In your opinion, how effective has the stimulus been so far?

[Beet]

It's been very effective at generating short term bursts of increased consumption at targeted industries. We can see that in the increase in car sales, housing construction, etc. All of those were driving forces behind the GDP increases last quarter even as unemployment, lending to small business, etc. (i.e. the fundamentals), and other fundamentals continued to deteriorate.

The problem is that it's just that - a short term at enormous long term cost. The reality is we haven't made any of these businesses any more viable or less over-extended. Hence why we're seeing a drop off again in car sales (albeit at a slower rate), why real estate is continuing to devalue at unprecedented rates even as we pump more money into TALF/'Leasing' programs/etc., why consumer spending and sentiment has 'unexpectedly fallen' again, and a host of other bad news.

Actually, car sales in October were the highest non Cash for Clunkers month of the whole year. Those that predicted that car sales would continue to slump after Cash for Clunkers were wrong

Secondly, the real estate bubble was gargantuan and will continue to deflate until at least the middle of next year. The TALF isn't affecting real estate as much as the Fed's agency purchases are, though.

Consumer spending was up 1.4% in October. Consumer sentiment is steady but higher than in the Spring before the stimulus.

But that's not all credited to the stimulus, it has to be credited to the whole range of government responses.

The stimulus hasn't created 640,000 jobs; first of all that number is unreliable. It's probably a bit lower than that; in the range of 400,000-700,000 jobs, probably. But here's the catch: these are confirmed jobs, a.k.a., jobs where they can actually track back direct spending to a physical job opening position. Jobs that were created by the tax cuts, by the money multiplier, don't get counted. So the administration's hard count is just the most conservative base estimate.

But even if you just use a low estimate of 500,000, how is that "very ineffective"? Do you think those 500,000 people would call the stimulus "very ineffective"? No, of course not! And don't forget that it's not just jobs we're talking about but economic activity-- which in turn creates tax revenues that go back to the government.

I agree also with jfern that tax cuts are ineffective compared to direct fiscal spending.

Bottom line, I think the stimulus is getting massively sold short and it's a tragedy, because more stimulus is precisely what we need, with 10% unemployment. One thing the Chinese have done right is that they've massively stimulated their economy.

Finally, I agree with NDN that we need an overhaul of the tax code and a new industrial policy. A stimulus filled with quasi-useful spending has some benefits but what we really need is a new economic model and an economic program that moves us in that direction. But keep in mind that a tax overhaul and industrial policy would pretty much amount to a second stimulus, or at least it would be called that. So if you attack the whole notion of stimulus as ineffective (which is what Republicans are doing), then you're also attacking a tax overhaul and industrial policy.

[Beet]

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That doesn't actually prove my main point wrong, which is that sales HAVE fallen off the 14.1 million sales peak in August and remain 'stable' right now. GM's sales are remained even but Chrystler's are down and Ford (which obviously, hasn't really been the focus of government intervention efforts) has seen modest gains primarily as a result of their new models. If they're up from last year it's because of unprecedented money being poured into the system as well as continued layoffs. Let's see how those numbers hold several months from now.

No one said that they would remain at 14.1 million continuously and not fall back down. The program's success is proven by the fact that it increased sales up to that level while it was operable, and then stabilized back at a level equal to or higher than the level it stood before the program. All indications are that will occur. The real savings from the program though, come due to the fact that the new cars purchased get 9.1 more MPG on average than the cars traded in, and this from a low 15.8 MPG as the base. Therefore, they represent a significant savings in fossil fuel consumption for a given amount of driving, which will benefit the entire US balance of payments over time.

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It depends when inventory clears out. Price-wise, things are now closer to the bottom than the top. New home starts are also at such a low level that they have probably bottomed. What we really need is household formation, and eventually the Millennial generation demographic will be a huge boon on that front-- once they can get jobs, that is.

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September consumer spending was expected to be down because of cash for clunkers. Ex auto, there was a slight rise in September. On the October number, it may well be too optimistic (as there were probably more closings than openings) but all signs are that consumer spending has stabilized compared to the free-fall of autumn 2008. It's currently being dragged down by credit card reform (needed), a higher savings rate (needed), and higher unemployment (which is partly why additional jobs programs are required).

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1. Lower and simpler tax systems. Not just at the federal level, but also at the state and local (e.g. property tax deduction).

We probably need a simpler tax system, and I'd consider lower taxes in some areas, but given the current structural budget deficits, I really don't see massively lower taxes as being very realistic. Which brings us too...

2. Less spending on deadweight like the military and overhauling our entitlement system to be at minimum, more sustainable (medicare comes to mind).

I agree. Unfortunately, entitlement programs are sickeningly popular. What I like about the health bills in Congress right now is that they are (or realistically try to be) deficit neutral. But I wouldn't oppose an across the board cut in Medicare-- politicians would, unfortunately.

3. Low tariffs and incentives for new factories/remodeling. If we had actually followed through on this in the early '90s as Bill Clinton originally promised we'd be in a far better state now.

Aren't tariffs are already pretty low? How do you expect American factories to help the unemployment problem when the majority of factories that would actually be competitive with Third World countries would be very capital intensive, high productivity, and therefore not employ that many workers? Not sure what Clinton promised in the early '90s but it seems intriguing. The solution to trade, IMO is to get the Chinese to realize that their mercantilistic currency policy is against their interests.

4. Credit for small business. It's just not there right now, even with all of the takeovers and interest rate cuts. Reforms to regulations at nearly all levels (e.g. ordinances, licensing, compliance, etc.) could help them tremendously as well.

The Small Business Administration is trying to do this but they're getting a lot of defaults and it's being called the 'hidden bailout' in the Washington Post. I agree on reforms on regulations.

5. An end to money being diverted to zombie banks and 'too big to fails,'; Efforts at curbing consolidation (anti trust)...

Nice to say, hard to implement.