking run the pumps.

Perhaps it is my Protestant thift gene kicking in, but I can't help but think this is going to do real damage to my grandchildren and beyond. That is intuition however, not economics.

Easy: given the number of people in the US who start businesses in any given year, somehow I do not think the government has destroyed private sector incentive.

[Bruce Wilder]

I think Galbraith's piece excellent and complete.

Only because we've gone around and around with ndk, I would acknowledge that the vast array of credit guarantees handed out by Treasury and Fed, apparently in the vain hope that we faced only a psychological panic, have increased solvency risk. At this point, rather paradoxically, if the U.S. government doesn't engage in increased spending on a "grand scale", the deflationary spiral already underway could well undermine the government's credit.

Talk of "crowding out" is borderline insane, in this context. Deflation and credit risk driven by the recessionary spiral downward has driven the real interest rates faced by private business borrowers sharply upward. Private business investment demand will be minimal, with the economy operating at 20% below capacity, and real interest rates are already being driven to potentially lethal levels by deflation.

It is truly time to panic; this is a national, possibly a global, economic emergency. But, a deer-in-the-headlights response will result in getting run over.

I hope Galbraith gets a wide and receptive audience.

[Jesse]

The crowding out seems to be acomplished by an outsized financial sector and a policy of attempting to maintain the status quo that created the problems that have brought us to this point.

Granted, the failing of banks had to be addressed. It might have been done through the FDIC and a real nationization rather than the ineffective application of significant tranches of money to maintain failed models and management.

[Ben]

In Obama's plan he suggests cutting unnecessary government programs. What if cutting these programs causes businesses in the private sector to start hurting and need government help like the financial industry and automotive industry?

[ken melvin]

I'm reminded of a Faulkner's about an inflated horse.

[don]

Galbraith does no more than parrot Krugman's simplest posts. He even fails to raise the point that the stimulus may actually increase total wealth (public plus private) of U.S. residents - if it works as advertized. Some of his statements are gibberish - because the U.S. Fed made some loans to foreign Central banks, "we have become a creditor to much of the world." The stock of U.S.-owned foreign assets is very, very far below the stock of foreign owned U.S. assets. If we look only at centeral bank reserves, the imbalance is about $4 trillion.
As was brought up by an earlier poster on this blog, Krugman in other work notes the need for international cooperation. There is nothing in Galbraith's simplistic discussion to acknowledge the effects of external leakages. With no international cooperation (for example, it has been predicted that China will accumulate something like $500 billion in additional foreign reserves over the next year - a very large anti-stimulus for the rest of the world), the stimulus may be largely dissipated with no remarkable effect beyond a big increase in U.S. debt. Galbraith's piece is nothing more than poorly supported assertions.

[Melvin G.]

Ben-
If the businesses in the private sector failed, would you really want the government to have to deal with these companies and them looking for a bailout, just like GM and Ford?

[Fred]

What I'm trying to wrap my head around is who is opposing a massive stimulus and why. The Austrian types I understand, given that Austrianism is combination of stupidity and disturbed psychological upbringing. But is there anyone among the elite who opposes a massive stimulus? If so, what is their agenda? That some hedge funds might want a meltdown I can also understand (short commodities and equities, long T-bonds). But surely the majority of the rich and powerful (the Wall Street Journal crowd) stand to lose disproportionately from a deep recession. Right?

[ndk]

Martin Wolf explains the case against big stimulus plans in big deficit countries very well. Again, I ask everyone to resist rushing into this without consideration of the implications and possible outcomes, even if it is successful in the short run.

[noneed]

I can understand a stimulus might work if we had money to back it up but we borrow everything and I do not think you can solve a lack of domestic savings with more spending. You can't spend your way out of problem when there real wealth it goes out to Asia. Now if you think of the Great Depression we were a rising super power we were accumulating all the wealth much like China and Japan are today, we are more like Europe during that time period. Too much debt, and stimulus in the wrong situations like this one could be devastating for the economy in the long run. And by the way, who demanded the TARP money banks and the auto industry. A stimulus might help the poor, but it will for sure help the rich. I do not think this country takes an action without helping them out. Economic recessions and depression hurt the middle class and poor first. Rich may be affected but if i had 10 million I am set for life unless my currency loses value. So do not just discredit the Austrians or other non-main stream economists. They have predicted the problem and in my point of view that deserves recognition. I think most economist thought the economy was great 03-07 even though it was artificial.

[ken melvin]

Seems to me that individuals and groups might see themselves benefiting from a depression; some did during the great one by accumulating lots of land, etc. Whether 'tis so begs the question, the question being: What is better for the whole nation? Or, what is better all the nations of the world?

I do think that it is possible that the stimulus may fail to work, or, worse, it may amount to a re-inflation of the bubbles, leading to a complete collapse. So, it's very important that any moneys spent be directed to either well being or needed infrastructure. Heretofore, the models have been based on growth, which was another way of saying unlimited resources. A more realistic model would look to finding a sustainable equilibrium. Where Japan is is where Japan is. Where we are is more realistic than where we were. Should we be looking at ways to continue with this lesser economy?

[Richard H. Serlin]

On the crowding out issue, quickly, during a recession, the government spending largely employs workers and capital which would just sit idle anyway -- this can only help growth. The deficit spending will absorb some investment funds, but the employing of idle workers and capital will create more funds, some of which will be invested, adding to the supply of (real) investment funds.

Plus, the Fed can counteract any increase in interest rates from the government borrowing more, by printing more money and buying down real rates -- normally there'd be an inflation worry, but not in a recession, especially one this severe.

Finally, the government spending can and should be mostly in high return investments anyway, the kind the free market will grossly underprovide due to well established market problems like externalities, especially the pink elephant of economics, positional/context/prestige externalities. These are things very well worth using loanable funds for anyway.

[don]

I don't count myself as in opposition to massive stimulus, but I am highly sleptical that it is in our long run interest. Who opposed Greenspan's effort to boost consumer borrowing following the dotcom bust? In retrospect, was that the best policy? Would we have done better to have accepted a bigger downturn? The arguments for the stimulus are simply not convincing and, IMHO, proponents have not done proper justice to the potential downside.
Fred - I don't care much for appeals to authority myself, but if you would like a more 'elite' source for the point of view I have expressed, see http://gregmankiw.blogspot.com/2008/12/fiscal-policy-puzzles.html

[ken melvin]

I suspect that demand is the egg, investment the chicken.

[Patricia Shannon]

I think anyone who thinks unemployment is a good cure, should resign their job and give all their money away.

[paine]

mark t:

"On the question of what if the stimulus is too large, we've heard for years how sensitive upper income households are to variations in the tax rate. If these claims are correct, then a way to slow down an overheated economy is available"

lovely and sly

[steve from virginia]

Since the problems orbit massive borrowing and debt overhang, it is hard to see how replacing private borrowing with more massive government borrowing is going to solve anything.

Nevertheless, the stimulus isn't massive enough. The government can't replace the entire retrenching private sector. TARP- related borrowing is supposed to total $8.5 trillion. What is GDP, again?

Debt has been a substitute for real wealth from Ronald Reagan's suburbia to 2007, the cat is now out of the bag; debt is debt and nothing more. It has to be repaid; the real question is ... can it be serviced?

Now, the quantitative easing begine. Long rates will join short rates @ the bottom; there will be another credit bubble. Can anyone guess what will happen next and when? Remember crude oil @ $147 a harrel.

Our future is doomed if the only economic choices are short- lived bubbles or a statism.

[mmckinl]

Bruce Wilder says...

"The Greenback did help to finance the war, but it would be wrong to think the Union was simply "printing money"; the Union enacted a vast array of excise taxes and an income tax, payable in greenbacks."

And so could the present government, increase taxes (on the wealthy) or increase deposit requirements at banks to lower leverage.

The fact is that there is no reason to borrow the money. The money could be used to make banks whole under nationalization while the government takes a stake.

There is certainly no reason that the creation of currency and credit should not be the utility of the government as spelled out in the Constitution.

So the premise stands, "There is no reason the government must "borrow" the money.

[Mike A.]

Well, you have to prevent a depression. Everything is secondary to that. Spend what you have to spend.

But if you are dumping the money in the wrong place, it doesn't matter how much of it you dump.

[mrrunangun]

The deficits can be thought of as using tomorrow's national capital stock today. If the capital is employed wisely, it will remain productive and future generations will find it a benfit rather than a burden as we find the hydroeletric dams and electrification programs bequeathed us from the 30s. If it is squandered, it will be an unalloyed burden on our posterity. To date the selfish, lobby-driven behavior of our ploitical and businessleaders has not given cause for confidence, but perhaps the new team will do better.

[Cap]

During the Great Depression, the public attempted to save in the form of cash in mattresses. This prevented capital expenditures, and created a downward spiral. Public borrowing enticed the cash out, and put it back to work.

Unfortunately, constant inflation/negative real after tax interest rates eventually created a public preference for saving in the form of inflation hedges. This also prevented capital expenditures. Foreign capital was then used as a replacement, until foreign capital fled. The proposal is to substitute public borrowing of foreign capital to restore the replacement flow of foreign capital.

[oc bear]

Don is correct. We are in this mess because we took the advice of Mr. Greenspan to take variable rate mortgages and Mr. Bush's advice to go buy a car to combat terrorism. The basis of these problems is spending more than we make. If there is an exit strategy to spending our way out of the recession then we should understand that strategy going in. It should be debated first and then executed not the other way around.

[carping demon]

ndk says...
...I ask everyone to resist rushing into this without consideration of the implications and possible outcomes, even if it is successful in the short run.

There ain't no long run if you don't make it through the short run.

[ndk]

There ain't no long run if you don't make it through the short run.

Yes, but per the link to Mankiw's empirical analysis earlier, there's not great evidence fiscal deficits even help us in the short run.

[carping demon]

"In short, if the world economy is to get through this crisis in reasonable shape, creditworthy surplus countries must expand domestic demand relative to potential output. How they achieve this outcome is up to them."...Martin Wolf, FT Dec. 2, 2008

That is to say, they will do this at their own speed as it pleases them. Meanwhile, we have short term problems here which cannot wait until the "open world market" re-balances itself, even though it eventually must. Housing is going to continue down, regardless of mortgage rates; hundreds of thousands if not millions (Big 3 BK) of borrowers are going to lose their jobs in the next couple years; 32.5 million today use food stamps; 50 million only use ERs, which are vanishing; if we don't immediately improve education our grandchildren won't know how to write a check even if we leave them an economy to write one in. We may not if we sit around and wait for the rest of the world to come up with a plan. We can trim the sails later, now it's time to bail.

[calmo]

"trim the sails later" you don't say carping demon..."now it's time to bail" [You B a sailor then? seaworthy? able seaman...(so mo betta than "war hero"...dandy in waiting for an audience...any fatassed audience, yes?)?]

Ok, who does Wolf have in mind with this: "creditworthy surplus countries" and should he get withit and talk about those credit worthy "surplus" individuals within those countries?
Why is this such an effort for the entrenched voices to cast this problem in self-burying ways? Is he paid by transnational "surplus" individuals to conceal the transnational character or just dense?
Now, about sailing in rough weather...definitely you reduce sail immediately --maintain way, and steerage to climb the next wave rather than have it capsize you and the cute little bailer, yes?

[a]

"In principle, economic growth can come from household consumption, business investment, government spending, or exports. This is a tautology, indisputable and known to everyone who has ever opened a textbook...."

Fine, but tautologies can't tell you what to do about a posteori problems. While 2+2=4 will tell me that if I have 2 chops on the first shelf, and 2 chops on the second, then I have 4 chops in all, it won't and can't tell me what temperature I should cook a pork chop in order to be able to eat it.

So, in particular, Galbraith's tautology cannot and will not say, if you increase government spending, then you will get economic growth. Because a tautology will not tell you what happens to consumption, business investment, or exports, should the government spend more, in *the real world*. Now Galbraith can try to reason about those causal relationships (there's no crowding out, i.e. an increase in government spending will not diminish business investment), but those are the important claims, which can only be verified by experience. And as near as I can tell, Galbraith isn't citing experience to bolster his claims.

says...

Wow a - and I thought the comment you left under Duy's post was dumb. This tops that - no contest. The pork chop thing is just pointless, literally.

[calmo]

So, anony you ask *a* to let up on "tautology" and beg Jamie not to use it again...in case there's a word terrorist on the prowl, you know?
A tautology is a tautology...is about as cute as that word gets...so we move on...yes, past "a priori", "a posteori" sniffing for any little morsel...whatsoeva...any indication that he read Mark's remarks on Jamie's post...not that I can find.
Then, anony, you take that bold step of ignoring the comment, demonstrating that it was not "pointless, literally"...rather than posting and sayin so much...izat clear?

Ok, shoot: take that step, as pointful as you can do it...(although I prefer non-pointy comments that are just embarrassingly honest) and give us your take: whatya got?

[a]

"Wow a - and I thought the comment you left under Duy's post was dumb. This tops that - no contest."

Yeah, I'm a winner!

[a]

calmo : you're right, Mark's comments are more germane - I was replying to Galbraith's remarks. Still, I would be more impressed with Mark's comments if he cited examples in the real world, such as "when Japan was in a liquidity trap, this happened..." The way it's phrased, I can't tell whether Mark's referring to what happens in a particular model, or what has actually happened in the real world.

[OhNoNotAgain]

"Because a tautology will not tell you what happens to consumption, business investment, or exports, should the government spend more, in *the real world*."

It would seem to me that when you have severe deceleration in all three departments, that government spending would not exhibit any "crowding-out" effects at all. Logically, how could it possibly do so ? This is the defacto definition of the government as the "spender of last resort".

[a]

Don't know about logically, but here's a scenario (assuming the deficit is financed by borrowing).

Business investment depends on future expected consumption. Businesses see a bigger deficit now and so expect more taxes in the future, in order to pay back the government borrowing of today. Businesses therefore expect lower future consumption, so invest less today.

[Patricia Shannon]

If sales are falling and business can't pay its creditors and employees, are they going to invest today, regardless of what might or might not be the tax structure tomorrow? Not to mention that they can't get loans.

[OhNoNotAgain]

"Business investment depends on future expected consumption. Businesses see a bigger deficit now and so expect more taxes in the future, in order to pay back the government borrowing of today. Businesses therefore expect lower future consumption, so invest less today."

Public corporations have enjoyed record profits over the last decade. In addition, we have seen a combination of low taxes during the time of a rising deficit, meaning that investors have already pocketed much of the money that should have been used to pay down the public debt and reduce the deficit (same goes for SS). In other words, they have already received the money that will be needed to eventually pay for these taxes. If they spent it foolishly and didn't invest it in ways that would pay off, then that is their problem. They had the opportunity to invest that money wisely. This is one of the reasons why I think that tax cuts are a complete waste if it means running up deficits. If the money isn't spent wisely and in a productive manner, then you've got yourself into a worse situation than you would if you hadn't gotten the tax cuts at all. It's like not paying your mortgage so that you can go bet at the track, hoping that you'll have the mortgage money and then some by the end of the day. This, of course, is in contrast to selling your house, moving into a cheaper apartment, and risking the savings in a new endeavor.

[Beezer]

What's this about productive investment issues? We've not spent anything the past 40 years on our infrastructure. For heaven's sake, folks. We could spend trillions and still not get the infrastructure we need finished.

And as for the auto industry. Have any of the commentators actually looked at what's being developed around the world in the way of electric/hybrid cars? It's amazing. How about an electric car with no drive train and no brakes that gets about 80mpg and can go from 0-60 in 4.5 seconds. Got one in Britain already. And a number of these various new cars will happen on a mass produced scale within the next two years. So let's not bury our domestic auto industry quite yet. Give 'em a loan.