Depends what you mean by “saved.” Money in bank accounts doesn’t just sit there passively, it’s put to work for the bank. Money sitting in the safe deposit box in your closet, on the other hand, doesn’t in fact contribute – but it’s still a good policy, no?
Tax deductions and credits could be more stimulative because people would actually have to spend some money to get the deduction or credit. The downside is that some of the activity would have been done regardless of the new tax break, so not all new spending is because of the tax break. Also, the other problem as you mention is social engineering. Our tax policy towards housing is an example of this. As a society we have way overinvested in housing because of the tax deductions associated with housing. That money could be invested in the productive side of the economy and actually provide jobs for people. Also when the government had a 10% investment tax credit it turned some projects that were not profitable to become profitable, which caused firms to invest in inefficient projects.
If the bank just parks those saving at the Fed it doesn’t do much good for anyone. If a business borrows the money and builds something with the money it has a stimulative effect. But as we can see from the banking sector today, putting more money in deposits does not necessarily mean more investment.
Which is why food stamps help the economy, generally every cent is spent.
Help? A preponderance of food stamps are an indicator of economic failure.
That’s not what I’m talking about. When the government gives out food stamps to people who need them they tend to spend all of it. A dollar spent by food stamps yields more economic activity than a dollar in tax cuts.
And does not cause inflation?
Maybe this sounds a little facetitious but if they privatize everything (sell off all assets) they might be able to eliminate all debt. But then we’d all be depending on privates for everything and you know how easily they can go out of business too. Are we as a society ready for that?
The government doesn’t print, it borrows, hence the trillions in debt.
Actually, some of them will, and some will lose. During the Depression, some people got greatly more wealthy and some went broke. But interestingly, the fractional share of national income going to capital remained the same at roughly 1/3; the same as it is today. Just like then, the relative income of government workers climbed well above what non government workers got.I am certain that you are correct about this. We are in a depression now–a depression hidden by food stamps and unemployment benefits. The Fed can only try to push the string for so long. It isn’t working. It won’t work. The depression has to run its course.I am no economist, but I do heed much of what I am told, particularly by people who have had decades of experience. In my opinion, we are in a depression. The difference between this one and the Great Depression is that we have millions of people on food stamps instead of in soup lines. We have millions on ever-extended unemployment benefits instead of standing on street corners looking for a half day’s work or a handout. We’re little better off, but we have largely hidden the reality of a society that’s broke on it’s backside.
In an effort to buy votes by spending recklessly without extracting it from the pockets of Americans, and adjusting when the pockets went empty, the government (complicit with the Fed) is borrowing and debasing the currency in an effort to pay for that borrowing. (Just the interest)
What is not recognized is that we have had decades of “stimulus” with no real “reset”, and the government is increasingly “pushing on a string”. The cost of a lot of things has to go down still more and, unfortunately, the cost of labor is one of those things…at least temporarily. So, one thinks the cost of labor is already too low? Well, since the cost of transfer payments comes out of labor’s share of the national income, it is too high. Every laborer is carrying more and more recipients of transfer payments on his/her back.
But horrors! The rich will benefit!
During the Depression, the government did all kinds of things to get prices up, to get wages up, to get people to spend money by pushing money at them. But it didn’t work. And it won’t work now. It won’t work because so much of the wealth presently being created is not real. It’s “wealth” that has been printed, borrowed and invested in paper; exactly the pre-1929 scenario.
For whatever it’s worth, the Great Depression simply had to run its course and, in my opinion, so does this one. Values have to reset.
It may be remembered, and with some concern, that GM did not go broke in the Depression. It just sold fewer cars, but stayed afloat.